Category: Economics

The US-German 2-year interest rate differential (swap rate) is a useful directional guide to the actual euro-dollar exchange rate.  At about 105 bp, it is the highest since 2005.  The US premium had peaked in late 2004 near 185 bp.  In the second half from the 1990s, it was common for that US premium to be in excess of 250 bp.  It has risen 25 bp since the center of October, encouraged through Draghi, whose dovishness again surprised traders. 

The Eurozone PMI confirms an irony.  Economic data from the Eurozone offers held up well, pointing to fairly steady even if unimpressive development.  Draghi made a case for environment policy based on risk situations.  The data does not seem to assistance such sense of urgency.  From 52.3, the Eurozone production PMI was slightly better than the flash (52.0) and is a little above the Q3 typical. Of note, on a nationwide level, Germany's flash May was revised higher (Fifty two.1 from 51.6) and Italy was a pleasant surprise at 54.One (consensus 53.1 after 52.7 in Sept).  The service PMI may also surprise on the upside.  Even though the market has treated Draghi'utes comments as if they were a commitment to ease policy at the Dec 3 meeting, it may not be the done deal. 

Many still are unconvinced the Fed will hike in the center of December.  Some argue towards it on technical grounds.  Raising rates in therefore close to the end of the year might inject extra volatility into the markets and complicate year-end activity.  As a matter of fact, the Federal Reserve has taken action in the 30 days of December.  It hiked rates in December 2004 and December 2005, for example.  This cut rates in December 2001 and December 1995.

If one assumes that Given funds, which have been averaging 13 bp over the past 50 and 100 days continues to do so in the first half of December, and then after the rate backpack averages 30 bp, then your December Fed funds contract is pricing in a 75% possibility of a hike. Some assume that it will average the middle of the number, but besides the fact that it’s been averaging around the middle of the variety now, there is no compelling debate to assume this remains the situation.  Indeed, we suggest the possibility that in order to maintain maximum control, the Fed will want to provide adequate liquidity to keep the Given funds rate relatively low to ensure the attractiveness of one of the brand new tools in this cycle, the eye paid on excess supplies (which is the top of the Fed funds target range).  It is true that no one really knows where Given funds will trade following the hike, and we need to take the "odds" only in the contest of this assumption.  My work shows that the conventional measure may under-estimate the market-based probability of a Fed backpack in December.

The euro is an especially narrow range.  The $1.1060-75 music group is blocking the benefit, while $1.10 is holding the downside in check.  A break of say $1.0990 could see the euro retesting its recent lows close to $1.09. On the upside, the new short likely will not be pushed unless the $1.11 region gives, which was the high prior to the Chinese rate cut.  

The buck has not traded below JPY120 since October 22.  If that is support, then the topside of the current range is incorporated in the JPY121.50-JPY121.60 area.  As we predicted, the incremental additional stimulation for the Japanese economy may come from a supplemental budget rather than monetary policy.  Meanwhile the focus is on the Japan Post IPO, which expects to raise the equivalent of $12 bln, when Japan returns from Tuesday's holiday. 

Despite much better than expected manufacturing PMI, sterling encountered a wall of retailers near $1.55, and was unable to recover.  There was talk of Asian central banking institutions on the offer.  It finished the North American session just off its lows near $1.Fifty four.  The implied yield of the June 2016 short-sterling futures has increased by 10 bp in the last four sessions.  Sterling has acquired a net 1% over those 4 sessions.  The market may turn cautious ahead of Super Thursday (MPC decision, minutes and quarterly inflation report).  Technical support may be within the $1.5340-$1.5370 area. 

Barring a strong rally in oil, the US dollar is unlikely to slip much further from the Canadian dollar ahead of this week's slew of data, including trade and employment data to which the Loonie seem especially sensitive.  For the trade numbers, released on Wednesday, the focus should be on non-oil exports, which may be turning higher.  The US figures arriving at the end of the week may overshadow their employment data launched at the same time.  Although the thought would be that the Bank of Canada's two rate cuts this year completed the mini-easing cycle, another price cut cannot be completely ruled out.  In September, Canada lost nearly 62k full-time jobs. Another depressing report and rate cut talk may resurface, whether or not the new government wants to pursue a small fiscal deficit.  Tech support team for the US dollar is seen in the CAD1.3040-CAD1.3060 range.

A Few Short Thoughts on FX is republished with permission from Marc to Market

A critical driver in the foreign exchange market and the global capital markets more generally, is the ongoing preparation by the Federal Reserve for a rate hike, while many additional central banks, including the ECB, warn investors that more accommodative monetary policy may be necessary.  In the days forward, the economic data and recognized speeches will occur in the context of building expectations.

After Draghi'utes press conference following the ECB conference last month, market expectations for additional monetary stimulus is operating high.  However, while many marketplace participants view it as a done deal, it is not clear that they forged a consensus.  The recent economic data suggests that expansion continues apace, and if not impressive, steady.  Core inflation is running at 1.0% year-over-year, that while soft, is not signaling the deflationary spiral.  Moreover, the European economic locomotive, Germany, expects to have found better traction after a weak August and a predict that both orders data and industrial output information bounced back. 

As we noted last week, the Eurozone economic data does not seem consistent with the feeling of urgency Draghi's expressed lately.  Either the economic data flow deteriorates, or it will be hard to reach a consensus for new bold action.  If the financial data is in line with consensus, recommending that the Eurozone expanded by 0.4% in Q3 as it did in Q2, which is also the average quarterly development since the middle of 2014, then your risk is that the pendulum of anticipations will swing back to mild action.  An increase in the duration of the purchases may be more likely than buying more, or even cutting rates deeper in to negative territory, as experienced seemed possible following Draghi.

The Fed cannot be very disappointed along with Q3 GDP figures.  As it had anticipated, the largest inventory swing in four years weighed upon headline growth, but final domestic sales (excludes inventories and net exports) rose Two.9%.  Although this is slower than Q2's 3.7% pace, it is better compared to 2014 (~2.4%) and H1 2015 (~2.3%).  It speaks to the resilience of the US economy.  Moreover, after tax income flower 3.5%, allowing consumption to add 2.2 percentage suggests GDP and an increase in cost savings.

