The writer, Morgan Stanley Investment Management’s chief global strategist, is author of ‘The Ten Rules of Successful Nations’
Driven by the success of America’s vaccine rollout and massive government stimulus, the US economy is expected to grow as fast as 7 per cent this year and is currently leading the world recovery. The commentariat is talking up an “American Renaissance” in a nation that on Sunday marked its 245th Independence Day.
But there is a problem: America just went through an economic renaissance. It’s not likely to be reborn again.
A decade ago, in the wake of the 2008 financial crisis, Standard & Poor’s downgraded US government debt for the first time ever, triggering dire forecasts of American decline. Instead, the 2010s saw an expansion of American economic power, driven by its tech prowess and its relatively quick resolution of the debt crisis.
The US share of global gross domestic product rose from a 2011 low of 21 per cent to 25 per cent last year. Average incomes started the decade 26 per cent higher in the US than in Europe and finished more than 60 per cent higher. The US income lead over Japan grew even more dramatically. By early 2020, despite talk of “despair” in the jobless middle classes, US consumer and small business confidence hit highs unsurpassed since the 1960s.
As a financial superpower, the US reached even greater heights. Its share of global stock markets increased in the 2010s from 42 per cent to 58 per cent. The dollar emerged more dominant than ever, helping the US extend its lead over other developed nations.
By late 2019, 75 per cent of all overseas loans to individuals and corporations were denominated in dollars, up from 60 per cent before the crisis of 2008. Six of every 10 countries used the dollar as their “anchor” — the currency against which they measure and stabilise the value of their own currency — near a record high. China’s efforts to challenge the dollar as the world’s favourite reserve currency also failed utterly during the 2010s.
After a comeback decade, America is unlikely to rise anew in the 2020s. As I argued at the start of the pandemic, booms that are potent are almost always followed by a long hangover.
The US economy led the world in the 1960s, but in the 70s it worried about falling behind the oil-fuelled Soviet Union. In the 1980s it fretted over an ascendant Japan. The US came roaring back during the tech boom of the 1990s, but the 2000s were all about the rise of emerging markets led by China.
Forecasts for another US surge rest in part on faith that it can keep extending its lead in technology. But the US internet giants already face challengers in emerging markets from Asia to Africa, where local entrepreneurs are building national and regional market leaders in ecommerce, e-banking and search. Europe is closing the innovation gap in fields such as robotics and AI, and European start-ups are attracting more private equity money than ever before.
Booms are often killed by complacency, which grips the US now. Significant voices in both political parties have argued that America should continue to borrow and spend freely, thanks to the unrivalled status of the dollar as the world’s most wanted currency.
But easy money flowing out of the Fed is threatening to weaken the dollar and feeding the rise of zombies — companies which earn too little to make even interest payments on their debt. They barely existed in the US 20 years ago, but accounted for 6 per cent of listed companies by 2010, and almost 20 per cent by last year.
The federal government and corporations are now so deep in debt, it is hard to imagine how they can further boost the economy. In 2010, the US owed the rest of the world $2.5tn, a sum equal to 17 per cent of US GDP. By early last year, those liabilities had risen to $10tn and more than 50 per cent of GDP — a threshold that has often triggered currency crises in the past. Currently they are $14tn and 67 per cent of GDP.
None of this means that American declinists, so wrong in the 2010s, will finally be proved right. China’s rising share in the global economy has come largely at the expense of Europe and Japan. Declinists, still convinced the US will soon be overtaken by China, overlook the fact that China has huge debt problems too.
What is more likely is that the US will have a mediocre decade, weighed down by the excesses of its recent boom. Relative to other markets, US stocks are at a 100-year peak. Valuations that high reflect the new optimism: after a decade of unanticipated US success, many analysts now expect more of the same. Alas, this may be as good as it gets for America.
Restarting a sustainable, export-oriented economy – Business in Vancouver
Clean, sustainable products and services will be key to B.C.’s economic recovery | Chung Chow
This column was originally published in BIV Magazine‘s Trade issue.
