The new President made a pompous appearance. America will Shine in a new size: more more respect, in the world, a completely new orientation of economic policy. Strong words, great promises, so Ronald Reagan in 1981 took office.
put Reagan and brought the USA and the Rest of the world interest rate shock. A combination of higher government spending and tax cuts, driving the state budget deep into deficit. At the same time, the US Central Bank, the Inflation is fought, has aggravated the Situation. In the result, the Dollar appreciated strongly. Parts of the US industry lost its international competitiveness, which led to a massive loss of jobs.
so Now Donald Trump. The President-elect promises to reduce taxes and increase government spending. A large infrastructure program to trigger a construction boom. Oh, and at the same time he wants to deleverage the American state. How it all fits together is a mystery.
For all the uncertainty, the acquisition of power Trumps means for world politics, one thing is certain: When he makes his crude financial policy announcements from the election campaign is only partially true, the time of ultra-low interest rates is over. The consequences would be felt around the world. In a world of extremely high debt, we have to adjust to serious economic shocks.
Crash of bond prices
the first taste was immediately after the announcement of the election result in the past week, visible: 10-year US government bonds lost value, interest rates soared by a few tenths of percentage points. German government bonds are, so far, negative interest, now back to positive returns. Many emerging countries experienced almost a Crash of the bond prices.
of Course, so far, the interest rate level is still low. But Trump moves only in two months in the White house.
history does not repeat itself. The world today is different than it was in 1980. And Reagan was ready to massive external deficits, to be output of program Finance. He believed in international free trade and the independence of the U.S. Central Bank.
Trump, however, wants to protect U.S. jobs from foreign competition. The chronic foreign trade deficit, he wants to overcome. Therefore, he is questioning international trade agreements. China and Mexico, he has already threatened with punitive tariffs. The Euro-zone and Germany in particular, to high Surpluses with the United States, could be next in the stocks.
The US Federal reserve under its chair Janet Yellen has attacked Trump in the election campaign, sharp and, implicitly, their independence is called into question.
As a conflictual scenario is brewing. The mix of Reagan, cher, fiscal policy and populist trade policy has the potential to result in a severe economic crisis.
Should Trump, in fact, a large debt-financed spending program to work, America will need trillions of dollars in foreign borrowing. For this, he will have to offer significantly higher interest rates than in the past. Evaluates the result of the Dollar, as in the early eighties, under Reagan, would increase the US trade deficit, instead of falling, as Trump promised. Companies would lose their competitiveness, further job losses are included.
Not an unrealistic scenario: While the construction industry is booming, lost more industrial jobs in the rust belt of the American mid-West, so that the people Trump have voted, because he has promised them a new, better Jobs. A highly expansionary fiscal policy would, first and foremost, is the use of America’s domestic economy – at the expense of the foreign economically active industry.
According to his pre-election rhetoric will Trump the negative effects of his policies other responsible. America’s trading partners – China, Mexico, the Eurozone – need to complain about unfair practices adopted. A cascade of dumping allegations and punitive tariffs would probably be the result. On the incumbent President Barack Obama, who is Wednesday Germany-Visit to the country, start pouring a lot of questions.
Such protectionism, however, will increase the price of many goods in the United States. Anyway, a trump’s edition of the program will take on an economy that already works close to the full employment threshold and the meanwhile, strong wage growth is produced. The threat of deportation from millions of Latin American migrants could lead in some sectors and regions to acute shortage of personnel.
In the case of rising inflation rates would have to actually respond to the Fed and monetary policy rapid tightening – venom for Trump promised high rates of growth. Accordingly, the pressure on the Central Bank is likely to increase in this scenario to keep interest rates low, and higher rates of price increase. Fed chair Yellen will have to answer on Thursday all sorts of questions of the Congressman.
Trumps economic policy, as far as was previously foreseen, has what it takes to change the world economy – and not for the Better. The Era of extremely low interest rates and inflation rates are likely to go to the end; the independence of the Central banks is at risk; the international division of labor is likely to be turned back.
Whether the people are wealthy, and makes America greater? It would be carefully formulated to be a Surprise.
The most important economic events for the week
Berlin – New citizens - 9. Integration summit at the Federal Chancellery.
Brussels – European impotence - EU-the Council of foreign Ministers, London: The world order of the post-war period is finally over. The Europeans are looking for answers.
Tokyo – arm Japan - a Stagnant economy, aging population: New from the Japanese gross domestic product in the 3. Quarter.
Gütersloh shared prosperity - The Bertelsmann Foundation has published the Index of social justice in the European Union.
Berlin – attack on the business model - Work national conference, with employers President Kramer, Chancellor Merkel and economy Minister Gabriel: the export-oriented economic model in a world order with Trump?
Wiesbaden – performance – , The Federal Statistical office published a first estimate for German gross domestic product in the 3. Quarter.
Brussels – guardian Trump has asked the US defence commitment in the framework of the Nato in question. Now, the EU has advised the Minister of defense.
Berlin – Welcome, lame duck! - U.S. President Barack Obama visits Europe and makes it into Berlin Station.
Frankfurt am Main banks, and more - The Bundesbank published its report on financial stability in Germany.
Paris – The most important price in the world – The International energy Agency (IEA) world energy Outlook.
Paris – American model - the third TV debate of the candidates for the primaries to the presidential candidacy of the Conservatives in France. The candidate, Juppe or Sarkozy, will it get to do with Front National leader Marine Le Pen, the Trump and the Brexiteers wants to emulate.
Berlin – course - After the change of direction in his country meets Obama, Merkel, May, Hollande, Renzi and Rajoy.
Wolfsburg – The time according to the Diesel - meeting of the Supervisory Board at Volkswagen.
Lima – the Eastern half of The world I summit of the Pacific rim countries (Apec) in Lima, with Obama and Putin.
Lima – the Eastern half of The world II continuation of the Apec summit.
Paris – The conservative challenge - First round of the primaries for the nomination of the presidential candidate of the Conservatives in France.