Economics & Global Affairs

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Blog Post - views-on-the-economy-and-the-world

The End of Zero Interest Rates?

| Aug. 14, 2023

What a difference a year makes!  In 2021, interest rates were close to zero in the US and the UK,  and slightly negative in the eurozone and Japan.  They were expected to remain low indefinitely.  Remarkably, as recently as January 2022, investors thought that the probability the interest rate would rise above 4.0 % within 5 years was only 12% in the US, 4 % for the euro-zone, and 7 % for the UK [p.45].  Those were short-term nominal interest rates.  Correcting for expected inflation, real interest rates were substantially negative and expected to remain so.

Picture of someone looking at a screen

TIMOTHY A. CLARY/AFP via Getty Images

Analysis & Opinions - Project Syndicate

The End of Zero Interest Rates

| Aug. 13, 2023

As recently as 2022, most monetary economists expected interest rates to remain low indefinitely. While many analysts still expect near-zero interest rates to return, they will likely remain elevated for the foreseeable future, making it harder for governments to service their debts.

Flowers bloom around graves of World War I soldiers prior to a foundation laying ceremony at Loos British Cemetery in Loos-en-Gohelle, France, Thursday, May 4, 2023.

AP Photo/Michel Spingler)

Journal Article - Quarterly Journal: International Security

The Peril of Peaking Powers: Economic Slowdowns and Implications for China’s Next Decade

| Summer 2023

Peaking great powers facing a slowdown in growth are likely to try to violently shake up the world. These findings amend classic theories of great power conflict. They help explain some of the most consequential geopolitical events in modern history. And they have ominous implications for contemporary Chinese foreign policy. 

Gate of Tianjin Free-Trade Zone. A brightly lit arch over a nighttime roadway. A brightly lit pillar appears in the background.

Wikimedia Commons

Journal Article - Quarterly Journal: International Security

Collective Resilience: Deterring China’s Weaponization of Economic Interdependence

  • Victor Cha
| Summer 2023

China leverages its market in a form of “predatory liberalism” that weaponizes the networks of interdependence created by globalization. ne response to China’s bullying would be for its targets to form an alliance to retaliate against China’s high-dependence trade should Beijing act against any alliance members. 

Driverless trucks move shipping containers at an automated port in Tianjin, China, Monday, Jan. 16, 2023. China's exports fell 7.5% from a year ago in May, 2023, and imports were down 4.5%, adding to signs an economic recovery is slowing.

AP Photo/Mark Schiefelbein

Analysis & Opinions - The Wall Street Journal

China Relies on U.S., Allies for Hundreds of Products

  • Timothy W. Martin
| Aug. 09, 2023

China has at least a 70% dependence on the U.S. and its allies for more than 400 items, ranging from luxury goods to raw materials needed for Chinese industries, a new analysis of trade data has found. (...) The analysis, set to publish Wednesday in the International Security academic journal, uses data from the United Nations Comtrade database, which tracks official global trade statistics. China’s high-dependency exposure was calculated by bundling together trade activity from the U.S. and more than a dozen allies across a range of categories.

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Blog Post - views-on-the-economy-and-the-world

Isn’t this what a soft landing would look like?

| July 19, 2023

A skydiver jumps out of an airplane, apparently without a working parachute. On the way down, a passing hang-glider calls out to ask how he is doing.  The plummeting man shouts back “Okay, so far!”

For many, the US economy resembles the skydiver.  But they are probably wrong.

  1. Expectations of a hard landing

Many think a hard landing became inevitable when the Fed in March 2022 began a series of interest rate hikes, which totals 5.0 percentage points so far and is expected to continue. Many economists, as well as the public, have been confidently predicting a recession for over a year now, or even saying that it has already begun.  In June 2022, 57% of respondents told pollsters that they believed the US was already in recession, versus only 21% who did not.  An inverted yield curve in bond markets suggests that the financial sector, too, has been expecting a downturn.  The word “recession” appeared far more often in public media during the last year than is usual even in the midst of a true recession.

A worker in the foreground adjusts some large straps as he looks up. In the background there is a flat horizon scattered with wind turbines against a blue sky.

AP Photo/Andy Wong

Analysis & Opinions - Financial Times

Climate Action in an Era of Great Power Competition

| July 18, 2023

At the foot of the Eqi Glacier in Greenland in June, I watched ice formed thousands of years ago drop into the warming ocean. With this vivid depiction of climate change in my mind, I was disappointed that neither of the conferences held last month to prepare for the UN’s upcoming COP28 summit had produced any real breakthroughs.

However, while the need for climate action is rising, the stakes for COP, perhaps counter-intuitively, look to be diminishing. An underwhelming COP28 would be a missed opportunity but it may not be a tragedy. Twenty or even 10 years ago, it was reasonable to hope a co-operative approach could address climate. But it is no longer a realistic expectation — nor the most promising route for progress.