By Sandro Scocco is Chief Economist at the Stockholm-based think tank Arena Idé and has a background as the Chief Economist of the governmental research institute ITPS. He is also a former Director at the Labour Market Board and served during the 1990s as an adviser to several Swedish social democratic ministers.
From the Social Europe Journal, December 9, 2016
A popular narrative today is that low-income groups in the western world have fallen behind owing to jobs lost to new machines and to low-paid jobs overseas. Political populists like Trump or Le Pen have happily exploited this frustration with nostalgic, nationalistic and anti-free trade messages. A new study shows that this narrative has little support in historical trends.
Certainly, large groups have fallen behind in recent decades. But this is true not only of low-income groups but also of large parts of the middle class in many countries. Take, for example, those with higher education in the US; their real incomes have stagnated in the past 15 years. In the whole of the industrialised world median wage growth has fallen markedly behind GDP growth. By contrast, the top 1 percent have increased their income much faster than the rise in GDP and, in some countries, including the US and Sweden, they have more than doubled their income share.
So, there is a clear breeding ground for anger and frustration among broad groups, and not just among low-income earners, but is it really related to technology and trade?
Why They Stayed Calm and Carried On
By SCOTT SUMNER who is Ralph G. Hawtrey Chair of Monetary Policy at the Mercatus Center at George Mason University and Professor of Economics at Bentley University. Follow him at the TheMoneyIllusion.com.
This article was published in Foreign Affairs on November 13, 2016.
To read the entire article please go to: http://fam.ag/2fSMsCE
World financial markets have had an unusual reaction to the unexpected U.S. presidential election victory of Donald Trump: they remained relatively calm and, some might say, even responded positively. Unlike the British pound after the Brexit vote, which tumbled rapidly shortly after, the U.S. dollar, after Trump’s election, actually strengthened modestly against foreign currencies such as the yen, the euro, and the yuan. Interest rates in the U.S. treasury bond market have increased, in both nominal and real terms. Inflation is also expected to increase modestly.
The reaction of global equity markets was perhaps the most surprising of all. U.S. stock futures fell as much as five percent on Tuesday evening, as it became apparent that Trump had all but secured a victory. The behavior was consistent with the pre-election pattern. Whenever polls showed an increased chance of a Trump win, stocks tended to dip (as they did following reports that FBI Director James Comey would be reopening an investigation into Secretary Hillary Clinton’s emails). But a few hours after Tuesday’s decline, stocks beat expectations and crept back up. By the end of the next trading day, the market was above pre-election levels.
Dr. Allan H. Meltzer is an American Economist and the Allan H. Meltzer professor of Political Economy at Carnegie Mellon University’s Tepper School of Business. He is the author of a large number of academic papers and books on monetary policy and the Federal Reserve Bank. Dr. Meltzer’s two volume books, “A History of the Federal Reserve”, are considered the most comprehensive history of the central bank. He is considered one of the world’s foremost experts on the development and application of monetary policy. Currently he is also President of the Mont Pelerin Society. Dr. Meltzer originated the aphorism “Capitalism without failure is like religion without sin. It doesn’t work.”
This is a monthly column written by Professor Meltzer for Defining Ideas of the Hoover Institution.
It is posted in http://www.hoover.org/research/
In late August, I again spent 3 days with central bankers from all over the world at the annual meeting sponsored by the Kansas City Federal Reserve Bank. The spectacular, scenic beauty at the Grand Teton National Park, Wyoming, is one of the world’s most beautiful places. The meetings attractions include stimulating discussions of economic policy in addition to the spectacular scenery and wonderful hiking.
This year’s central topic called on participants to discuss ways to improve future monetary policy operations. A major concern is about ability to respond effectively to a recession if the current low interest environment continues. Central bankers have learned to lower interest rates to encourage borrowing in recessions and to raise rates when inflation threatens or occurs. Because interest rates are close to zero in all the developed countries, some market participants fear that central banks will be powerless to act. Chair Yellen tried to reassure them.