Former US President Bill Clinton’s campaign strategist, James Carville, famously remarked that when it came to winning elections it was the economy, stupid.
This dictum has led many observers to surmise that the strong US economy makes President Donald Trump’s re-election in 2020 nearly certain. However, between now and November there can be many an economic slip. This would seem to be especially the case at a time when the International Monetary Fund estimates that 90% of the world’s economies are experiencing slowdowns.
This was the lesson that Republican hopeful John McCain learned as the US and global economies collapsed on the eve of the November 2008 presidential election, after having started the year on a seemingly sound footing.
To be sure, if the election were held today, the strong US economy would make Trump a formidable candidate for re-election.
Unemployment is at a 50-year low, the economy is growing at a satisfactory rate, wages are rising and the US stock market is beating record levels on almost a daily basis.
These achievements come at the cost of incurring a large budget deficit and a ballooning public debt that might have mortgaged the country’s economic future, but such matters are unlikely to be of concern to the electorate.
Unfortunately for Trump, today’s US economy will not be the determining factor in the 2020 presidential election. Rather, what will matter is how the US economy and financial markets perform in the months immediately running up to November 2020. In six months, the US economy could be looking decidedly less rosy.
Today, much like in early 2008, serious risks hang over the US and global economies. These include a global credit and asset price bubble of epic proportions, spawned by a decade of ultra-easy money by the world’s main central banks.
Global debt-to-GDP levels today are significantly higher than they were at the start of 2008. US and global equity valuations are stretched, housing bubbles have re-appeared in a number of important economies, and an alarming amount of credit has been extended to non-creditworthy borrowers around the globe at historically low interest rates.
No one can know when the global credit and asset market bubble will burst or what event will cause it to do so. However, with the abrupt change in the global economy over the past year, it would be rash to dismiss the possibility that the global credit bubble could burst well before the election.
The Chinese economy shows clear signs of losing momentum, the German, Italian, and UK economies all appear to be on the cusp of recessions, and the Indian economic growth rate has halved amid increased domestic political strife. Trump has a fragile truce in his trade war with China and is threatening to impose additional import tariffs on an already weak European economy.
The global political landscape is deteriorating. Geopolitical risks in North Korea and Iran have increased and the Middle East is in turmoil once again. Social protests are gaining momentum in countries as disparate as Chile, Colombia, France, Hong Kong, India, Iran and Venezuela.
Past experience, including that in 2008, should be informing us that when credit and asset price bubbles burst, the economic and financial market fallout can be disruptively large. It should also be reminding us as to how interconnected the world’s economic and financial system has become. In the same way as in 2008 the Lehman bankruptcy spilled over from the US to the rest of the global economy, a systemic crisis abroad could very well spill back to American shores.
Trump could be lucky in November; the global credit bubble may burst after his re-election. However, this is far from a certainty. It is equally possible that this time next year, we will look back and ask ourselves how we could have missed so many early warning signs about real trouble ahead in the global economy. These include the recent sovereign debt default in Argentina, the rising private credit defaults in China and Turkey, the WeWork financial fiasco, and the abrupt economic slowdown in China and Germany, the world’s second and third largest economies respectively.
Desmond Lachman is a resident fellow at the American Enterprise Institute. He was formerly a deputy director in the International Monetary Fund’s Policy Development and Review Department and the chief emerging market economic strategist at Salomon Smith Barney.
Securing good jobs, clean air, and a strong economy – Prime Minister of Canada
Autoworkers have been a keystone of the Canadian economy for generations. By investing in the future of the auto industry, we are not only securing good middle-class jobs, we are fighting climate change, and building an economy that works for generations to come.
Since January alone, Canada has secured several historic manufacturing deals for electric vehicles (EVs), hybrids, and batteries – deals that will create and secure thousands of good, middle-class jobs and provide the world with clean vehicles. Today, we are seeing the results of one of those deals start to roll off the line.
The Prime Minister, Justin Trudeau, was joined today by Premier of Ontario, Doug Ford, to open Canada’s first full-scale EV manufacturing plant, General Motors of Canada Company’s (GM) CAMI assembly plant in Ingersoll, Ontario. Starting today and going forward, the plant will build fully electric delivery vans – the BrightDrop Zevo 600 – which will help cut pollution and keep our communities healthy for our children and grandchildren.
Thanks in part to a $259 million investment from the Government of Canada, GM’s CAMI assembly plant was able to retool its operations to build these electric vans. By 2025, the plant plans to manufacture 50,000 EVs per year. This investment has helped secure thousands of well-paying, high-quality jobs across GM facilities, and is helping advance the electrification of Canada’s automotive sector.
