The events of the last week have crowded out reflection on economic policy. But things have been happening. Wilbur Ross, the US commerce secretary, described the trade deal reached with China earlier this month as “pretty much a Herculean accomplishment….This is more than has been done in the history of US-China relations on trade.” Read more

President Donald Trump

President Donald Trump  © Getty Images

Details of President Donald Trump’s first budget have now been released. Much can and will be said about the dire social consequences about what is in it and the wildly optimistic economic assumptions it embodies. My observation is that there appears to be a logical error of the kind that would justify failing a student in an introductory economics course.

Apparently, the budget forecasts that US growth will rise to 3.0 per cent by 2021 because of the Trump administration’s policies — largely its tax cuts and perhaps also its regulatory policies. Fair enough if you believe in tooth-fairies and ludicrous supply-side economics. Read more

An employee leaving Bear Stearns in the 2008 crisis

An employee leaving Bear Stearns in the 2008 crisis  © Getty Images

Several weeks ago I gave a talk based on my Brookings paper with Natasha Sarin at the Atlanta Fed’s annual research conference. Here are the video and slides. I continue to be puzzled by gap between what is widely believed and my reading of market evidence. Read more

Donald Trump and Steven Mnuchin

Donald Trump and Steven Mnuchin  © Getty Images

Last week, I suggested that I felt sorry for Steven Mnuchin, the US Treasury secretary. He found himself forced by circumstance and his president to say and do things that undermined his and Treasury’s credibility.

I wish there was an external force that could be blamed for the secretary’s comments on Monday but they look from the outside like unforced errors. Read more

  © Getty Images

I had a keynote conversation last week with my friend Markus Brunnermaier on fintech and the future of finance at a conference he held at Princeton. Here is the video. Markus got me to think about a number of different aspects of fintech that I hadn’t fully considered before. Some of the main points I tried to make were: Read more

Treasury secretary Steven Mnuchin

Treasury secretary Steven Mnuchin  © Getty Images

President Donald Trump’s tax proposals were rolled out on Wednesday by the Treasury secretary Steven Mnuchin and National Economic Council director Gary Cohn. For reasons of long-run budget health, fairness, and economic impact I think they are extraordinarly ill-advised. I am certain that the substantive concerns I have will be extensively addressed in the debates to come.

As I read about the proposals and thought back over the tax discussions of the last year, I found myself feeling sympathetic to Mr Mnuchin. Some of the most difficult moments for any cabinet officer come when the president fails to respect his department’s desire to do serious policy work, when political circumstance forces the repudiation of his major past statements and when out of loyalty he has to support absurd propositions. All three of these things happened to the Treasury secretary this week. Read more

  © Getty Images

The Obama Department of Justice has been attacked from both sides for its post-financial crisis approach. Some, like the senator Elizabeth Warren, believe it was insufficiently aggressive and followed a “too big to jail” policy. Others, including many in the banking industry, believe it acted wrongly in extorting huge penalties from banks for relatively venal sins.

Because of DoJ independence, my work in the White House gave me no window into specific cases. I have tended to sympathise with the department given the contradictory nature of the critics’ attacks and the complexity of the issues involved. Read more

Steven Mnuchin

Steven Mnuchin  © Getty Images

As I learnt (sometimes painfully) during my time at Treasury, words spoken by Treasury secretaries can over time have enormous effects and therefore should be carefully considered. In this regard, I am very surprised by two comments made by Steven Mnuchin in his first public interview last week.

In reference to a question about artificial intelligence displacing American workers, Secretary Mnuchin responded that: “I think that is so far in the future — in terms of artificial intelligence taking over American jobs — I think we’re like so far away from that (50 to 100 years) that it is not even on my radar screen”. He also remarked that he did not understand tech company valuations in a way that implied that he regarded them as excessive. I suppose there is a certain internal logic. If you think AI is not going to have any meaningful economic effects for a half century than I guess you should think that tech companies are overvalued. But neither statement is defensible. Read more

President Enrique Peña Nieto of Mexico (left ) and China's President Xi Jinping

President Enrique Peña Nieto of Mexico (left ) and China's President Xi Jinping  © Getty Images

I was in Mexico yesterday seeing the country’s president, foreign minister and finance minister and addressing a convention of bankers. The only subjects anyone is interested in are the future of Nafta and US-Mexican relations.

I came to Mexico from Beijing and so was able to report that there was no greater strategic gift the US could give China than to abrogate Nafta and rupture the North American community.

In narrow commercial terms right now, Mexican goods enter the US on a preferred basis relative to Asian goods. This preference would disappear with suspension of the free trade agreement. Furthermore, about 70 per cent of Mexican exports are of goods that are not finished but are inputs to further US production. Anything that hurts Mexico therefore also hurts us in global economic competition with China. Read more

Phil Mickelson: Master of the long swing

Phil Mickelson: master of the long swing  © Getty Images

McKinsey has a new study out on an important topic — the question of whether companies systematically take too short a view and do not invest enough for the long term. If true, as many chief executives believe, this is a serious indictment of current corporate governance arrangements and has important policy implications. To take one close to my heart, if short-termism causes under-investment it will be a cause of secular stagnation.

I am not sure what to believe in this area. On the one hand, there are many anecdotes suggesting that pressures to manage earnings hold back investment. And the short-termist view is very widely believed.

On the other hand, some of what is done in the name of the long term may be unmonitored waste. The observation that many “unicorn” companies with no profits, and sometimes no revenues or even fully developed products, get valued so highly makes me sceptical of the idea that the capital market is systematically myopic. It is also the case that the companies generating the highest immediate cash flows — which should be overvalued on the myopia theory — have historically had the highest stock market returns, implying undervaluation rather than overvaluation. Read more