There are at least nine Fed officials speaking in the 7 days ahead.  We argue that the actual Fed's leadership defines the hawk-dove scale at the Fed.  This really is to say that several Fed officials are more dovish than the troika associated with Yellen, Fischer, and Dudley, and several are more hawkish. Methodologically, we suggest that policy hails from the leadership, so location emphasis on their views.  In addition, we suggest investors be sensitive to changes in views.  That Brainard and Tarullo among the governors, for example, that have more dovish than the troika.  It would be more newsworthy if they softened, rather than maintained, their stance.

The US reports ISM for manufacturing and services, the Chicago PMI offers any kind of hint, there is upside risk to the consensus estimate of 50 and 56.5 respectively, and auto sales, which might slow slightly from the nearly 18.1 mln unit annualized pace in September.  However, the most crucial report of the week is the month-to-month nonfarm payroll report.  The degeneration of the last two job reviews has not had confirmation through other labor market blood pressure measurements, including the weekly jobless claims, where the four-week moving average is actually making new cyclical lows.

The October employment report expects to become the best in three months, with job growth picking up to 180k from 142k in September.  The three-month average is 167k.  The internals may be as important as the headline.  Included in this are the possibility of an upward revision to the August and September reports, the potential for the unemployment rate to slip to 5.0% and the underemployment rate (U-6) to dip beneath 10% for the first time since 2008.  The year-over-year pace of hourly earnings increase can tick up to 2.3%, which is the upper finish of the recent range.

While the Eurozone data is not poor enough to suggest the need for urgent monetary action, the US data doesn’t seem to justify the emergency setting of the Fed Money rate.  Barring a significant surprise, this week's data should keep a December rate backpack very much in play. Remember for the majority of the Federal Reserve, the continued absorption of slack in the work market, understood as the sufficient and necessary condition to boost wages, which in turn are the key to core inflation, and heading inflation converges to core inflation. 

Three central banks from high-income countries meet in the coming days:  The Reserve Bank of Australia, the Bank of England as well as Norway's Norges Bank.  On balance, the market does not expect any kind of to change rates, but the RBA may be the closest call.  Soft inflation data with a backdrop of variable mortgage rate hikes through leading banks spurred the actual speculation.  The derivatives marketplace put the odds at almost 50/50.  However, strong domestic credit score growth may have bought the RBA some time.  The Norges Bank cut rates at the last conference and signaled a lower repo-rate path. It appears for the moment, though, that it is happy to wait and watch. 

Under the new conversation regime, the Bank of Britain will release the moments and the quarterly inflation report at the same time as its rate choice.  The BOE appears several months at least from raising interest rates.  There has been one dissent at the past two meetings.  There seems to be a greater risk of someone joining the dissent compared to McCafferty giving up his call for an immediate hike.  Even if the dissent does develop, the forecasts contained in the inflation report will illustrate why this will remain a group for some time.  Note for example that the 5- and 10-year breakevens have fallen by about 35 bp because the end of H1.  Similarly, the actual implied yield on the 06 2016 short-sterling futures contract has rejected about 40 bp since mid-July. 

The BOE is widely expected to be the second major central bank to hike rates following the Federal Reserve.  This anticipation should help sterling outperform most other major currencies on the divergence hypothesis.   However, the perceived gap between the Fed's move and the BOE'utes move can be several months and there lay sterling's vulnerability.  At the same time, growth appears to be moderating and transferring composition.  This PMI information expects to shed more light on this. The manufacturing activity forecast is to moderate for that third consecutive month whilst services are expected to have quickened their own expansion, snapping a three-month downturn. 

Monetary conditions in the UK have stiffened in recent weeks.  Sterling has risen near 3.0% (Two.85%) on the BOE's broad trade-weighted measure since mid-October.  At the same time, 10-year gilt yields go up by 16 bp.   Even if blunted by the 1.5% rise in the FTSE 100, monetary conditions have become less accommodative, leaving the actual BOE to make a nuanced argument that it is not really the right time to raise prices yet, but that day continues to approach. 

Another highlight of the week forward is Japan's public providing of Japan Post.  It will require three forms, a holding company, a bank and an insurance company.  It will list November 4.  It is the world's largest IPO of the year and the biggest Japanese IPO since 1988.  Its aim is domestic retail investors, and preliminary reports indicate strong interest.  It is unlikely to be a substantial factor in pushing the pound. 

The BOJ left policy on maintain last week, which disappointed lots who had anticipated an expansion of its asset purchase strategy.  While BOJ's Kuroda offers guarantees that further easing will come if necessary, investors are thinking about what will take to reach that tolerance.  Current core inflation is negative and after weak output and household spending information, it is likely the economy contracted in July-September period after contracting April-June.  

Contrary to what some refer to as the "technical definition," Japanese authorities do not appear to regard what Japan is experiencing as a recession.  Still continued weak point in Q4, and the risk which base effects lift heading inflation, but does nothing for measures of core inflation, will likely keep conjecture running high for addition monetary easing either past due this year or early next. 

China's PMIs released over the weekend are unlikely to have much long lasting impact. The PBOC has on average, cut rates every other month this year.  The PMI data is consistent with other data recommending that the service sector, that the government wants to grow, is doing better than the manufacturing sector, which continues to slow.  Additional targeted easing measures are likely this year.  With the new five-year plan agreed upon, the next important focus is the IMF's decision on the SDR, expected later this month.

The Week Ahead: Building Anticipations is republished with permission from Marc to Market

The US dollar recorded combined performance last week.  Consolidative technical stress, after it spurted higher after the previous week with the help of the dovish ECB and rate cuts by the PBOC, and month-end pressures dominated.  There is some disappointment that the BOJ didn’t ease, helping send the actual yen higher before the weekend break. Heightened expectations for an RBA price cut in the week ahead weighed on the Australian dollar. The actual euro itself was practically unchanged on the week as well as off 1.5% on the 30 days. 

The dollar gained against most emerging market currencies even though there were a few notable exceptions.  The rebound in oil prices may have helped the Mexican and Colombian pesos and B razil real to close the week on a firm note (0.5% and 0.7% and 0.5% respectively) to lead the emerging marketplace currencies.  The Chinese yuan also flower about 0.5% last week, assisted by speculation of treatment and reports about raising capital controls in a possible experiment in the Shanghai free-trade zone. 

The dollar'utes technical tone is not particularly strong as the new month starts.  The next big drive in the divergence is not until Dec when the ECB may ease, and also the Fed may tighten.  The late dollar longs might have their conviction tested.  Even a strong jobs report after the week may be unable to restart the dollar's upside impetus.   

