Failure to take public finance seriously will cause economic distress, especially with an aging population. Troubles are coming to the Japanese economy not as single spies but in battalions. Its economy is in recession, its public finances are on an unsustainable path, and its currency keeps plumbing new record lows. If there is one good ...

Anyone doubting that China is well on its way to a Japanese-style lost economic decade has apparently missed the bursting of its massive housing and credit market bubble and the souring of U.S. and European trade relations with that country. And if China, the world's second largest economy, were to fall, it would constitute a major headwind ...

The last thing the global economy needs now is to have Germany, the world’s third-largest economy, go through a prolonged period of economic stagnation. Economic troubles are coming to Germany, Europe's largest economy, not as single spies but in battalions. They are also doing so at a time of domestic political weakness when the country lacks ...

A stumbling Chinese economy can be a major drag on world aggregate demand. Anyone who thinks that China will not be a drag on the world economy has not been paying attention to signs that China's housing- and credit-market bubble has burst. Nor have they been paying attention to indications that deflation now threatens China's economy or to ...

The U.S. has to dodge domestic and international bullets. There is an old proverb that man plans, God laughs. No matter how carefully one might plan, all too often, something unforeseen occurs that tears those plans asunder. Something similar might be said about economic forecasting. No matter how careful the economic forecaster might be, all ...

The Fed has forgotten that monetary policy operates with long lags. James Tobin, the late Yale economist, used a domestic example to illustrate how monetary policy was best conducted. He observed that if someone wanted to set the room temperature at a comfortable level, it was best to maintain a steady hand when using the thermostat. That is ...

It is a question of when, not if, we will have another round of the European sovereign-debt crisis. So much for the convergence and generalized economic prosperity that the eurozone's creation was supposed to produce. Some 25 years after launching the euro, there has been continued divergence between the public finances and economic ...

Troubles are coming to the commercial real estate sector, not as single spies but in battalions. This does not bode well for regional banks, which are heavily exposed to that sector. More importantly, it does not bode well for next year's economic outlook – especially if we were to have a regional bank-induced credit crunch. It would be a ...

There are two basic questions: Who will now be financing the U.S. government’s massive borrowing needs, and at what price? While Washington idles about our budget problems, the bond vigilantes and the rating agencies are sending us a clear message: Our country's public finances are burning. Unless we get serious about mending our public ...

Troubles are coming to the world economy – not as single spies, but as battalions. They are doing so on multiple fronts, in the United States, China and Europe. Coupled with renewed geopolitical strains in the Middle East, those troubles heighten the chances of a full-blown world economic and financial market crisis by the middle of next year. ...

There are several warning signs that the Fed's aggressive monetary policy is going too far. Rudi Dornbusch, the late MIT economist, used to say that he could understand the Mexican central bank making mistakes. What he could not understand was how the same people could make the same mistakes time after time. Judging by how little attention ...

Three of the world's four largest economies are facing major problems, which could affect the U.S. as well. John Donne famously wrote that no man is an island entire of itself. Something similar might be said of the U.S. economy. Anyone doubting that the U.S. will be affected by China's economic troubles has not been paying attention to ...

In a recent interview with Larry Kudlow, the former President Donald Trump asserted that the dollar is losing its dominance as the world's international reserve currency, as the U.S. comes to resemble a third-world country. With characteristic hyperbole, he warned that the dollar's loss of its reserve status would be worse than losing any ...

Our economy has shown encouraging signs of a rebound, but there are still many things that could go wrong in the months ahead. In 2003, six weeks into the Iraq War, President George W. Bush boarded an aircraft carrier and dramatically declared mission accomplished. The war, of course, was far from over. Today, against the backdrop ...

Next week's key Federal Reserve policy meeting will occur against the backdrop of considerable financial market strain, an incipient credit crunch and a looming debt ceiling showdown. If ever there were a time for the Fed to be more forward-looking and less data dependent, it has to be now. If the Fed did become more forward-looking, maybe then ...

Financial markets could be excused for having been caught by surprise by Silicon Valley Bank's (SVB) recent collapse. After all, who was to know that the country's 16th largest bank would have taken on so much interest rate risk by buying on an unhedged basis massive amounts of long-dated U.S. Treasury bonds? Who also was to know that the ...

Europe faces an even worse economic predicament than the United States. Spare a thought for Christine Lagarde, the president of the European Central Bank (ECB). She now finds herself in a worse monetary-policy predicament than Jerome Powell, her counterpart at the Federal Reserve. Like Powell, Lagarde is having to pursue a hawkish monetary ...

The economist John Maynard Keynes supposedly said that, "When the facts change, I change my mind. What do you do, sir?" When the U.S. Federal Reserve meets this week, it should heed Keynes's advice and take note of the major way the economic landscape has changed since its last policy meeting. If not, we should brace ourselves for some ...

As the country heads towards a debt ceiling showdown later this summer, a dangerous idea is gaining currency. It is that the U.S. Constitution makes debt default impossible. This idea risks breeding complacency among our politicians about the economic and financial market dangers associated with the debt ceiling standoff that lie ahead. ...