As B.C. looks to restart its economy, the demand for our province’s clean and sustainable products and services is surging across a variety of sectors, demonstrating the key role that trade will play in our economic recovery.
Exports increased 24% year-to-date for April – that’s up $3 billion over the same time last year. It’s a big boost for the provincial economy, with a majority of our exports being commodities in great demand. Our stringent environmental standards in wood exports, burgeoning clean tech sector and high standards in labour protections mean that when other markets buy from us, they’re also contributing to a cleaner and more socially responsible global economy.
B.C. was committed to international trade long before the pandemic. It creates new opportunities for businesses, and more importantly, it creates good jobs and prosperity for people in B.C. When businesses export, they are more resilient. Access to more markets means they have a more diverse customer base and aren’t as impacted by fluctuations in their local economies.
We have a program perfectly designed to help small businesses get their goods and services to new markets. It’s called Export Navigator. This program offers businesses free expert guidance on exporting. Businesses get connected with an expert advisor who will help “navigate” them through the export process. It’s hugely beneficial, helping businesses reach new customers for the first time and making the process a lot easier along the way.
We continue to support B.C. businesses in other ways as well. For example, we developed a series of grant programs to meet their unique needs, making over half a billion dollars available in direct supports. The Launch Online program helps businesses improve their online presence to attract and keep customers and meet demand as online shopping hit new heights during the pandemic. The Supply Chain and Value-Added Manufacturing grant helps B.C.-based manufacturers in the aerospace, shipbuilding, food processing and forestry sectors recover and grow, supporting them to seek efficiencies to continually keep goods flowing into the marketplace.
From natural resources and agrifoods to manufactured goods and high-tech goods and services, B.C. has a lot to offer to the world. We are a responsible, low-carbon producer of natural resources and manufactured goods, and we are working hard to make sustainability a larger part of B.C.’s brand and our global competitive advantage. Our priority is to help B.C.-based businesses start up, scale up, access global markets and succeed in the highly competitive world marketplace. The more we export, the more new dollars we bring into B.C. and generate revenue that supports government investments in health care, education and critical infrastructure.
We stand behind the high-quality goods that B.C. has to offer to the world. Globally, companies large and small are increasingly applying environmental, social and governance filters to their investment decisions. We are committed to growing our economy in a sustainable way, and are working on a new trade diversification strategy that will provide us with the opportunity to develop an updated, forward-looking and ambitious approach that aligns closely with these principles, while ensuring that our exporting businesses are maximizing the opportunities afforded to them through Canada’s existing free trade agreements. Our recently announced Mass Timber Demonstration Program is an example of how we are advancing technologies that can showcase to the world the possibilities of building with a more sustainable and environmentally friendly product from B.C.
The pandemic leaves behind many lessons and creates a once-in-a-generation opportunity for B.C. to redefine itself. We know the pandemic is not impacting everyone equally, with women and visible minorities being disproportionately impacted. This is why we are committed to continuing to grow strong, robust industries that can provide good jobs for all of B.C.’s diverse populations.
Growth in trade will be a big part of our economic recovery, and as we transition through our restart plan, we will continue to engage with businesses, industry and key stakeholders to ensure we’re supporting their efforts to expand globally.
Our goal is to diversify our trade sectors to include not just our natural resources, but clean tech, high tech, agritech and advanced manufacturing. We need to support our exporters and encourage new exporters to expand our opportunities in global markets and strengthen our resilience.
We’re committed to invest in people and in businesses to restore economic growth and we are confident that the entrepreneurial spirit of B.C.’s business community will rise to the challenge as we work together to build a better future with meaningful jobs and a strong, sustainable economy for all.
Ravi Kahlon is B.C.’s minister of jobs, economic recovery and innovation. George Chow is the province’s minister of state for trade.
This column was originally published in the July 2021 issue of BIV Magazine. The digital magazine can be read in full here.
