Topic Category: Economy

The sharp defeat of Narendra Modi’s Bharatiya Janata Party in the state of Bihar has put the prime minister’s reform plan and political legacy at risk. Despite his overwhelming victory in last year’s national election, his government has failed to overhaul the legal barriers and regulatory excesses which have left an economy full of entrepreneurial people mired in poverty.

For baffling reasons, Russia is perceived as a world power that rivals America. Look beneath the veneer of Putin’s bluster and you’ll find a country in deep financial distress that is on the verge of economic collapse. The culprit is oil. The price of a barrel of oil has been cut roughly in half since June 2014, reaching levels last seen during the depths of the 2009 recession.

The rupiah is plumbing the depths it last visited in 1998 during the Asian financial crisis. The chart below of the rupiah’s value against the U.S. dollar tells the tale. Although the rupiah’s recent plunge is not as dramatic as the post July 1997 float of the rupiah, it is ugly nevertheless.

Prime Minister Narendra Modi delivered his second Independence Day speech in mid-August, and used the opportunity to lay out his government’s priorities for the remainder of his term, which ends in 2019. Largely missing from the address was the optimistic promise of sweeping reforms that would transform the Indian economy, a topic that was the central feature of his first Independence Day speech in 2014.

In mid-July, Bank of Canada Gov. Stephen Poloz affirmed that the country’s GDP contracted for a second consecutive quarter in the April–June 2015 period, technically meeting the definition of a recession. That is very bad news for Prime Minister Stephen Harper’s CPC government, which will be seeking re-election to a fourth consecutive term at parliamentary elections scheduled for October 19.

The plunging Shanghai Stock Exchange and the sudden reversal in the yuan’s appreciation have caused fears to spread beyond China’s borders. Is something wrong with the world’s growth locomotive? In a word, yes. The most reliable approach for the determination of nominal gross domestic product (GDP) and the balance of payments is the monetary approach. Indeed, the path of an economy’s nominal GDP is determined by the course of its money supply (broadly determined).

Although President Xi Jinping’s position at the head of the CCP is secure, the potential for possible political instability was highlighted when the country’s stock market lost roughly one-third of its value in June and July. The government intervened strongly to help stop the slide, cutting interest rates and transaction fees, suspending IPOs, and authorizing the national pension fund to buy stocks.

Economic growth in the U.S. continues to suffer for a variety of reasons. For one, our antiquated tax code punishes U.S. companies and inhibits corporate investment here in the United States. How bad is it? The federal corporate tax rate, at 35 percent, when added to the average estimated state rate of 4.1 percent, brings the combined tax rate to 39.1 percent — the highest among developed countries.

The Federal Reserve’s recent decision to forestall interest rate increases should give Congress the impetus to pass the Trans-Pacific Partnership on behalf of the U.S. economy. This clear sign by the Fed that U.S. economic growth continues to underimpress should have our representatives in Washington looking for ways to spur consumer activity. Free trade agreements do just that.