Broomer's Blog

From the category archives: US

US

Hey Genius, You’re Worrying about the Wrong Deficit

The trade deficit dominates President Trump's attention and by some reports, he has been fixated on this subject since the late 80s when Japan seemingly threatened to take over the world. Clearly that episode did not end well for the Japanese economy, yet Trump has persisted in wailing about unfair trade practices with his main trading partners. To be fair, Trump's ultimate intention is to engineer freer trade is reasonable but is this really worth the risk of igniting a trade war to reset the balance?

Meanwhile there has been surprisingly little comment about the cost of his tax cuts. It may be more correct to consider these not as tax cuts but merely deferred taxation measures. Most of the personal cuts are earmarked to end by 2025 but even for the permanent corporate ones to be sustained, the money needs to come from somewhere. Otherwise it will necessitate cuts to expenditures. Trump reckons that the Laffer Curve will come to his rescue as the greater growth will lift tax revenues, but as this stage of the cycle this appears rather farfetched. Even using the fanciful assumptions in the White House projections, these tax cuts do not become self-funding over the next decade. While Trump believes that his policies will spur economic growth, there are good reasons to suspect that they won't.

Continue reading »

Trump’s Follies

It is galling to watch Trump's vain posturing as he parades around the world. It is easy to push his buttons; he seems to offer an entire keyboard of them. We may have sympathy with Gary Cohn's rumoured assessment of the man as being 'dumb as shit' but he is the one in power and we are obliged to objectively consider the consequences of his actions.

The tax cuts have been a good thing for the stockmarket, though these are now wholly reflected in prices. The improbable device of soaking the rich with even more wealth will almost certainly spur economic growth, perhaps by as much as 0.7% this year and a further 1.5% in the following one according to the Economist. However, this comes at a monstrous cost to the government deficit which will hit nearly 6% by 2020. Through modern history, the deficit has never been greater outside a time of crisis. This leaves the economy in a vulnerable position and the government's finances risk spiralling out of control if something untoward occurs.

Continue reading »

Pedalling Harder Just as the Brakes are Being Applied

My brother-in-law is a cycling fanatic. I asked him the other day if there is a technical term to describe pedalling while the brakes are being applied. He thought about this for a moment, before suggesting 'stupidity'.

It is almost 10 years since the financial crisis and the long drawn out recovery finally appears to be on a self-sustaining path. Monetary policy is gradually being tightened in the US, emergency rate cuts are being reversed in the UK and the ECB is dialling down its QE programme. With US unemployment just hovering above 4%, many monetary hawks will be thinking this is not before time.

Continue reading »

Trump is going to end up with kimchi on his face

Donald Trump really does not need anyone's help to make him look foolish; he seems perfectly capable of doing this all by himself. Over recent weeks, I have been following his comments on North Korea with disdain and North Korean President, Kim Jong-un, must be relishing the propaganda victories that Trump has continually presented him.

My wife was born in Seoul, so I tend to follow events on the Korean peninsula with more interest than many. Events north of the border are often disturbing, sometimes weird and occasionally comical. This Telegraph report about Kim Jong-un's father provides some flavour to this. The people of the South are also incredibly proud of their small nation. Koreans are typically a passionate people and are sometimes referred to as being the Italians of Asia. If you are ever in search of an entertaining evening, I would strongly recommend taking a drink in a Korean bar when the national football team is playing.

Continue reading »

Archive