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Democrats want Americans to kick Trump out, but there's one problem: the thriving economy – National Post

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(Bloomberg Opinion) — Democrats are facing a challenge they haven’t confronted since the 1988 presidential election. They are trying to persuade enough Americans to kick a Republican out of the White House even though the economy is doing well. They failed that year – and as their latest presidential debate showed, so far they haven’t figured out how to meet the challenge this time either.

Early in that debate, moderator Judy Woodruff of PBS noted that “the overall U.S. economy right now looks strong” and asked the candidates what they would say to voters “who may not like everything President Trump does but they really like this economy.” Each of the candidates who responded denied her premise. They said it wasn’t really a strong economy after all.

One of their tacks was to bring up specific shortcomings of the economy. Senator Bernie Sanders of Vermont said we have the highest child-poverty rate “of almost any major country on earth” and that wage growth over the past year, at 1.1% after inflation, has been “not great.” Former Vice President Joe Biden said that “most Americans” would “have to sell something or borrow the money” to pay an unexpected $400 bill. Entrepreneur Andrew Yang said that depression, financial insecurity and student loan debt are at record highs.


Senator Elizabeth Warren speaks as South Bend Mayor Pete Buttigieg and former Vice President Joe Biden listen near the end of the sixth 2020 U.S. Democratic presidential candidates campaign debate at Loyola Marymount University in Los Angeles, California

REUTERS/Mike Blake

Many of these specific complaints are false or overstated. America’s child poverty rate looks bad in international comparisons only if you are looking at relative poverty: the fraction of children in households making less than half the median income. That’s actually a measure of inequality. Look instead at levels of material deprivation among children, and the U.S. is in line with other countries. Child poverty rates have also been declining.

Wage growth during the past year was better than it has been for most of the past two decades; and it is as good a conjunction of wage growth and high employment levels as we have seen in this period.

Biden’s statistic about a surprise $400 bill is wrong. He almost certainly misunderstood a Federal Reserve finding that 61 percent of Americans would pay a $400 bill out of cash. The other 39 percent, it is true, would sell something or borrow the money, for example by running a credit-card balance. That doesn’t mean a majority of the population would “have to” resort to such measures.

Americans’ self-reported financial security is also holding up well. The percentage of Americans who tell Gallup they are worried about maintaining their standard of living has generally been falling. For three years running, majorities have said that their financial situations are improving.

While Democrats are straining to find gloomy statistics, almost every economic indicator is moving in the right direction. Employment growth and wages are up. Poverty is down.

The other main tack the Democratic candidates took was to deny that Americans consider today’s economy good. Biden and Yang were joined by Massachusetts Senator Elizabeth Warren and South Bend, Indiana, Mayor Pete Buttigieg in claiming that although gross domestic product and the stock market have been rising, ordinary Americans aren’t feeling good economic times. “This economy is not working for most of us,” the mayor said.

Many of these specific complaints are false or overstated. America’s child poverty rate looks bad in international comparisons only if you are looking at relative poverty: the fraction of children in households making less than half the median income

But most Americans don’t feel the way these Democrats say they do. As noted already, most Americans say their financial situations are getting better. The percentage of Americans who say it’s “a good time to find a quality job,” as another Gallup question puts it, has been at or higher than 50% for all of Trump’s time in office. It was below 50% for almost all of the George W. Bush and Barack Obama years. During the past two years, a majority of Americans has also rated economic conditions as excellent or good. They didn’t do that during the past two presidencies.

It is certainly possible for Democrats to argue that we could be doing better, or to deny that Trump’s policies are responsible for the health of the economy. A lot of positive economic trends have continued, but not accelerated, during his time in office. But to say that “the middle class is getting killed,” as Biden did at the debate, is to fly in the face not just of the economic data but of what most Americans think about their own lives.

Perhaps the bottom will fall out of the economy before the election in a way that few people now anticipate. If it stays on the same path, though, President Trump will campaign next fall on a simple economic message: He has been good for the economy and the Democratic nominee would be bad. On current form, the Democratic candidate will counter him by trying to convince Americans that the economy isn’t as good as it looks and they’re not doing as well as they think they are. And then they’ll switch the subject to how Trump is dangerously disconnected from reality.

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Nigeria launches eNaira amid hope, scepticism – and plenty of uncertainty

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Nigeria on Monday became the first African nation to launch a digital currency – the eNaira – a move its leaders said will expand access to banking, enable more remittances and even grow the economy by billions of dollars.

Africa’s most populous nation joins the Bahamas, the first to launch a general purpose central bank digital currency, known as the Sand Dollar, in October. China has ongoing trials and Switzerland and the Bank of France have announced Europe’s first cross-border experiment.

But experts and cryptocurrency users in the continent’s biggest economy say the fact that there are more questions than answers regarding the eNaira – and a large amount of worry over the consistency of Central Bank (CBN) rules – means the government faces a tough path to make the eNaira a success.

Central Bank Governor Godwin Emefiele said during Monday’s launch that there had been “overwhelming interest and encouraging response”, adding that 33 banks, 2,000 customers and 120 merchants had already registered successfully with the platform, which is available via an app on Apple and Android.