The Dollar Index rallied about 4.4% in the second half of October.  It went from the lower end of its recent range to the upper end.  The data that may determine next month's coverage decisions is not available however.  It seems prudent for dollar bulls to take some profits in front of 98.00 in the middle of last week.  Assuming the correction of the advance in the last couple of weeks has begun, the first target is near Ninety six.30, but we believe the 95.70 area is the main objective.

The euro's dip brief below $1.09 seems to denote the end of a technical move.  Key support is at $1.08, but for short-term individuals it is a bridge too far, and also the first sign momentum has slowed after a big move, others get out as well.  Note that at $1.0940 the euro had given back 61.8% of its increases from March through July.  That bounce in the dinar followed a nine-month slide that began from near $1.Forty in Q2 14.  The March-August recovery in the euro fell timid of the 38.2% retracement of the preceding nine-month drop.    

On what appears to be the short-covering bounce, the euro approached the bottom end of the $1.1080-$1.1100 gang of resistance before the weekend.  A move above $1.1125 could signal moving back to $1.1200-25, the latter housing the actual 20-day moving average.  It looks like the actual MACDs and stochastics can turn higher next week.

Since the immediate dollar gains after the ECB and PBOC announcements, the dollar has chopped around a JPY120-JPY121.60 range.  The actual JPY121.85 area marks the 61.8% retracement of the dollar's decline since the August higher.  The current range itself is the upper end of the band that has endured since late August.  Every day ranges did increase a week ago.  The market here too seemed reluctant to challenge the dollar extreme, which extends to JPY122.00 (and corresponds to the 20-week moving average). 

Purchases against the euro helped lift sterling against the dollar ahead of the weekend.  It managed to near above the downtrend line drawn from the actual August 25 high (~$1.5820) and also the September 18 high (~$1.5660).  There is a trend line violation on an intraday basis but not on the closing basis in Oct until the end of the month.  This came in near $1.5410 at the end of a few days.  Below there, support is near $1.5350.  The next upside focus on is in the $1.5510-$1.5525 area, with a split signaling a move toward$1.5600. 

The dollar took out a downtrend line against the Swiss franc prior to the weekend but closed back below it.  The trend collection connects the September Eleven high (~CHF1.1050), the October Thirteen high (~CHF1.0950) and the October Twenty-eight high (~CHF1.0900).  It comes in near CHF1.0885 at the beginning of next week and finishes the week closer to CHF1.0865.  The RSI did not confirm the breakout.  The CHF1.0905 area also corresponds to a 50% retracement of the dollar'utes losses since September Eleven, and the 61.8% retracement is near CHF1.0940. 

The US dollar spent the first half of October easing from the Canadian dollar after documenting 11-year highs at the end of September.  The greenback recovered in the other half of the month before stalling in the middle of last week in the CAD1.3270-CAD1.3280 region.  It tested the CAD1.3255 region before the weekend that matches a 50% retracement of the greenback's gains since the middle of the month.  The actual 61.8% retracement is near CAD1.3000.  A break of that targets CAD1.2940, and then CAD1.2800. 

Softer than expected Q2 inflation information fanned expectations of an RBA rate reduce this week and weighed on the Australian dollar.  With the help of continued credit expansion, the Australian dollar found support near $0.7070 and recovered to almost $0.7150 before the weekend.  Immediate resistance is incorporated in the $0.7185 area.  Assuming overcoming this particular, the initial target is $0.7210-$0.7225.  As the RSI has already turned higher, and the MACDs and Stochastics look poised to turn in the next session or 2. 

Light sweet crude oil looks to move higher in the coming days.  The down draft that required the December contract from about $51.40 a barrel on October 9 to just about $42.60 on October Twenty nine appears complete.  The 50% retracement focus on (~$47.00) happened before the weekend.  The next retracement target is a little above $48.00.  The technical indications are constructive, and the chance of surpassing retracement objectives.  The 100-day shifting average is near $49.60. 

US 10-year Treasury yields rose from 2.00% on October 27 to almost 2.20% before running out of vapor.  This is an important technical area.  It corresponds to the 20- as well as 200-day moving averages. In addition, it is the location of a trend line off the mid-July (~2.46%) and mid-September (~2.30%) highs.  We anticipate a consolidative phase ahead of the employment data, which suggests a downward drift in produces. 

The S&P 500 looks technically vulnerable after posting an outside down day before the weekend. It made a new higher for the move on Friday prior to reversing to close below Thursday's lows.   Given the big run-up, one should respect the price action. Search for lower prices, especially in the first area of the week.  We look for the space created by the sharply higher opening on October Twenty three to drawn prices. That gap is roughly in between 2055.20 and 2058.20. Anticipate additional support near The year 2050.

Dollar may Trade with Heavier Bias Ahead of Employment Data is republished with permission from Marc to Market

Republican presidential candidates debated a range of economic issues in their third debate, from what to do about Medicare and social security to taxes policy and even a brief exchange on daily fantasy sports activities. The moderators became part of the scrum, and Hillary Clinton and her other Democrats took a few bashes, as GOP contenders strove to stand out. Here is an instant evaluation from three scholars.

Candidates as well as media spar, but Americans get their moment

– Thomas Kochan, MIT Sloan School of Management

We were promised the debate over economic issues, but what we got for the first hour was protracted sparring between TV interviewers appearing gotcha questions hoping to egg upon candidates to attack each other and candidates turning the tables by blaming the nation’s problems on a left-leaning media. Which was a sorry performance through people on both sides of the microphone.

Yet once they got past that part of the circus, the actual candidates did start to recite some of the big economic issues of the day, including the 30 years of wage stagnation; the growing quantity of women in poverty; the high cost of education, and the financial challenges facing Medicare as well as social security.

A few ideas for reform came through on the couple of these issues. At least four candidates – John Kasich, Jeb Bush, Marco Rubio, and Chris Christie – suggested social security and Medicare could be stabilized via some combination of raising the years of eligibility, reducing advantages for high-income earners and retirees, as well as adjusting benefit formulas with regard to younger workers. Kasich was probably the most focused on concrete ideas when he proposed using public service to pay down student debt and also the expansion of online courses and better hyperlinks between high school, two-year, and four-year colleges to bring down the cost of higher education.

These Republicans as well as their Democratic counterparts recognize they have to focus on the issues holding back operating families from realizing their dreams. Senator Rubio said it most obviously: if we do not address these problems directly, the next generation is destined to have a lower standard of living than their parents.

Therefore, the good news within tonight’s debate, indeed in this campaign, is that the American community is being heard.

