Financial Times The Exchange

Stephanie Flanders The ingredients of the Trump economic cocktail

| Nov 19 05:00 | Comments |
Not much is known about Donald Trump's economic policies yet

Not much is known about Donald Trump's economic policies yet  © Getty Images

Somehow, a lot of investors are expecting President Trump to be the economic love child of Lawrence Summers and Ronald Reagan. If implemented, a combination of pro-business tax and regulation policies and increased defence and infrastructure spending could certainly be a bullish cocktail for investors in the short term. But those buying into the euphoria should be careful to read the small print.

Investors are buying US stocks — especially bank stocks — on the assumption that Donald Trump is going reflate the economy in a way that will benefit Wall Street more than most. That looks like a good bet, given the emphasis among his close advisers on unpicking post-crisis bank regulations, cutting taxes and pushing up interest rates. All of those things will make it easier for banks to make money. Selling bonds to buy equities is also likely to be a profitable strategy, at a time when the US was already looking at the prospect of rising inflation and looser fiscal policy, long before November 8. Read more

‘Smart green’ technology is the path to follow

| Nov 18 05:00 | Comments |
Ride hailing replaces car ownership

Ride hailing replaces car ownership  © Getty Images

In the digital revolution, the mass use of computing technologies has so far just added to global demand for energy and materials, without fulfilling its potential promise of “dematerialising” products, production methods and lifestyles. But the information and communications technology era is still young, and policies are still old. We have new choices to make. Rather than viewing climate change and resource scarcity as limitations, we can use “smart green” technology to unleash a sustainable direction for economic growth.

The mass-production revolution brought a postwar golden age to advanced countries in a win-win game for business and society that we need to replicate today. In this phase of the ICT revolution, tilting the playing field with policies to stimulate a synergistic direction for innovation and long-term investment can harness new tech and new demand from smart green global growth. Now, as then, boldness is called for. Read more

Lorenzo Bini Smaghi How far will the pendulum swing against globalisation?

| Nov 15 05:00 | Comments |
The Great Wall of China

The Great Wall of China  © Getty Images

The US presidential elections are a further confirmation that advanced economies are having a hard time dealing with the consequences of globalisation. Harvard’s Professor Dani Rodrik has said it is not possible to achieve at the same time the three objectives of national self-determination, political democracy and hyper-globalisation. At least one has to be given up.

As a large part of the population in advanced economies feels the negative effects of globalisation, it is not surprising that the popular vote is increasingly turning against free trade and international agreements. The most recent data on international trade show that the reversal of the globalisation trend has already started. The key questions are: how far will the pendulum swing back, and what are the long-term effects on growth and prosperity in various parts of the world on the new environment? The answers will ultimately depend on the chain of reactions triggered by the initial protectionist measures. Read more

Ivo Daalder Trump’s task is to rebuild trust with Europe over Nato

| Nov 14 12:57 | Comments |
president-elect

US president-elect, Donald Trump  © Getty Images

As a candidate, Donald Trump stirred great anxiety among our European allies with comments that called the US commitment to Nato into question. As president, he will have to reassure these allies that America’s commitment to their security remains strong and unconditional. And, as allies, Europeans will have to demonstrate that they are as committed to their own defence as they expect the US to be.

During his run for office, Mr Trump raised profound questions about the strength and importance of Nato, which stood as the cornerstone of America’s engagement in Europe for nearly 70 years. Not only did he assert that the alliance was “obsolete”, but he indicated that as president he would fulfil America’s obligation to come to an ally’s defence only if they “fulfilled their obligation to us” — meaning the need to “pay their bills”. Read more

Yukon Huang Was China wishing for a Trump victory?

| Nov 12 03:00 | Comments |
Trump on the front of a Beijing newspaper

  © Getty Images

For many Chinese, the US elections were being depicted as a test of the virtues of the American model of democracy. The process became an easy target for Beijing’s propagandists to illustrate what they see as a flawed political system, with its internal divisions and a costly, time-consuming election that yielded two candidates both judged untrustworthy by the majority of American voters.

But as unexpected as the outcome was for the Chinese, there is an old saying: Be careful what you wish for. Donald Trump’s victory may have pleased those Hillary Clinton regrettably referred to during the campaign as the “basket of deplorables” but what Beijing really wanted was more nuanced. Read more

Stephanie Flanders Investors: sit tight and look for Trump clues

| Nov 10 05:00 | Comments |
Donald Trump and vice-president elect Mike Spence

Donald Trump and vice-president elect Mike Spence  © Getty Images

Many parents are wondering how to explain to their children how Donald Trump could break so many of the rules we try to teach them, and still get to the White House. The job of investors looks easy by comparison — they just have to work out what this extraordinary event will mean for world markets.