The Government of Canada will continue to work to attract investment from companies around the world as we build our EV supply chain – from mining critical minerals to manufacturing batteries, and vehicles. By taking action today, we are positioning Canada as a global leader in EVs, fighting climate change, securing good jobs, and building an economy that works for all Canadians – now and into the future.
“When we invested in GM’s project to build Canada’s first full-scale electric vehicle manufacturing plant in Ingersoll, we knew it would deliver results. Today, as the first BrightDrop van rolls off the line, that’s exactly what we’re seeing. This plant has secured good jobs for workers, it is positioning Canada as a leader on EVs, and will help cut pollution. Good jobs, clean air, and a strong economy – together, that’s the future we can build.”
“Today is proof that our historic investments in EV manufacturing are paying off. With the first BrightDrop vans coming off the assembly line, we’re seeing the skill of Canadian workers making a huge difference as the world moves to EVs. Our government, in partnership with GM, is cementing Canada’s leadership in the EV supply chain.”
“This milestone represents GM at our best – fast, flexible and first in the industry. The BrightDrop Zevo is a prime example of GM’s flexible Ultium EV architecture, which is allowing us to quickly launch a full range of electric vehicles for our customers. And, as of today, I am proud to call the CAMI EV Assembly team the first full-scale all-electric manufacturing team in Canada.”
“This is a very exciting moment – a revolution in the way we transport people and goods. Today marks a huge day for BrightDrop, as we expand our footprint and begin producing the Zevo electric vans at scale, and a huge milestone for Canada on the road to a brighter future. Opening the CAMI plant is a major step in providing EVs at scale and delivering real results to the world’s biggest brands, like DHL Express, who will be our first Canadian customer.”
- The Government of Canada’s $259 million investment supports GM’s more than $2 billion project to reignite production at its Oshawa assembly plant, after operations stopped in 2019, and transform its CAMI assembly plant in Ingersoll.
- The investment is being made through both the Strategic Innovation Fund and its Net Zero Accelerator Initiative.
- The Government of Ontario made a matching contribution of up to $259 million toward the project.
- Founded in 1918, General Motors of Canada Company (GM) is one of the largest automotive manufacturers worldwide. It is headquartered in Oshawa, Ontario, and is one of Canada’s largest automotive manufacturers.
- GM is planning to introduce 30 new electric vehicles by 2025, eliminate tailpipe emissions from new light-duty vehicles by 2035, and become carbon neutral in its global products and operations by 2040.
- The automotive sector contributes $16 billion to Canada’s gross domestic product and is one of the country’s largest export industries.
- The automotive sector supports the employment of nearly 500,000 Canadians.
- The 2030 Emissions Reductions Plan, released in March, puts Canada on track to achieving our goal of cutting emissions by 40 to 45 per cent below 2005 levels by 2030 while continuing to build a strong economy.
- To make zero-emission vehicles more affordable and accessible, the Government of Canada offers incentives of up to $5,000 off the purchase or lease of a light-duty zero-emission vehicle through the Incentives for Zero-Emission Vehicles (iZEV) Program. Since May 2019, close to 176,000 Canadians have taken advantage of this program.
- Since 2015, the Government of Canada has invested $400 million in building approximately 35,000 zero-emission vehicle charging stations across the country.
UK's Economy To Dip Into Recession This Winter – OilPrice.com
The UK’s recession will officially begin this winter and is likely to last for most of next year, a closely watched survey out today suggests.
S&P Global and the Chartered Institute of Procurement and Supply’s (CIPS) final purchasing managers’ index (PMI) measuring private sector activity in November was unchanged at 48.2, the lowest number since January 2021 when the UK was in the constrained by tough pandemic lockdowns.
The reading was below analysts’ expectations but held steady from an earlier estimate. The services PMI was unchanged at 48.8. Services firms generate about two thirds of UK GDP.
The figure prompted experts to predict the forewarned recession will start during the final weeks of this year.
A recession is typically defined as two consecutive quarters of contraction. The UK economy shrank 0.2 percent over the summer.
PMI has slid this year
Source: S&P Global
Britain’s PMI has now been below the 50 point threshold that separates growth and contraction for four months now, indicating consumers and businesses started cutting spending during the summer when the cost of living crisis gathered pace.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said Britain is now in the teeth of the worst economic slowdown outside the Covid-19 pandemic since the financial crisis in 2008.
The economy is being spiked by the worst inflation crunch in 41 years, with prices rising 11.1 percent over the year to October.