Candidates are getting the content that the next president has to focus like a laser upon these economic issues. The question is can we go beyond the personal assaults the media feeds on as well as insist on getting more thoughtful solutions to the problems Americans care about. Perhaps it is time for the media professionals to catch up with the applicants and start listening to what typical Americans want to hear.

Issues overlooked: housing and inequality

– Mechele Dickerson, University associated with Texas at Austin

Other than the fact that they attacked the moderators a lot more than they attacked each other, probably the biggest surprise during the third Republican presidential debate may be that quite a few of them now seem to see that they cannot keep ignoring the center class.

Mike Huckabee, John Kasich, Ted Cruz, and Rand Paul did not attack the Top 1% or hedge fund managers with the fervor Bernie Sanders exhibited throughout the Democratic debate, and Carly Fiorina and Marco Rubio did not explain what they would do to solve the problem of flat middle-class wages or close the wages inequality gap. However, they do at least mention the economic woes facing the middle class.

Unfortunately, only one candidate (Paul) even mentioned the housing crisis and it was in the context associated with attacking Federal Reserve policies. None of the Republican or Democratic candidates seems to understand the link between rising rents and housing unaffordability. Housing unaffordability keeps getting even worse, and it will not improve until we recognize the link between it and income inequality.

This issue, of course, is not a problem for hedge fund managers or other highly paid workers who have consistently received raises during the last 30 years. They are not facing the housing affordability crisis. In comparison, as both Republican and Democratic candidates mentioned during their debates, wages have all but stagnated for lower- and middle-income workers. These workers simply cannot afford their rents. In addition, the problem is most obvious in cities like Memphis and Detroit, where incomes have not stored pace with even modestly rising rents, according to a recent analysis.

The crisis is due to obtain much worse. More People in america are being forced to rent because they cannot afford to buy a home. At the same time, the share of renters investing more than half of their income upon housing may soon achieve almost one in three.

The income inequality space and rising housing unaffordability tend to be interrelated and solving all of them must be one of the top priorities of the next president. Unfortunately, you would not know that we are still facing a housing unaffordability crisis by listening to the presidential debates.

Marco Rubio walks a tightrope

– Lisa Garcíthe Bedolla, University of California at Berkeley

Much of presidential campaigning is about symbolism.

In tonight’s debate, Marco Rubio set himself as the candidate who is concerning the future and achieving the American Dream. To do this, he had just to walk a fine line, emphasizing their youth and his immigrant story, while trying to ensure Republican voters do not observe him as inexperienced as well as “other.”

In comparison with the other Republican candidates on the stage this evening, Marco Rubio’s relative youth is striking. Rubio’s age had been the basis for criticism through Donald Trump earlier in the campaign.

Instead of trying to present himself because seasoned and experienced, Rubio emphasized the urgency of the moment and his hopefulness for the future. By stating, he did not want to “wait around his turn” to run, he implied that what he didn’t have in experience he made upward for in enthusiasm as well as optimism. Consistent with that information, he refrained from attacking his opponents while still ably defending himself from a direct assault from Jeb Bush.

Similarly, Rubio made a reason for presenting himself as an “everyman,” putting an emphasis on his humble origins, their need to pay his way via school, and his awareness of what it means to struggle to support a household. He also referred to his parents’ migration story, connecting that to his support for and belief in the American Dream.

Rubio is actually running for the nomination of a celebration that has strong negative feelings towards immigrants in general and Latino immigration in particular. He is attempting to emphasize his working class origins while espousing economic policies that mainly benefit the wealthiest People in america. In addition, he needs to do both those things while appearing authentic and presidential.

It is telling that his weakest second in the debate was when the moderator pointed out the contradiction between who benefits from his tax plan and his rhetorical focus on people “residing paycheck to paycheck.” The exchange made evident the fundamentally contradictory message he is attempting to package and sell to Republican voters.

Unlike in previous debates, Rubio mentioned his parents’ migration but not where they came from, de-emphasizing his Cuban roots.

With bombastic “outsider” candidates Donald Trump and Bill Carson currently leading the Republican field, it will be interesting to see if Rubio’s youth and migration story permit him to distance himself from Washington.  Alternatively, if the contradictions inherent in their message, his story, as well as immigrants’ relationship to Republican primary voters end up being too much for him to beat with hope and a smile.

Scholars on the GOP debate: middle-class struggles take center stage because Rubio walks tightrope is republished with permission from The Conversation

While the U.S.-led Trans-Pacific Partnership has potential to split Asian countries Pacific, it could be a foundation with regard to truly free trade, as well as other free trade plans in the region.

Recently, the U.S. international policy elite and mainstream media greeted the Ough.S.-led Trans-Pacific Partnership (TPP) agreement along with great fanfare. In common fashion, the Washington Post has argued, “by knitting the U.Utes. and Japanese economies with each other in their first free-trade deal – as well as binding both of them closer to increasing Asian nations – the TPP would create a counterweight to China within East Asia.”

While the creation of the actual TPP has been a great disappointment in China and resulted in mixed feelings across the Asia Off-shore, it is very much in line with Washington’s new and more assertive strategy in the Asia Pacific, because reflected by Revising U.S. Great Strategy Toward China, a current Council on Foreign Relationships report.

In reality, the TPP seeks to expand U.S. geopolitical existence in the Asia Pacific, because deemed by the U.S. Department of Defense and its Joint Vision 2020’s ‘full spectrum dominance” – the aspiration to achieve control over just about all dimensions of the competitive room.

Where does it all leave Asia? Well, there are good, poor and ugly scenarios. Let us start with the last ones.

The Iron Curtain scenario

In the “Iron Curtain” situation, the exclusive TPP contributes to the militarization of the Asia-Pacific, while economic benefits decrease. Instead of unity, fragmentation triggers friction. As economic growth dims, the dream of the “Oriental Century” remains just that – a dream.

Following the TPP announcement, the People’s Financial institution of China’s chief economist Ma Jun estimated that it has possibility to reduce China’s GDP by 2.2 percent. Named “ABC” (Anyone but China), the trade deal was about containing China’s rise and polarizing Asian countries, just as Europe was split through the Cold War. The actual odd difference is that now Washington is erecting the actual Iron Curtain.

Ever since the announcement of the U.S. rotate to Asia, the Government has been shifting the bulk of it’s naval assets to the region by 2020, while increasing military workouts and ties in the region. In the process, territorial and maritime friction in East and South The far east Seas has steadily accelerated.