“If Clinton wins, I’m selling the US and buying the world. If Trump wins I’m buying the US and selling the world.” That’s what one seasoned investor told me his strategy was going to be, some time ago. If President Trump really does “put America first”, many investors will be minded to do the same. It’s bad news for the rest of the world to have a man in the White House who has railed so long and so hard against open trade, and appears to care so little for the main pillars of the postwar international order. Read more

Stephen King The Trump effect on the rules of engagement

| Nov 09 17:29 | Comments |
The Dax index at the Frankfurt Stock Exchange shows the market reaction to Donald Trump's victory

The Dax index at the Frankfurt Stock Exchange shows the market reaction to Donald Trump's victory  © Getty Images

Donald Trump’s victory in yesterday’s US presidential election could mark the end of the established global economic order. For many decades, and more so than any other nation, America helped shape the world we live in. Directly or otherwise, Washington nurtured the institutions that helped establish the international economic rules of the game. The International Monetary Fund and World Bank were children of Bretton Woods. What eventually became the EU would never have happened in the absence of the Marshall Plan. Nato’s success in keeping the peace in large part reflected the deep pockets and military reach of successive US governments.

Mr Trump’s victory may in time be seen as part of a new American narrative, one associated with disengagement from the rest of the world. The US may be heading back to its isolationist past, associated with the 1917 Asiatic Barred Zone Act and Congress’s subsequent refusal to sanction US membership of the League of Nations. If so, the rules of international engagement are going to change. Read more

Liberals need courage to resist the populists and nationalists

| Nov 02 05:00 | Comments |
Donald Trump addresses a rally in Sanford, Florida

Donald Trump addresses a rally in Sanford, Florida

Times are tough for liberal internationalists who believe in a combination of democracy, market economy and globalisation. The ideology, faults and all, has proved its worth, but its defenders seem to have gone into hibernation.

Europe and North America are still by far the most prosperous continents. The combination of free trade and enterprise has lifted millions of people out of poverty over the past decades. Yet, attacks on such a system are coming from all directions. Illiberal and protectionist European governments are commonplace. Britain is leaving the EU and the Wallonian parliament wanted to block a free trade agreement with Canada. Read more

Ahmed Rashid China steps in to protect its Pakistan project

| Oct 28 03:00 | Comments |
Mourners gather round the coffins of victims of the attack on a military academy in Quetta, Baluchistan

Mourners gather round the coffins of victims of the attack on a military academy in Quetta, Baluchistan  © Getty Images

China’s diplomats have taken the unprecedented step of intervening in Pakistan’s complex domestic politics to ensure the smooth passage of its $45bn investment in infrastructure projects as part of its One Belt, One Road programme.

In recent weeks the Chinese embassy in Islamabad has twice issued press statements calling on Pakistan’s bickering politicians to resolve their differences over the China-Pakistan Economic Corridor. Read more

Ahmed Rashid The way forward for India and Pakistan over Kashmir

| Oct 18 03:30 | Comments |
An Indian soldier carries ammunition after a gun battle with suspected militants in Indian Kashmir last week

An Indian soldier carries ammunition after a gun battle with suspected militants in Indian Kashmir last week  © Getty Images

The bellicosity between India and Pakistan has subsided for now but the issues that have caused the trouble remain, keeping alive the fear of war between the two nuclear powers.

Both countries are in trouble. While there is mounting criticism of India’s Prime Minister Narendra Modi for his failure to address the unrest in Kashmir, Pakistan is isolated in the region. This was highlighted by the cancellation of the summit of South Asian leaders due to be hosted by Islamabad in November. The meeting had promised to be a rarity in a region that sees little internal trade or economic co-operation. Read more

Ivo Daalder The west needs a new strategy of containment for Russia

| Oct 16 05:00 | Comments |
President Vladimir Putin addresses a rally in Moscow in March 2015 on the anniversary of his signing the annexation of Crimea

President Vladimir Putin addresses a rally in Moscow in March 2015 on the anniversary of his signing the annexation of Crimea   © Getty Images

Relations between the US and Russia have reached their lowest point in 30 years. Not since Ronald Reagan and Mikhail Gorbachev began the slow but steady effort to end the cold war have relations between the two been this bad. Read more

Roger Altman American business finally backs the Democratic nominee

| Oct 13 12:00 | Comments |
Hillary Clinton and Donald Trump shake hands after their debate on Monday

