The European Central Bank (ECB) replicated the Federal Reserve Bank’s earlier U-turn on monetary policy at its latest meeting. Barely three months after the central bank announcing an end to Quantitative Easing (QE), Mario Draghi, the ECB president, pulled the alarm over the sharp economic slowdown and announced a two-pronged approach. First, the central bank would continue its ultra-low interest rates policy at last through the end of 2019. Second, barely three months after announcing), the ECB will provide continued support to financial markets and banks.
Another amazing week. As politics got murkier however, markets surged higher. In terms of what will be remembered decades from now, the event that shocked nearly everyone was the abrupt ending of the US-North Korea Summit. As the next set of leadership-level meetings loom this month, surely the Chinese must be reevaluating their strategy vis-à-vis President Donald Trump. What these negotiations have in common is that in both cases the US is asking Kim Jun-un and Xi Jinping for structural changes that for different reasons each might have trouble delivering.
The US government shutdown is over, but the question of how a wall between the US and Mexico will be funded is unresolved. The threat, or lack of a threat posed by immigrants at the southern border, is a litmus test for US politicians. AMLO, Mexico’s new leader, could achieve what no one has before in terms of eliminating violence and corruption, or he could make things much, much worse and turn his country into the next Venezuela.
The biggest economic conference of the season, the World Economic Forum, has just wrapped up in Davos. Most of the sessions are now available as they happen, and with the snow piled high here in Chicago, watching them online almost seemed like being there. I’ve included links to some of the best discussions and interviews you might enjoy on this even colder weekend.
Predicting the future is notoriously difficult, but that doesn’t stop the flurry of prognostications every January. We’ve gathered a selection of 2019 forecasts, including some predicting low probability events, because just imagining the unlikely can reveal horizons sometimes obstructed by conventional wisdom.
Like previous “year ahead” reviews I have published on EconVue, this is not intended as a prediction of how events will necessarily unfold in real life. Instead, as always my intent is above all to consider the main risks to the stability to the international political and economic environment in various regions of the world that I am relatively familiar with.
I am sharing with you my new article examining trends and challenges facing Latin America and the Caribbean as we begin 2019. The work focuses on the reinforcing effects of the fragmentation and other changes in the criminal groups across the region, the advance of the PRC, and deepening political crises in Guyana, Venezuela, Honduras, and Guatemala. The article also highlights significant developments and challenges in Mexico and Colombia as countries of concern.
I normally feel after reading, reviewing, and discussing the events of the previous week that I’m able to discern a direction or constructive theme. Today however, every corner of the world seems mired in some degree of turmoil, and markets are reacting. There is so much noise that it is difficult to decide what is causing this new volatility. Is it China, the Fed, the Mueller investigation, Yellow Jackets, or technology run amuck?
Forecasts for 2019 are now coalescing. The typical view is that the first half of the year will be more difficult for the world economy than 2017 and 2018, with beneath-trend growth likely. As has been anticipated in these notes for some time, the Eurozone is the focus of concern. Not only will the European Central Bank end its asset purchases next year, but warnings are being given to the weakest banks – the banks that cannot easily fund their assets from market sources – that the ECB’s long-term loan facilities to them may not be extended in mid-2020.
From November 26 to December 2, 2018, I traveled to Taipei, Taiwan to speak at the prestigious private university, Tamkang. There I had the chance to interact with academics, officials, and students regarding Taiwan’s relationships in Latin America and the Caribbean and its associated struggle for diplomatic and existential survival.