Recently, the Upper House of the Diet in Japan passed Leading Shinzo Abe’s highly controversial protection bills, opposed by Fifty four percent of Japanese people, as evidenced by the huge, bitter demonstrations in Tokyo, japan. In addition, right after the TPP deal, U.S. Pacific Fleet Chief Admiral Scot Swift warned against “egregious” restrictions in the contested South China Seas, which cynics noticed as an effort to provoke the Chinese response.

However, since most Americans do not support further army commitments abroad, the White House prefers free industry rhetoric to the ugly realities of containment. The stakes for that White House to conclude the TPP talks grew higher following the U.S. Defense Assistant Ashton B. Carter stated in April that the Obama administration is opening a new phase of its strategic rebalance toward Asian countries Pacific.  This would occur by purchasing high-end weapons such as a new long-range turn invisible bomber, refreshing its defense alliance with Japan and expanding trade partnerships. The trade pact was “as important as another plane carrier.”

The interpretation of Carter’utes comments came as an work to play down the Asia “pivot” as a mainly military project.

The dead on arrival scenario

The TPP agreement concluded following multiple rounds of talks, intense lobbying and bitter rubbing over dairy products, automobile business and intellectual property rights within pharmaceuticals. Nevertheless, it still needs ratification by all 12 countries. In the “dead on arrival” scenario, the actual U.S. Congress torpedoes the offer in the short term, or bilateral and multilateral trade deals in the region mitigate the TPP’s discriminatory effects over time.

In the U.S. alone, the actual TPP faces a tough battle with the divided U.S. Congress, where only some Democrats assistance Obama’s trade policy and the Republican support is a lot more unpredictable amid contentious presidential campaigns, as confirmed by the stated opposition from the TPP by the leading Democratic candidate Hillary Clinton.

The TPP isn’t about free trade. In fact, some of its provisions might restrain open competition, whilst raising prices for consumers, as the Nobel Prize winning economist Frederick E. Stiglitz has argued. In the narrow point of innovation, the actual TPP sets the bar high for other U.S. trade talks going forward, however for life science sectors negotiators settled on a low bar that will be detrimental to biotech innovation for many years, as the U.S.-based It and Innovation Foundation offers argued.

Despite all the rhetoric about a “broad pact,” the TPP excludes China, India, and Indonesia, the biggest economies in East, South and Southeast Asia, respectively. Initially in 2005, the TPP had a more inclusive free trade vision among Brunei, Chile, Nz and Singapore. A far more exclusive eyesight originates from 2010, when Wa began talks for a significantly expanded FTA, which includes the U.S., its traditional partners (Japan, Canada, Australia, and Mexico), Peru and Vietnam.

Consequently, the arbitrators had to hammer a deal with nations that represent completely different levels of economic development. The actual living standards in the U.S. are 10 times higher than those in Vietnam, for instance. Accordingly, talks occurred under extraordinary secrecy, which left environmental movements, labor unions, and cyber protection observers frustrated and angry. 

The inclusive free trade scenario

In the actual “inclusive free trade” scenario, the TPP serves as a foundation for a truly Asia-wide FTA—one that has room for China, the U.Utes., and 21^st century currency plans. In this scenario, China and also the U.S. conclude their bilateral investment treaty (BIT). Development accelerates and economic relationships broaden across South, East and Southeast Asia. It’s the only scenario to sustain the promise of the Asian Century.

After the conclusion of the TPP agreement, the Ministry of Commerce’s diplomatically worded statement that China embraces the TPP agreement and hopes it can facilitate talks on other local free trade deals in order to push economic growth in the Asia-Pacific region reflected this desire.

The idea of regional free trade has been around since at least 1966 when Japoneses economist Kiyoshi Kojima advocated a Pacific Totally free Trade agreement. The actual talks began with the Asia Off-shore Economic Cooperation (APEC) forum, created in January 1989. Practical measures ensued during the 1994 meeting in Bogor, Indonesia, when APEC leaders opted for free and open industry and investment in the Asian countries Pacific.

In 2006, C. Fred Bergsten, then chief of the Peterson Institute for International Financial aspects, an influential U.S. think-tank, designed a forceful statement in favor of the Free Trade Area of the Asia Off-shore (FTAAP). If the agreement is achievable, he or she argued, it would represent the largest single liberalization in history. After all, the APEC represents 40 percent of the world’s population, almost 60 percent around the globe economy, and nearly 50 percent of world trade. Rather, the Obama Administration set it apart to focus on the TPP talks, assigned to Michael Froman, a former security as well as Soviet Union expert who now has now become the new U.S. Trade Representative.

Certainly, Beijing can circumvent most of the TPP’s constraints by taking advantage of its existing bilateral and multilateral trade plans and those concluded in the near future. China can also gain similar benefits through free trade in the actual Asia Pacific (FTAAP) and local economic partnerships (RCEP) — trade contracts that link the economies of China, Japan, and India along with Southeast Parts of asia.

What Asia Pacific really needs is an inclusive bloc, however. Absolutely no sustainable free trade agreement in Asia can ignore either China, or the Usa, or both.

Toward Asia-Pacific Free Trade is republished with permission in the Difference Group

After more than five years of skipped deadlines, trade ministers from the Twelve participating Asia-Pacific countries that fulfilled in Atlanta finally came to the conclusion the negotiations surrounding the Trans-Pacific Relationship (TPP) on 5 October 2015. So is the TPP settled? The short response to the question is not yet. The public fanfare accompanying the announcement led many to believe the arrangement would soon come into force. Yet there is still a lot more work to do before this occurs.

While the TPP agreement announcement arrived, the full-negotiated text is not out.  Expect it to come sometime in November 2015. This delay looks like it’s because officials are still focusing on the wording of the agreement. This is in itself unusual given the announcement and all the fanfare. A number of US Democrats fear ‘aspect agreements and special secret deals’ that water down the arrangement are still being struck, while one trade minister was forced to concede that ‘a few problems have yet to be settled … and we are nevertheless negotiating via email’.

Worse still, what’s finally publicly released is ‘not expected to be the final legally scrubbed text’ either, although it is anticipated to closely resemble the final edition to be presented for ratification. It appears the TPP is a ‘living document’ which will continue to evolve.