Dennis Robertson, the late Cambridge economist, was fond of saying that economic fashion was like going to the greyhound races. If you stood still long enough, the old dogs would come around one more time. We have to wonder whether the same might be said of Milton Friedman's fundamental view of inflation. Friedman famously said that inflation ...

Should stock market investors lose money next year, they will not be able to say they were not warned by the world's main central banks. First, Federal Reserve Chair Jerome Powell has been warning that bringing down inflation might require a prolonged period of high interest rates and below trend economic growth. Now, both the Fed and the ...

Xi's tightening his stranglehold on the CCP is cause for concern. China is no stranger to one-man rule leading to economic misfortune. Anyone doubting this needs only think back to the disastrous economic consequences of Chairman Mao's Great Leap Forward and subsequent Cultural Revolution. This history has to raise deep concerns about the ...

The Fed risks being caught hopelessly flat-footed by a global credit crisis — again. It might seem cliché to say that those who do not learn from history are doomed to repeat it, but the adage is particularly pertinent to today's Federal Reserve. Seeming to have learned little from the Lehman Brothers bankruptcy in September 2008, the Fed is ...

It did not take markets long to give the Federal Reserve's shift to a more hawkish monetary policy stance a resounding thumbs down. This must be of serious concern. Not because the markets are the economy, as Donald Trump would want us to believe. Rather it is because the markets' pessimism could be self-fulfilling in the sense that it could ...

In 1971, at the time when the United States delinked the dollar from gold, Treasury Secretary John Connally famously told a group of European finance ministers that the dollar was "our currency but your problem." Today, he might have said something similar about the Federal Reserve's recent shift to a hawkish monetary policy stance. The ...

The country’s property and credit-market bubble is now showing every sign of bursting — at a dangerous time for both China and the world at large. The late American Enterprise Institute economist Herb Stein famously wrote that if something cannot go on forever, it will stop. Mr. Stein might very well have had in mind the unsustainable, ...

In his Jackson Hole speech last week, Federal Reserve Chair Jerome Powell enumerated a number of lessons that are now guiding his thinking as to the appropriate stance of monetary policy. Notable in his speech, however, was his failure to mention several even more relevant lessons in today's economic setting. That omission is likely to keep ...

Troubles are coming to the world economy not as single spies but in battalions. In setting U.S. monetary policy, the Federal Reserve should take these troubles into account if it wishes to spare the U.S. economy an unnecessarily hard economic landing. Among the more systemic of the world's economic troubles are those emanating from China, ...

Due to his data-driven monetary-policy approach, the Fed chairman's 'soft landing' is looking less likely. Jerome Powell risks going down in history as the Federal Reserve's worst chairman since Arthur Burns, who brought us runaway inflation in the 1970s. He risks doing so by first having kept monetary policy too loose for too long as he ...

Hope springs eternal at the Federal Reserve. At a time when all clues point to a recession before year's end, the Fed clings to the belief that it can slay the inflation dragon while securing a soft economic landing. This does not bode well for the economic outlook. It likely means that much in the same way as last year the Fed kept ...

It would be an understatement to say that the Federal Reserve has a poor forecasting record. Last year, the Fed kept assuring us that inflation would soon come down to its 2 percent inflation target. It did so only to find that consumer price inflation accelerated to a 40-year high of more than 8 percent. This year the Fed keeps assuring us ...

If the European Central Bank doesn’t act more swiftly and decisively, it risks another round of the European sovereign-debt crisis. The latest European Central Bank (ECB) meeting reminds us that Christine Lagarde's ECB never fails to disappoint. Faced with the highest euro-zone inflation rate since its 1999 founding, the ECB's policy response ...

The Powell Fed has lacked patience in its monetary-policy management, and we are now paying a heavy economic price. When it comes to today’s monetary policy, Jerome Powell’s Federal Reserve is behaving like an impatient person using a thermostat. First, when the room is too cold, the person sets the thermostat to very hot. Then, when the room ...

Anyone who believes that the Federal Reserve will succeed in its efforts to reduce inflation without causing a hard economic landing has not been paying attention to the recent meltdown in the financial markets. Nor have they been paying attention to the dramatic increase in mortgage rates or to the rapid rise in the dollar. Until very ...

With its policy credibility in tatters following the recent surge in inflation to a 40-year high, the Federal Reserve can ill-afford to make another major policy mistake. Yet that is what it seemed to have done at its most recent policy meeting. By committing itself to an overly aggressive monetary policy to get the inflation genie back into ...

As the world's major central banks begin to adopt hawkish monetary policy stances, there is some good news and some bad news about the world economic outlook. The good news is that the world economy does not appear to be suffering from the same vulnerabilities that made the 2008-2009 Great Recession so severe. The bad news is that the ...

The end of a market safety net. If ever a Federal Reserve has been the stock market’s friend, it has to have been Jerome Powell’s Fed. However, if the recently released minutes of the Fed’s last policy meeting come to pass, the central bank will soon become anything but. Not only will markets have to learn to cope, at least for a prolonged ...

