The US economy is on track to break its own record; its current 115 months of expansion is only five months shy of the record set in the 1990s. The next recession will come, maybe soon, as the economy succumbs to factors such as policy errors, foreign growth and corporate profit. And the United States will not fall alone; other Western Hemisphere countries will be dragged down with it.
The financial crisis a decade ago exposed the considerable challenges of resolving large, globally active banks. In the United States, the Federal Deposit Insurance Corporation – which has insured deposits and resolved failed banks since the Great Depression era – is one of the agencies leading the resolution planning effort. The chairman of the FDIC discusses the Corporation’s current bank resolution tactics in a global environment.
Emerging markets are already looking forward to 2019, glad to see 2018 nearly behind them. It turned out not to be a good year for emerging markets as a whole, after being on top of the world in 2017. Factors beyond their control—such as the monetary-tightening regime in the United States and high-flying dollar, trade wars and market corrections in developed economies—are largely to blame, but recognizing this will not erase the pain.
Little is more valuable to financial-market participants than accurate predictions of future growth. With interest rates on the rise in the US, investors are anxiously looking for indications of an impending recession. But what are yield curves really telling us about future growth prospects—in the United States and also in Australia? Is dreaded recession in the cards, or is modest slowdown more likely?
The United States has reached a critical point in determining data privacy standards. With mounting concern among all stakeholders, it is no longer a question of whether more privacy laws will be enacted, but how—and specifically, whether the problem will be resolved at the state or national level.
At the end of August, leading ratings agency Moody’s downgraded 18 banks and two finance companies in Turkey. According to the agency, the downgrades “primarily reflect a substantial increase in the risk of a downside scenario, where a further negative shift in investor sentiment could lead to a curtailing of wholesale funding”.
The name of the Tax Cuts and Jobs Act of 2017 describes its purpose: slashing the US corporate tax rate from 35 to 21 percent would result in executives investing the resultant savings into growing their companies, increasing productivity, creating jobs, equalizing wage inequalities. If only the executives were on the same page. Instead, many are funnelling the lion’s share of the windfall into share buybacks, benefiting their investors.
All over the world, regulations have been implemented to protect economies, especially following the major recession 10 years ago. But unfortunately they have not always been executed in concert, leading to costly regulatory fragmentation. Banks have been particularly hard hit by the costs of compliance to misaligned regulation, with resources being drained away from more productive areas. But there are ways to mend these divergences, starting with cooperation between regulators.
Global growth is strong, but policymakers need to navigate uncharted waters and enact complex policy changes to keep the world economy on an even keel. The main risk lies not in economic conditions, but in economic policy debates too often distorted by partisanship. We have a chance to leverage new technologies to lift living standards on a sustainable basis—but we need a more level-headed discussion to chart the path forward.
U.S. banks are highly profitable and supporting of economic activity, as they were prior to the 2008-09 financial crisis. It is important to remember how quickly conditions can change. As a result of post-crisis prudential reforms, banks have bolstered their capital and liquidity. It is essential to preserve these hard-won improvements. It would be a mistake to assume that a severe downturn or crisis cannot happen again.