Following its release, the next step for the TPP is ratification through the respective legislatures. This is expected to happen within about two years. For the US, legislators will have a the least 90 days to study the arrangement before Congress votes ‘yes’ or even ‘no’. While the Trade Promotion Expert (TPA), the fast track negotiating authority granted to the US President, may have helped in successfully concluding negotiations, how it affects congressional passage is less clear. If a majority of legislators discovers the final agreement compromised, an excessive amount of they could vote ‘no’, as they can no more change its details. House Republicans will need to support it in numbers if it is to pass, however may find it difficult if there are too many critical compromises.

Other countries may also face challenges in getting the actual agreement passed by their legislatures. When the TPP is ratified only after a country ‘cherry picks’ the agreement for its desirable components, and avoids dealing with the greater sensitive areas of reform, the entire process could be compromised.

What if a person or more countries fail to ratify the TPP? The TPP will still survive if at least six unique signatories — accounting for 85 percent of the region’s 2013 GDP — complete ratification, ideally but not necessarily within 2 yrs. The GDP threshold guarantees the agreement cannot enter into force without both the US and Japan.

The final action, following successful ratification, is implementing the agreement. This is arguably the most crucial step in the process in terms of its impact on the ground. History is littered with examples of industry and other agreements that have experienced little or no impact because of the way in which they have been implemented. While the controversial investor–state dispute resolution mechanism may increase the likelihood of compliance, it cannot guarantee comprehensive implementation.

Even with no negotiated text, we can currently judge some crucial aspects based on information either officially or unofficially released. With time drained in the lead-up to the September 2015 Atlanta meeting, there was increased speak of compromise and flexibility to interrupt deadlocks and reach agreement.

More than a year ago, I warned that the TPP was ‘degenerating into a series of bilateral offers, with a US–Japan agreement at its core’ and to accommodate the differences, we should ‘look out for lots of transition periods and other loopholes’. It is now clear that the special pursuits of middle-income countries — Vietnam and Malaysia in particular, but also Peru and Mexico — have been accommodated to secure agreement.

The leaked text purported to be the final intellectual property chapter implies that transition periods for pharmaceuticals can extend up to 18 years (as it does with regard to Vietnam). Data exclusivity on biologics also appears to have been limited to five years, a lot less than the actual 12 years the US pharmaceutical lobby pushed for. Various transition periods also apply to copyright and trademark procedures. In addition, some countries even have the option to maintain current domestic rules when implementing TPP responsibilities.

There are several other examples of special interests being added to the actual TPP, including exemptions for changing government procurement policies as well as state-owned enterprises (SOEs). Immediately following conclusion of negotiations, Malaysia’s Trade Minister reiterated that ‘flexibility approved to Malaysia included longer transition periods and differential treatment for the country’s sensitive areas … such as government procurement, SOEs and Bumiputera issues’. There’s also indications that Malaysia, Vietnam, Peru and Brunei might be granted a minimum five-year grace period to reform its SOE policies. However, the integrity of reform outcomes tends to deteriorate as delays in execution increase.

These compromises suggest that the outcome of the TPP is likely to be lower than exactly what most estimates suggest, since the main benefits would be based on real reforms in these delicate areas. Still, in the long run the actual TPP will be judged by its ability to attract other nations — for example China — under its umbrella. First, it has to come into force. Unfortunately, the likelihood of this happening is only marginally higher than prior to Atlanta.

The TPP is not a done deal yet is republished with authorization from East Asia Forum

Protests against austerity continue to roil parts of European countries, most recently in Brussels earlier this year when 100,000 people took to the streets as well as police deployed water cannons.

This type of public and occasionally violent demonstration has been taking place across Europe since the beginning of the sovereign debt turmoil as leaders decided reducing spending was the best way to deal with the region’s mountain associated with debt. The resulting slashes in benefits and training spending alongside higher taxes and freezes in public field salaries helped galvanize many Europeans onto the streets in protest.

Beyond the immediate impacts associated with austerity and spiking unemployment rates, the other factors shaped the public’utes reaction? In addition, what mobilized individuals to demonstrate in ever-rising numbers throughout Europe?

A new study that I published in the International Journal of Communication helps determine those factors and indicators that they go well beyond the typical suspects of unemployment, revenue and social demographics such as population density.

In fact, my research shows that one of the most basic forms of modern communication and simplest uses of a smartphone, the written text message, was crucial to mobilizing anti-austerity efforts across the European Union. Through a mixture of statistics and network analysis, my study paints an image of what drove the protests and who was behind them.

Predicting protests

The research began with national-level data upon 27 EU member countries (all but Malta). These data looks at the relationships between the prevailing economic conditions over the course of the economic turmoil, from 2007 through 2012.

The analyses started with simple correlations, which found some associations between youth unemployment as well as protest activity that obtained stronger over time, as well as very weak but positive correlations between protests and the quantity of texts sent.

Where it started to get much more interesting, although, was when I controlled for the influence other variables were having on protests, such as democracy levels and population density. This particular happened with regression modeling, which is similar to correlations but allows researchers to account for the influence of other factors, including time, on an outcome. Unlike correlations, regressions can get nearer to (but still not perfectly determine) causal-type relationships.

What I found in the very first regression model was that the volume of text messages sent in all countries was a positive predictor of demonstration activity, as were youth unemployment rates. What this means is that as the total number of text messages went up in one year, demonstration activity increased in the next year. The same was true for youth unemployment rates. More protests followed rising amounts of joblessness among young people.

Combining youngsters unemployment and texting

My statistical analysis showed these relationships weren’t a result of mere chance. The actual regression models took into account a variety of other related factors that perhaps could have also explained the actual increases in protest, for example internet diffusion and income amounts. However, even when taking into account individuals factors, youth unemployment as well as texting levels remained significant.

Even more interesting, though, was that youth joblessness shown this same relationship just in an overall model, and never in year-by-year regressions. That is, it showed up only in figures for the entire series of countries and many years. Of the seven factors modeled, only texting activity remained positive and statistically substantial from 2009 onward within explaining protest movement.

The chart shows the average levels of sociopolitical lack of stability, SMS activity, mobile phone adoption, internet diffusion, and youth unemployment for EU countries through 2007 to 2012. Mobile and internet figures tend to be per 100 people, SMS activity scaling is by Ten million, youth unemployment basis is on rates per 1,000, and sociopolitical instability changes by a factor of One hundred for comparability. Jacob, Writer provided

Therefore, to try to make the most of all these results, I then combined the volume of text messages with the youth unemployment rate to determine the collective impact of these two factors at the same time. Taking a look at what is called an “interaction term” demonstrated that the combination of these two elements had an even stronger relationship to higher levels of protest.