Some 200 million nairas’ worth of eNaira, which will maintain parity with the traditional currency, has been issued to financial institutions, he said. President Muhammadu Buhari said use of the currency could grow the economy by $29 billion over ten years, enable direct government welfare payments and even increase the tax base.

Nigeria’s young, tech-savvy population has eagerly adopted digital currencies. Cryptocurrency use has grown quickly despite a Central Bank ban in February on banks and financial institutions dealing in or facilitating transactions in them.

Nigeria ranked seventh in the 2021 Global Crypto Adoption Index compiled by research firm Chainalysis. Official digital currencies, unlike crytocurrencies such as bitcoin, are backed and controlled by the central bank.

But some of what drove Nigeria’s enthusiastic adoption of cryptocurrencies was the Central Bank’s own shifting rules regarding accessing foreign currency – and the naira’s plunging value on parallel markets that saw savings shrink.

“It’s not clear looking at the CBN’s body of work that Nigerians would be comfortable using this,” said Ikemesit Effiong, head of research with Lagos-based consultancy SBM Intelligence.

He added that the CBN had not yet made clear whether users could transfer eNaira back into traditional naira, whether they could use cryptocurrency to buy or sell the eNaira or even whether there would be physical locations to use and transfer eNaira, or whether it would be entirely digital.

“There are more questions than answers, even though we are looking at the launch of this digital currency. The fact that this is the case so late in the game is concerning,” he told Reuters.

The CBN issued a nine-page FAQ, which said eNaira users would access it via the phone app, internet banking or a code dialled from mobile phones, but it did not address transferability or other questions raised by Effiong.

Only three local television channels were allowed to attend the launch, and officials took no questions.

For 28-year-old Ebuka Joseph, an art dealer and enthusiastic cryptocurrency user in the commercial capital, Lagos, the uncertainty means he will stay on the sidelines, for now.

His concerns centre on whether he would easily be able to change eNaira back into normal currency.

“I have had issues trusting the central bank … because they have already banned crypto,” he told Reuters. “I want to hear from people, see people use it, before I venture into it.”

 

(Reporting by Libby George; Editing by Nick Macfie)

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Explainer: Climate change: what are the economic stakes?

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COP26 climate talks in Glasgow starting next Sunday may be the world’s best last chance to cap global warming at the 1.5-2 degrees Celsius upper limit set out in the 2015 Paris Agreement.

The stakes for the planet are huge – among them the impact on economic livelihoods the world over and the future stability of the global financial system.

Here are 10 climate change-related questions that economic policy-makers are trying to answer:

1) HOW MUCH DOES CLIMATE CHANGE COST? From floods and fires to conflict and migration: economic models struggle with the many possible knock-on effects from global warming. The ballpark IMF estimate is that unchecked warming would shave 7% off world output by 2100. The Network for Greening the Financial System (NFGS) group of world central banks puts it even higher – 13%. In a Reuters poll of economists, the median figure for the output loss in that scenario was 18%.

2) WHERE IS THE IMPACT GOING TO BE FELT HARDEST? – Clearly, the developing world. Much of the world’s poor live in the tropical or low-lying regions already suffering climate change fall-out like droughts or rising sea levels. Moreover their countries rarely have the resources to mitigate such damage. The NFGS report projects overall output losses of above 15% for much of Asia and Africa, rising to 20% in the Sahel countries.

3) WHAT DOES THAT MEAN FOR INDIVIDUAL LIVELIHOODS? Climate change will drive up to 132 million more people into extreme poverty by 2030, a World Bank paper last year concluded. Factors included lost farming income; lower outdoor labour productivity; rising food prices; increased disease; and economic losses from extreme weather.

4) HOW MUCH WILL IT COST TO FIX IT? Advocates of early action say the sooner you start the better. The widely used NiGEM macroeconomic forecast model even suggests an early start would offer small net gains for output thanks to the big investments needed in green infrastructure. The same model warns of output losses of up to 3% in last-minute transition scenarios.

5) WHO LOSES OUT IN A “NET ZERO” CARBON WORLD? Primarily, anyone with fossil fuel exposure. A report by think tank Carbon Tracker in September estimated that over $1 trillion of business-as-usual investment by the oil and gas sector would no longer be viable in a genuinely low-carbon world. Moreover the IMF has called for the end of all fossil fuel subsidies – which it calculates at $5 trillion annually if defined to include undercharging for supply, environmental and health costs.

6) WHAT SHOULD CARBON REALLY COST? Tax or permit schemes that try to price in the damage done by emissions create incentives to go green. But so far only a fifth of global carbon emissions are covered by such programmes, pricing carbon on average at a mere $3 a tonne. That’s well below the $75/tonne the IMF says is needed to cap global warming at well below 2°C. The Reuters poll of economists recommended $100/tonne.

