Politics

Inconsistency needs composure

US trade policy appears to be dominated by sentiment and electoral considerations and is characterised by a high degree of volatility. Within a few days, US President Trump announced tariffs of 10% on a volume of 300 billion US dollars and then partially postponed them again. To make matters worse, there was actually no reliable justification for either action. They appear to the observer as completely arbitrary actions of the US government or the president himself. The financial markets, especially the stock markets, have reacted violently to both announcements. However, nothing should be interpreted into these movements. The economic outlook will not be changed by these erratic actions. However, the reluctance of companies to invest is likely to increase even further, as uncertainty about the further development of the trade conflict should deepen. However, weak investment and stagnating world trade are the main reasons for the slowdown in growth momentum….

A higher national debt would even make sense now

The black zero in Germany is wobbling. Expenditure wishes and revenue expectations are diverging more and more. The burdens are coming from both sides. As the economy weakens, tax revenues will decline in the long term, while spending expectations will continue to rise. Even last year there was a comfortable surplus: In the overall public budget, revenues in 2018 were almost 54 billion euros higher than expenditure. And this despite the fact that last year government spending grew more strongly than tax revenues. I am actually a great friend of a balanced budget for states, especially against the background of intergenerational justice. This, however, is currently being made absurd. The Federal Government can currently go into debt with negative interest rates. Increasing indebtedness does not, therefore, lead to a burden on future generations. Assuming a positive return on investment in growth and employment, today’s rising debt would also have a…

US Federal Reserve remains reasonable

US Federal Reserve remains reasonable As expected by most market participants, the US Federal Reserve has lowered its key interest rate by 25 basis points. At the same time, it ended the balance sheet reduction prematurely. Overall, the Fed has thus loosened the monetary policy environment slightly, but avoided classifying this as a trend reversal. It has thus resisted the high political pressure and continued its relatively sensible monetary policy. The statement published after the interest rate decision sounds optimistic and hardly changed. For example, the Fed has attested that economic growth has continued to be moderate and that consumer spending has increased. Market-based inflation expectations remain low. The effects of the cooling global economy and subdued inflationary pressure explain the 25 basis point cut in key interest rates. Now the developments will be „further observed“, which is a linguistic disarmament compared to the phrase „closely observed“, which usually signals…

The baby boomers are coming

  In Germany, there have been two major states of emergency for some time now. One is Europe and why Germany needs the euro, the other revolves around the consequences of demography for society and the welfare state. The latter is what we are talking about here. The consequences of the demographic development can be mitigated by more immigration and a sensible immigration law, higher investments and increasing productivity. This will require a noticeably higher equity ratio in private portfolios and housing subsidies tailored to demand. Even if the new population projection by the Federal Statistical Office is somewhat more optimistic. The basic problem of an ageing society with too few children remains. In around ten years‘ time, when baby boomers will gradually retire, the change in age structure will accelerate dramatically. The baby boomers, who today still contribute as skilled workers to the production of goods and services, pay…

Can Boris Johnson make the Brexit?

Brexit hardliner Boris Johnson will be Britain’s new prime minister, and he wants to lead the country out of the EU – whatever the cost. First, he will try to persuade the EU to resume treaty negotiations. In his view, the negotiated draft treaty is unacceptable to Great Britain. In any case, the draft has no chance of winning a majority in the House of Commons, as Theresa May had to experience bitterly. But will the EU even agree to new negotiations? It doesn’t look that way. Johnson will certainly try to force the other side to give in with new offers and all kinds of threats. Alone, the chances of success are slim. If he fails, he wants to do the hard Brexite. The crucial question is whether the British Parliament can stop him. It remains to be hoped, but the „hard brexit“ risk has undoubtedly increased with Johnson’s…

Spain: Economic growth remains dynamic – despite political impasse

The political hanging game in Spain continues. After the previous Prime Minister Pedro Sánchez did not obtain a majority for his re-election in a second round of voting, the options now remain for a third round of voting until 23 September or new elections on 10 November. The private sector takes a critical view of the country’s political future. Various climate barometers continue to show solid overall confidence. For several months now, however, the mood in industry, services and consumers has been deteriorating visibly. The fundamentally adverse environment resulting from international geopolitical risks is not the only reason for this. However, concerns about the possible negative economic consequences of a political stalemate are likely to be overstated. This is already reflected in the result for economic growth in the second quarter. According to a preliminary estimate by the Spanish central bank, economic growth was a strong 0.6% compared with the…

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