ECB Lifts Restrictions on Bank Dividends as Economy Rebounds – Bloomberg
The European Central Bank said it will lift a cap on how much lenders can return to shareholders with dividends and share buybacks, while urging them to remain cautious given uncertainty in the pandemic.
The ECB “decided not to extend beyond September 2021 its recommendation that all banks limit dividends,” the central bank said in a statement on Friday. “Instead, supervisors will assess the capital and distribution plans of each bank as part of the regular supervisory process.”
Reopening economy buoys B.C.’s job market – Business in Vancouver
B.C.’s labour market outperformed most of the country in June with a 1.6% (42,100-person) monthly gain and outpaced the national increase of 1.2%.
The province moved through steps 1 and 2 of its restart plan, highlighted by the reopening of restaurant in-house dining and larger organized events, travel and other recreation. The labour market has fully recovered employment losses from the previous two months, exceeding pre-pandemic levels by 0.6%. The latter marks the best performance among all Canadian provinces, reflecting shallower economic restrictions from the pandemic, solid performances in the commodities and technology sectors and a robust housing market.
However, full-time work has similarly lagged, with levels 1.6% lower than in February 2020, while part-time work rose 9%. B.C.’s unemployment rate fell to 6.6% from 7% in May and marked the lowest level since the pandemic began.
Metro Vancouver performance was consistent with employment growth of 1.5%, although unemployment remained higher at 7.4% of the labour force.
There was strong rehiring for accommodation/foodservices (up 12%) employees as dining restrictions were largely lifted. This contributed half of the net monthly increase. Significant gains were also recorded in finance/insurance/real estate (up 4.1%), health care/social assistance (up 3%) and business/building/other support (up 5%). Gains align with broader business and office reopenings. A drop in resource employment and construction were partial offsets to services-driven growth.
Hiring momentum will continue with Stage 3 of the restart plan underway, which allows for larger events, fairs and trade shows, reopenings of casinos and normalization of fitness classes and gyms, while domestic tourism partly offsets international travel restrictions.
The Lower Mainland’s housing frenzy continued to cool through June as affordability erosion and satiation of demand pulled forward by the pandemic cut sales. Meanwhile, both buyers and sellers are likely taking a step back to pivoting attention to other activities as social restrictions ease.
Multiple Listing Service sales spanning Metro Vancouver and Abbotsford- Mission (Lower Mainland) reached 6,007 units last month. While still up a lofty 46% from a year ago, this is compared with a 217% increase in May. •
Bryan Yu is chief economist at Central 1 Credit Union.
Why are Covid cases rising among double vaccinated? – Deccan Herald
Luxury Real Estate Sees Unprecedented Growth in First Half of 2021 – Storeys
96% of COVID-19 cases are among those not fully vaccinated, B.C. health officials say – Global News
Silver investment demand jumped 12% in 2019
Europe kicks off vaccination programs | All media content | DW | 27.12.2020 – Deutsche Welle
Iran anticipates renewed protests amid social media shutdown
Business18 hours ago
Global outage affecting websites of airlines, banks, tech firms now fixed – Globalnews.ca
Politics24 hours ago
Jason Kenney's longing for Alberta's pre-COVID politics – iPolitics.ca
Media22 hours ago
Current's 2021 Public Media Salary Survey – Current
Tech15 hours ago
OnePlus Nord 2: An impressive 5G phone at an affordable price – CNET
Business21 hours ago
Nova Scotia reports 93rd COVID-19 related death; no new cases Thursday – CTV News Atlantic
Media12 hours ago
CBC grapples with how to program an Olympics in the social media age – The Globe and Mail
Investment15 hours ago
Martin Pelletier: How anti-vaxxers can impact your investment portfolio – Financial Post
Health21 hours ago
Among Fully Vaccinated, Breakthrough Covid-19 Infections Are More Common Than Previously Thought: Does It Matter? – Forbes