Pay is failing to keep pace with inflation, putting households on track for the biggest living standards shock on record. The Office for Budget Responsibility reckons real incomes will fall 7.1 percent over the next two years.
That living standards squeeze is expected to drive a spending slowdown, keeping the UK in recession for at least a year. However, experts think the amount of GDP lost during the slump will be small compared to past recessions.
Businesses are being squeezed by soaring energy costs, forcing them to scale back unprofitable activity.
Gabriella Dickens, senior UK economist at consultancy Pantheon Macroeconomics, thinks businesses will have to shed workers to offset weaker spending.
“Firms will move decisively to reduce employment next year, as they are forced to consolidate costs in the face of higher financing costs and weaker demand,” she said.
The pound slumped 0.34 percent against the US dollar on the news. The FTSE 100 climbed 0.24 percent.
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B.C.’s economy forecast to remain steady, despite slower near-term economic growth | BC Gov News – BC Gov News
Like other jurisdictions, B.C. is expected to see slower economic growth through 2023 because of global inflation and higher interest rates, before steady growth resumes in the medium term, according to projections from private-sector forecasters.
Each year, B.C.’s finance minister meets with the Economic Forecast Council (EFC), a 13-member council of private-sector forecasters from throughout Canada, in preparation for the next year’s budget. This is the second year that an additional set of discussions was added, providing an opportunity to consult with an Environmental, Social and Governance (ESG) Advisory Council to explore how the provincial government can continue to build a more inclusive, sustainable economy and support well-being in British Columbia.
The EFC anticipates the province’s economy will grow by 2.9% in 2022 and 0.4% in 2023; slower than their January 2022 forecasts of 4.2% and 2.7%, respectively. The updated figures are similar to what was presented in the Province’s Second Quarterly Report. Real gross domestic product (GDP) growth is then expected to pick up, with an increase of 1.6% in 2024, followed by gains of 2.3%, 2.3% and 2.1% in 2025, 2026 and 2027, respectively. The reduction in the near-term outlook is consistent with other jurisdictions and reflects persistent global inflation and interest rates rising higher and more rapidly than expected throughout Canada.
“We’re entering this period of slower growth and challenging global economic times in a strong position to continue supporting people, because B.C.’s economy grew more than most last year,” said Selina Robinson, Minister of Finance. “We’ll use the resources we have to address the issues that matter most to people, including housing, health care and building a sustainable economy that works for everyone – but no matter what is on the horizon and no matter what the numbers show, this government will continue to be here to support people.”
Discussions with the EFC and the ESG Advisory Council focused on current events, issues affecting B.C.’s economy and the environmental, social and governance opportunities and challenges facing the province. Topics at the meetings included:
- global inflation and monetary policy impacts;
- government policies to stimulate investment and ensure shared prosperity;
- socioeconomic factors in B.C., such as inequality, Indigenous partnerships, and well-being;
- environment, climate change and the transition to a lower carbon economy;
- housing affordability and supply;
- labour market dynamics and immigration; and
- opportunities for businesses to build on B.C.’s strong ESG profile.
“We are committed to building an inclusive economy, where environmental and social sustainability is the basis for future growth,” said Robinson. “A strong social, cultural and economic foundation is key to successful and resilient communities. We know this, and we know generations will benefit from the decisions we make right now.”
Forecasts and feedback from the two councils will be used to inform the next provincial budget, which will be released on Feb. 28, 2023. EFC members will also have an opportunity to submit revised forecasts in early January.
- In the Province’s Second Quarterly Report, B.C. projected a revised operating surplus of $5.7 billion in the 2022-23 fiscal year.
- Since the summer, B.C. has rolled out approximately $2 billion in affordability measures.
- Environmental, Social and Governance are three main categories often discussed when evaluating sustainability performance, risk-mitigation planning and societal well-being.
To read B.C.’s Second Quarterly Report, visit: https://www2.gov.bc.ca/gov/content/governments/finances/reports/quarterly-reports
For information about new and existing support measures for B.C. residents, visit: https://strongerbc.gov.bc.ca/cost-of-living/
For more about the StrongerBC Economic Plan, visit: https://strongerbc.gov.bc.ca/plan/
To learn about the ways B.C. is committed to environmental, social and governance principles, read the ESG summary report here: https://www2.gov.bc.ca/assets/gov/british-columbians-our-governments/government-finances/debt-management/bc-esg-report.pdf
Bedard, Fantilli headline Canada’s selection camp roster for 2023 World Juniors – Sportsnet.ca
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