In other words, while rising youth unemployment appeared to be a primary catalyst prompting people to protest, it was the mixture of youth unemployment and the increased frequency of text messaging on mobile phones that was related to demonstrations swelling in both frequency and intensity over this particular six-year time period. The graph at right shows the unity of these factors.

Modeling the communication

What were people communicating through their own mobile devices? Moreover, which mobile phone users were most critical to coordinating these anti-austerity direct orders?

While it wasn’t possible to access the content of all the texts cruising back and forth over this period, for obvious reasons, I was able to examine a lot more than three million public tweets that included relevant key phrases such as “austerity,” “euro” and “crisis” – most of which were sent from mobile devices and all during the last two months of 2012. The tweets serve as a useful stand-in for the content and customers of texts because twitter posts are more visible and consumer names (unlike phone numbers) tend to be publicly accessible.

Using BU’s Twitter Collection and Analysis Tool set (BU-TCAT), I applied several calculations to sort the Twitter data to reveal underlying network structures that shaped the actual flow of information in the network. One of the resulting graphs visualized the most prominent hashtags used, while another identified the most important users discussing the euro crisis on Twitter at the time.

The first of these graphs, the figure below, illustrates the mix and interconnection of subjects related to the euro crisis. In general, this concept map supplies a level of understanding about the conversation taking place in this public room and how conceptual interactions occurred, with out specific coordination or hierarchy, by Twitter users.

This spatialization image shows the relationships of approximately three million tweets concerning the euro crisis in terms of co-occurring hashtags. Jacob Groshek, Author provided

When looking at this graph of co-occuring hashtags, to understand its meaning, imagine if you gave One.5 million people a good orange and asked these to describe its features. Eventually certain dominant descriptive keywords and linkages between words would emerge, such as “juicy,” “round,” “sweet,” “orange” and so on. Now, when looking at this particular co-hashtag graph, imagine that the 1.Five million users that tweeted were not given an orange but rather a chance to publicly express their own opinions on austerity policies. Probably the most prominent nodes in the co-hashtag graph determine which concepts users applied most to describe their views on austerity policies.

A second chart illustrates how there were fairly few connections among the varied stakeholders operating in a network exactly where users were surprisingly sparsely connected with one another. More specifically, what this means is there were more than three zillion tweets in this data set from just over 1.Five million users, but which in the period of these two months, there were only 227 links between the 409 most active users.

To clarify further, this data set was summarized into the leading 409 figures which were tweeting about the euro crisis as well as austerity on Twitter, but there were just 227 instances in which they pointed out one another using the @username reference.

This spatialization shows the connections among about 1.5 million Twitter users, revealing there were only 227 links among 409 of the most energetic users. Jacob Groshek, Author provided

Clearly, there is a large number of tweets and a wide base of users. Nevertheless, this analysis showed that consumer interaction was irregular, usually uncoordinated, and centered around a comparatively small number of users. Additional study identified these users because mostly belonging to a community associated with Spanish journalists, activists and press organizations, along with satirical or pseudo company accounts (such as a deceased politician).

This study signals that these ostensibly open spaces for communication often morph into something else. Rather than as being a connected group of equal participants, the Twitterverse was full of disconnected posts and users where only a few acted as influential gatekeepers to share content.

Smartphones and simple tech rules

Overall, this study found that it was exactly how people used mobile media and not just the pervasiveness of mobile phones (which in itself was not statistically substantial) or online access much more broadly that were pivotal elements in how the public frequently erupted in protest to austerity measures.

In short, the simplest usage of the smartphone proved the key factor – when combined with youngsters unemployment – in explaining where and when people went to the streets to oppose austerity measures.

This is unique and different from how demonstrators in the Arab Spring or any other (reportedly) technologically inspired revolutions have been considered. Whereas individuals protests also engaged cell phones, texting and social media, these were operating in a different cultural and political climate-seeking regime – not policy – change. The results, of course, were also vastly various in that governmental transitions within Europe have been more orderly and programmatic, at a minimum, and that austerity national politics have continued.

Sometimes, the simplest solutions can be the most profound. In this case, the evidence suggests that the public erupting in protest against austerity measures had been driven, above all, by youth unemployment and texting.

In study regarding emerging media and politics, newness is not often nearly as important as “embeddedness” – in this case, the device all of us carry in our pockets, smart phone or not. Simple matters – and, as suggested here, sometimes short (message services) matters too.

How texting helped fuel the anti-austerity protests roiling Europe is actually republished with permission from The Conversation

When Australia’s Reserve Bank board meets on Melbourne Mug day next week, the question at hand is whether the RBA will seek to offset recent bank rate raises with a cut towards the cash rate. With a cut, the hope is banks will reverse their decision and get mortgage rates back to where we were before.

First Westpac, then Commonwealth Bank, now all of the big four have raised their variable rates on mortgages rising, purportedly in response to more stringent capital requirements imposed upon them.

In the wake of the 2008, financial crisis regulators around the world concluded banks did not hold enough capital as a barrier against potential losses.

The Murray report wisely suggested banks ought to hold more capital, but it does not come free. The actual investors who provide this need payment – which enhances the question: “by whom?”

Bank investors might accept a lower rate of return on their investment. Indeed, because the extra capital requirements help to make banks safer this might ‘t be unreasonable: the risk-return tradeoff has changed.

However, the big four have decided their clients should pay. Costs go up, and they are passing those costs (or perhaps a bit more) on to home loan customers. Kudos to Malcolm Turnbull for pointing this away last week.

Time to cut

I am upon record as suggesting the RBA should and probably will cut rates at least once in the coming months. That comes from my view that Australia is suffering from “secular stagnation” – the idea that the rate limit of the economy (or even more technically, the equilibrium real interest rate) has changed because, throughout the world, there are too many savings chasing after too few productive investment possibilities. This is enough of a reason to cut rates in and of itself, but the large four-rate hike makes it all the more likely, and important.

That is all not so difficult, but it raises two essential questions: (i) what are the implications for the RBA; and (ii) exactly what does this say about the banking system and the regulation of it. The common thread in the answer to those questions is the B-word: “bubble.”

For the RBA, cutting rates by 25 basis factors would offset the big four’utes recent hikes (not quite precisely, but close enough). Nevertheless, of course, the big four’s adjustable mortgage rates are not the only things impacted by the cash rate. A 25bp cut should flow into commercial lending and it should permit cuts by other mortgage providers. That would stimulate the actual economy.

