From the early 1980s, debt-fueled consumption in the United States drove global economic growth and facilitated the spread of globalization. Economic policy was formulated based upon the belief that markets are most efficient when left unregulated. Exchange rates floated, massive trade imbalances were ignored, and for three decades the world was transformed by one economic miracle after another. Then, in 2008, that economic paradigm collapsed, its philosophical underpinnings exposed as a delusion. Government bailouts were required to save global finance from systemic destruction. Government spending was increased dramatically to offset the collapse in consumption by the private sector. Government intervention thus prevented an economic breakdown into worldwide depression.
[Read more...]Politicians Meddling in Markets Gets Messy
Economists fully expect governments to get hands on with markets, and indeed,some structure is useful.Property rights and rule of law help markets to function more efficiently. Withbasic order markets are good at discovering prices and getting investments, products, and services where they are needed most.
[Read more...]The Safety Downsides to Globalization
China, “workshop to the world,” produces low-priced goods that have overwhelmed the global economy with value… except for some notable exceptions.
Historically, it’s a nation that’s not always held to the same health or safety standards to which US manufacturers, for example, are obligated to uphold. Occasionally it’s resulted indisastrous consequences.
[Read more...]Inflation Control: Mission Not Accomplished
Central bankers in the United States and Europe have had a primary mission to keep inflation under control. They may have well proclaimed mission accomplished with inflation having consistently averaged less than 3 percent in the last 10 years, only to be rudely awakened. Like a doctor judging an athlete by muscle tone and not internal organs or functions, our underlying condition went undetected.
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“Supranational” Investing
Some of the very best Argentine steak houses are in Amsterdam, some of America’s very best rodeo cowboys are Brazilian and some of the world’s very best beach volleyball courts are high in the Swiss Alps. The “cosmopolitanization” of the world is under way — creating vast, new and diverse patterns of commerce… which also means vast, new and diverse investment opportunities.
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