Hillary Clinton and Donald Trump shake hands after their debate on Monday  © Getty Images

This will be the first year in modern presidential history in which American business leaders, on balance, will support the Democratic nominee. This is evident in the list of chief executives who publicly support Hillary Clinton and the stunning absence of comparable support for Donald Trump. Such a profound shift reflects the growing realisation in the business community that: (1) Democratic presidents have consistently overseen better business results than Republicans; and (2) Mrs Clinton’s economic plan, according to respected independent assessments, would make the economy grow while his would shrink it. Read more

Diane Coyle How the digital age cuts through notions of material ownership

| Oct 03 14:48 | Comments |

Social convention means we know when we buy a drink we don’t keep the glass, writes Diane Coyle Read more

Mohamed El-Erian Yet more low but stable global economic growth is unsustainable

| Sep 30 19:25 | Comments |

An enduring malaise increases the influence of anger politics, writes Mohamed El-Erian Read more

Lorenzo Bini Smaghi Europe’s banks need consolidation to find stability

| Sep 27 05:30 | Comments |

  © Getty Images

European central bankers and supervisors have recently called for greater consolidation of the banking system, in particular in the eurozone, and for accelerating the capital market union project proposed by the European Commission.

These are welcome recommendations. The excessive fragmentation of the European banking system, especially in some countries, is hurting its profitability. It is no surprise that the stock price of banks located in countries with less concentrated markets, such as Italy and Germany, have performed worse since the start of the year, than those that benefit from substantial market power. Mergers, within borders and across borders, raise market power and facilitate the adaptation of banks’ business models, enhancing revenues based on fees rather than interest margins. Furthermore, the development of an integrated European capital market creates an additional financing channel for the real economy, reducing its dependence on bank credit. Read more

Richard Haass It is dangerous to invest too much hope in the Syrian ceasefire

| Sep 13 10:37 | Comments |

Even if Assad is prepared to abide by the truce, rebel groups may not be, writes Richard Haass Read more

Ahmed Rashid Uzbekistan has a chance to shake off Karimov’s legacy

| Sep 12 12:27 | Comments |

The next president must work to build an effective common market, writes Ahmed Rashid Read more

Ahmed Rashid A shaky holding operation in Afghanistan

| Sep 02 03:00 | Comments |
Afghan security personnel patrol near the American University in Kabul after the August attack

Afghan security personnel patrol near the American University in Kabul after the August attack  © Getty Images

Afghanistan is in the grip of chaos caused not only by the advance of the Taliban and its foreign terrorist allies during their summer offensive but also by a leadership crisis in Kabul that has permeated down to the regular and irregular armed forces deployed by the government, widened the country’s ethnic and political divide and helped worsen the economic meltdown.

The season has seen a dire security situation — yet the US seems reluctant to admit how bad it has become. At least two provincial capitals — Lashkargah, the capital of Helmand province in the south, and Kunduz, the capital of a province with the same name in the north — are besieged by the Taliban,who have shut down all roads into the two cities. Read more

Mohamed El-Erian Jackson Hole was a missed opportunity for a policy pivot

| Aug 30 14:46 | Comments |
Jackson Hole

Jackson Hole  © Getty Images

Two contextual realities formed the backdrop to this year’s Jackson Hole symposium of central bankers, academics and media. Read more

Diane Coyle How the data revolution is shifting the risks for insurers

| Aug 24 05:30 | Comments |

The risks are not balanced in the secondhand car market  © Getty Images

Markets do not work well when there are what in the lingo of economics we refer to as “asymmetries of information”, or in other words when one party to an exchange knows more than the other about some unobservable attributes of the item or service in question.

In a famous 1970 paper, “The Market for ‘Lemons’”, the titular lemons being secondhand cars of dodgy quality, the Nobel economist George Akerlof captured the essence of the problem. There is a good reason in economic theory why secondhand car salesmen do not always have a reputation for plain dealing: they know the quality of the vehicle they are offering for sale whereas the inexpert buyer cannot tell. Buyers will offer a price incorporating their view of the risk that a vehicle is a lemon. In some cases, this can be less than the price the seller of a high-quality car will be willing to accept. Sellers will withdraw the good cars from the market, leaving only lemons. The adverse selection can mean that in extreme cases the market collapses.

Some markets — including that for secondhand cars — limit the problem with devices such as reputation-building by big dealerships, or warranties. But sometimes the government needs to step in to ensure a market characterised by asymmetric information and adverse selection can function at all. Read more

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