Has the central bank learned anything from the painful bubbles of recent past? Rudi Dornbusch, the late MIT economist, once said of the Mexican Central Bank that he could understand its making policy mistakes. After all, its board members were only human. What he could not understand, however, was how it could keep repeating the same ...

For two years, the Federal Reserve has managed to lose credibility by making strong policy commitments it soon had to reverse once they were overtaken by reality. It's now poised to make yet another major policy pledge it won't be able to keep. The minutes, released Wednesday, of the Fed's last policy meeting suggest that starting as soon as ...

The country’s economy can ill afford the consequences of supporting Putin’s aggression in Ukraine. Vladimir Putin’s Russia is currently learning the hard way about the devastating economic costs of the Ukrainian invasion spearheaded by its leader. Before offering Russia support in its war effort, Chinese president Xi Jinping would do well to ...

William McChesney Martin famously observed that the Federal Reserve's job was to remove the punchbowl when the party gets going. Judging by his recent behavior, it seems current Fed Chair Jerome Powell does not subscribe to Martin's view. Last year, when the economy was booming and the equity and housing market were on fire, the Powell ...

Even with consumer price inflation running at almost 8%, the Fed announced Wednesday it would raise its policy rate to 0.25%-0.5%. That leaves its interest rate at a meaningfully negative level in inflation-adjusted terms.Especially after Russia's invasion of Ukraine and the renewed Covid outbreak in China, the Fed's timidity with interest ...

The ongoing crisis in Ukraine could send the U.S. economy into a worrying combination of ever-higher inflation and stagnating output. Talk about fighting the last war with little ammunition. In his State of the Union address, President Biden belatedly recognized that the country had an inflation problem, although he was very careful not to ...

Historically, currency collapses and bank-runs generally do not end well for economies that experience them. The currency collapse and bank-run now occurring in Russia will prove to be no exception. As occurred during the 1998 Russian financial market crisis, Russians should brace themselves for a deep economic recession and high levels ...

John Maynard Keynes famously said "When the facts change, I change my mind. What do you do, sir?" If ever the economic facts have changed, it must be today in the wake of Russia's invasion of Ukraine. This invasion highly complicates the Federal Reserve's policy choice at its next meeting on March 15-16 as to what to do to bring inflation ...

There are plenty of reasons to be concerned about the U.S. dollar's longer-run outlook as the world's dominant international reserve currency. Never before in peacetime has the U.S. run as large a budget deficit and had as high a public debt level as it has today. Never, too before has the Federal Reserve so quickly printed as much money as it ...

Americans have long viewed their economy as the shining city on the hill for other countries to emulate. Yet since the 2008 Lehman bankruptcy, and especially over the past four years, the U.S. economy has increasingly resembled the emerging market economies to which we have been so free with our economic advice. A principal challenge of ...

In the best of times, an economic cardiac arrest in China, the world’s second-largest economy, would not be good for the global economy. But these are far from the best of times. This makes it all the more difficult to understand both the financial markets’ and world economic policymakers’ complacency about the real risk of a ...

Its debt is more sustainable, but still much higher per capita than even the most indebted U.S. state. Puerto Rico’s Oversight Board has put forward a debt restructuring proposal that, if approved by U.S. District Court Judge Laura Taylor Swain, would allow the commonwealth to emerge from bankruptcy. It promises to make the island’s debt ...

A hallmark of the Trump administration is its disdain for the views of experts. Judging by the president’s seemingly relentless march to a full-blown trade war with China, this disdain for expert advice is likely to cost both the U.S. and the global economies dearly. It is also likely to deprive Trump of a strong U.S. economy and a buoyant ...

‘Modern monetary theory’ rests on dangerous, false premises. The U.S. won’t grow its way out of the red. Do deficits matter? Between Republican tax cuts and Democratic spending proposals, U.S. lawmakers act as if the answer is no. Lately, academic economists have echoed the sentiment, advocating large, unfunded infrastructure spending ...

NEWCASTLE, UK—One has to be struck by the remarkable degree of complacency in Washington policymaking circles, including at the Federal Reserve, about the forthcoming Brexit referendum. This is especially the case considering the potential that a vote in favor of Brexit has to derail the U.S. economic recovery and to further ratchet up ...

Recent U.S. political and financial market developments should give Federal Reserve policymakers pause as to the further resort to quantitative easing should the U.S. economy falter in the period ahead. Since quantitative easing policies have been an important contributor to the sense of economic unfairness that underlies the electorate ...

When trying to assess the global economic outlook, it is well to recall that at least four major economic policy blunders have been made over the past few years. Since it would seem highly unlikely that, over the year ahead, the global economy will succeed in dodging the economic consequences of all four of those policy mistakes. It would ...

Coming so soon after the FOMC's ill-advised interest rate hike last month, yesterday's FOMC statement underlines how out of touch the Federal Reserve has become about global financial market and economic developments. Indeed, by giving no intimation that it is now ruling out a March interest rate hike, or that it is now reconsidering the ...