7) WOULDN’T THAT LEAD TO INFLATION? – Anything which factors in the polluting cost of fossil fuels is likely to lead to price rises in some sectors – aviation for example. That could in turn lead to what central banks define as inflation – broad-based and durable price rises across the whole economy. Yet history shows this hasn’t necessarily been the case: carbon taxes introduced in Canada and Europe pushed overall prices lower because they cut into household income and hence consumer demand, a recent study showed. It is also true that doing nothing could lead to inflation: a European Central Bank paper last year warned of food and commodity price rises from extreme weather events and the land shortages being caused by desertification and rising sea levels.

8) ARE GREEN ADVANCES REALLY DECOUPLING EMISSIONS FROM ECONOMIC GROWTH? Genuinely sustainable growth implies that economic activity can grow as needed without adding yet more emissions. This is the holy grail of “absolute decoupling”. But so far, any decoupling has either been largely relative – in the sense of merely achieving higher rates of economic growth than gains in emissions – or achieved by shifting dirty production from one national territory to another. And that is why, for now, global emissions are still rising.

9) WHO BEARS THE BRUNT OF TRANSITION? The idea of “Just Transition” has been espoused by bodies such as the European Union to acknowledge that the transition to net zero should happen in a fair way – for example by ensuring low-income groups are not made worse-off. At a global scale, the rich countries which since their industrial revolutions have generated the bulk of emissions have promised to help developing countries transition via $100 billion of annual transfers – a promise so far not fulfilled.

10) COULD THIS SPARK A FINANCIAL CRISIS? The global financial system needs to be insulated against both the physical risks of climate change itself and the upheavals likely to happen during a transition to net zero. Central banks and national treasuries are calling on banks and other financial players to come clean about the exposure of their books to such risks. The ECB and other regulators have made it clear there is a long way to go on this.

 

(Editing by Giles Elgood)

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Bank of Canada to raise rates in Q3 next year, possibly sooner: Reuters poll

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The Bank of Canada will raise rates as early as the third quarter of next year, at least three months earlier than previously expected, according to economists polled by Reuters who see a risk that the increase could come even sooner.

Just last month economists were almost evenly split on the risk of higher rates; now nearly all are saying sooner rather than later.

That shift in view, based on intensifying inflation pressures – owing to global supply chain bottlenecks, labour shortages and rising energy costs – is increasingly shared by forecasters around the world.

“With inflation pressures continuing to build globally, Canada‘s activity story looking robust, and with the jobs market strengthening more quickly than in most other countries, the odds are increasingly stacked in favour of earlier and more aggressive policy tightening next year,” said James Knightley, chief international economist at ING.

That view is in line with the central bank’s latest Business Outlook Survey, which reported firms anticipating stronger demand as the COVID-19 pandemic fades, but supply constraints threatening to limit sales and raise costs.

Canada‘s inflation rate accelerated to an 18-year high of 4.4% last month, driven by high gas prices, soaring housing costs and rising food prices, putting pressure on the BoC to consider hiking rates before long.

While the median view of economists in an Oct. 18-22 poll showed the BoC would keep rates unchanged at 0.25% through the first half of next year, rates are expected to rise by 25 basis points to 0.50% in the third quarter.

Financial market traders are pricing in the first hike as early as April.

Forecasts from economists on whether rates will go up in Q3 were on a knife’s edge. But the risk to their expectations was clear: 90% of respondents, or 18 of 20, said a BoC move would come earlier rather than later.

BIG DIFFERENCE

Based on a smaller sample of respondents, the BoC was then forecast to hike in the first quarter of 2023 to 0.75% and end the year at 1.25%.

If the poll is correct, the BoC will notably diverge from the U.S. Federal Reserve, which is expected to keep rates unchanged through the end of next year. [ECILT/US]

“The big difference between the two countries is (that) in Canada employment is now back to the pre-pandemic level, whereas in the U.S., it’s not,” said Stephen Brown, senior Canada economist at Capital Economics.

Inflation was expected to remain above the central bank’s target and to rise to 4.1% this quarter, up from 3.1% predicted three months back. It was then predicted to ease, averaging between 2.2% and 3.7% in each quarter next year. But next year’s 2.5% average forecast is up from 2.2% predicted in July.

“The second wave of inflation in 2022 will be much more interesting, where we will see some increasing wages alongside demand coming from people spending money,” said Benjamin Tal, deputy chief economist at CIBC Capital Markets.

“That semi-normal to me would be the more risky inflation because it will be demand-driven, and if that’s the case, you would love to see the Bank of Canada and the Fed reacting to it,” said Tal, who expects both central banks to raise rates in the second half of 2022.

Growth was expected to take a hit this year. The export-driven economy would grow on average 5.0% this year, a sharp downgrade from 6.2% predicted three months back. For next year, it was expected to grow 4.0%, unchanged from the previous poll.

The BoC will also taper its asset purchase programme by C$1 billon from its current C$2 billion at its Oct. 27 meeting, the poll showed. That is also when the bank will provide its quarterly update on growth and inflation.

 

(Reporting by Mumal Rathore; Additonal reporting by Sarupya Ganguly; Polling by Prerana Bhat and Susobhan Sarkar; Editing by Ross Finley and David Holmes)

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