Still, the RBA is obviously balancing the desire to promote the economy through reduce rates, and concerns about asset price bubbles – particularly in residential property. In that regard, the big 4 move is good and bad. It should cool the possibly overheated property market, it forces the RBA’s hands. In addition, it takes away the stimulatory effect a cut would have had; absent the big four’utes preemptive move.

The second, and deeper question, is what all this states about the competitiveness of our banking system. The fact that customers, not shareholders, are on the receiving end of the cost of keeping more buffer capital exhibits how much market power the big four have.

That is not necessarily a terrible thing – spreads upon home loans are a little, but not particularly high by international requirements. It is not easy to make the case that the big four is tearing off the Australian public.

They have been willing to lend people a lot of money, relative to their earnings, to purchase residential property. Go to the big four’s online hand calculators and see how much you can borrow together with your income, and then try the same thing at a large American bank (like Bank of America). Australian banks will lend you plenty.

Therein lies the rub. It is one thing to raise prices a bit, and then have those counteract by an RBA rate cut. That will have little or absolutely no effect on borrowing behaviour. It is quite another to reform financing practices and stop letting individuals borrow staggering sums against frothy assets.

Moreover, we should concentrate on the latter practice.

The RBA should reduce rates, but not because the banking institutions are upping them is republished with permission from The Conversation

The US is once again around the precipice of default on its national debt – not due to a fundamental inability to generate and collect tax revenues (the la Greece), but because of political shenanigans over the country’s financial debt ceiling.

The Treasury Department projects that after November 3, the federal government won’t have enough cash on hand to pay for its bills and obligations without borrowing in excess of the current federal debt limit, currently US$18.1 trillion. If Our elected representatives does not act by then, the Treasury would have no option but to renege on its guarantees, an action that could possess serious consequences for the nation’utes economy – and well beyond.

It’s uncertain if we’ll observe more political shenanigans this week – like the attachment of amendments that may pose a problem for quick passage – as Congress considers whether and how much to raise your debt ceiling. The latest reports suggest House Speaker John Boehner and also the White House are negotiating a two-year deal that would suspend the debt ceiling until 2017.

That would be a welcome development, but dealing with this dangerous drama every year or two (or multiple times in a single year) begs an important question: why have such limits when the spending this seeks to constrain was already approved by Congress, and when the consequences of not raising it could be so dire?

Origins of the debt ceiling

First, a quick primer on government finance. When annual outlays (spending and transfers) exceed tax revenues, the government runs a budget deficit and must after that borrow funds to make in the difference. The government does so by selling Treasury securities to the public in exchange for cash.

Treasury securities are debt instruments, which are, essentially, promises to repay the face value (the dollar amount borrowed) in addition interest at an agreed-upon date. These types of securities are ultimately backed by the Treasury’s ability to collect future taxes to cover these types of payments. The total face worth of the federal government’s outstanding financial debt – the amount it currently owes it’s bond-holding creditors – is equal to the accumulation of all past annual deficits.

The legal ceiling on US debt places a legal upper bound around the size of this outstanding financial debt; that is, on how much the federal government can borrow.

The ceiling has been around since 1917, when Congress adopted it to strengthen the legislative branch’s control over spending and income taxes, then primarily determined by the president. Besides the US, only Denmark includes a statutory debt limit (even though in Denmark the limit is much less amenable to political mischief than here).

The ceiling’s weak rationale

The economic arguments for having the debt ceiling are exceedingly weak.

First, the original rationale for the statute – to provide a better balance associated with power between lawmakers and also the president over who controls fiscal policy – is obsolete. The Congressional Budget Act of 1974 now specifically explains procedures for how Congress would be to participate in the annual budget procedure. The ceiling is, at best, redundant in light of it’s initial purpose.

Second, the specific restrict set by the law – at first around $12 billion and now at its current level after having been raised 78 times because 1960 – is completely arbitrary and never linked in any meaningful method to the scale of the economy.

Were a debt limit deemed a good policy tool, the restrict would need to account for inflation. Or else, generally rising prices, actually at current low rising cost of living rates, would eventually drive nominal borrowing beyond the set limit anyway, even if there have been no changes in real (inflation-adjusted) spending and borrowing.

One option would be in order to index the nominal limit to a measure of inflation, like changes in the consumer price index. Another would be to impose the actual limit on debt like a proportion of the nation’s complete output. The latter alternative might at least have the advantage of braiding the ceiling to the sources available for paying off the debt.

Third, even if we grant the one possibly sound argument for sustaining a limit – that it disciplines financial policy – there are better ways to achieve this goal.

The current setup is totally divorced from the annual spending budget process, and is thus inefficient and inconsistent. In addition, the consequences of not raising the limit are extreme as well as potentially harmful to the overall economy.

Indeed, the mere anticipation of government default heightens uncertainty, damages the actual government’s reputation and expert, and increases borrowing expenses (ultimately borne by citizens). For example, a major scare over raising the ceiling in 2011 led to the loss of the national government’s AAA credit rating at Regular & Poor’s, which blamed political brinkmanship over both the ceiling and broader debt debate for that downgrade.

In addition, given the need for US debt as an worldwide financial asset, a US default could lead to yet another global financial crisis, among other unintended consequences.

A better way to control spending

Here is a better method to limit the role of government in the economy and promote fiscal discipline: rescind the current debt roof but impose a statutory limit on the annual outlays of the federal government as a proportion of the nation’s income.

Such a ceiling would discipline federal investing through the established annual budget process. It would force the actual American people, through their politics representatives, to determine how much of the nation’s productive capacity the federal government ought to control, and how to allocate individuals limited resources across alternative uses.

In addition, a roof on outlays is better than a roof on the debt-to-GDP ratio or even a well balanced budget amendment, since nor of those alternatives necessarily limitations the overall size of the government sector. I do not consider a country in which the government always has a balanced spending budget – but that controls, state, 50% of the nation’s GDP – a country with a lot of federal fiscal self-discipline.

Yes, there are always the opportunities with regard to political mischief, and a roof on spending might have its own unintended consequences. There are certainly many beneficial refinements to think about, such as a spending limit that varies with the state of the business cycle (rising during recessions and falling with expansions).

However, I would predict that such a strategy would rein in spending and limit the government’s role in the economy more effectively, along with less uncertainty and fewer harmful side effects, than the ill-advised, counterproductive, as well as unnecessary debt ceiling we’ve.

Explainer: what’s the debt ceiling as well as why it’s an obsolete way to control spending is republished with permission from The Conversation