Market strategists and policymakers are putting too much emphasis on a trade deal between the United States and China, and it’s quite likely that whatever is agreed will disappoint.
In recent months, analysts and market commentators have voiced concerns about a slowdown in the Chinese economy. The general view is that growth significantly below the current level of 6 per cent to 6.5 per cent would be bad for the global economy, posing the risk of modest deflation or even becoming a drag on economies around the world – legitimate concerns.
If you were learning about the causes of post-World War II US recessions 20 years ago, the standard chain of events went like this: As the economy goes into an upswing, wage and price inflation starts to rise. The Federal Reserve recognizes that rising inflation isn't a sign of healthy growth, and raises interest rates. In often-used phrase, it's the job of the Federal Reserve to order that "the punch bowl removed just when the party was really warming up." The higher interest rates dampen inflation, but also lead to recession. The clear implication from this earlier line of thought is that recessions don't occur just because a recovery has gone on for a long time: instead, recessions are caused when the Fed decides to dampen inflation. For example, here's eminent economist Rudiger Dornbusch (and co-author of one of the preeminent macroeconomics textbooks of the time) writing back in 1997:
The 2019 edition of the annual Heritage Foundation Index of Economic Freedom[1] shows moderate slippage in the rankings of some eurozone economies. This is a concern, especially as this trend coincides with the peak of the largest monetary stimulus in European Union history, the goal of which was to provide EU economies with opportunities to modernize and to implement important structural reforms aimed at delivering more robust growth, more sustainable job creation, and the generation of higher-quality job openings.
It seems as if there's always a majority against the way things are. In a world full of problems and issues, how could it be otherwise? It's why politicians are always calling for "change," which strikes me as a slogan that is appealing and concealing in equal measure. Because the real-world problem that arises is when those who are united in their opposition to the way things, and united in favor of "change," need to offer an actual alternative of their own.
A lot of people have heard, one way or another, that the country of Bhutan decided back in the early 1970s to pursue Gross National Happiness. The King at that time is supposed to have said: “Gross National Happiness is more important than Gross Domestic Product.” But in practical terms, what does that actually mean? Sriram Balasubramanian and Paul Cashin describe "Gross National Happiness and Macroeconomic Indicators in the Kingdom of Bhutan" in IMF Working Paper WP/19/15 (January 2019). They write:
The big selling points for a universal basic income are simplicity and work incentives. The simplicity arises because with a universal basic income, there are no qualifications to satisfy or forms to fill out. People just receive it, regardless of factors like income levels or whether they have a job. There are not bureaucratic costs of determining eligibility, and no stigma of applying for such benefits or in receiving them.