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US Economy

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The useful myth of central bank independence

One of the sustaining myths of modern economics is that central banks are independent, able to pursue monetary policy free from the pressures of politics. This makes monetary policy more effective: it gives confidence that the economy will be kept on a steady path unaffected by the exigencies of the
By Stephen Grenville
08 Apr 19
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US versus China: the economic model

With the US–China economic rivalry intensifying and “decoupling” becoming the mantra in Washington, what mindset, or economic model, is behind President Donald Trump’s response to China? Trump is a Republican, but not as we know them. Republicans favour free international trade,
By Stephen Grenville
16 Nov 18
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Can the Fed resist Trump’s pressure?

Central bank independence is now a well-established element of best-practice monetary policy just about everywhere. Except, perhaps, in America. Elsewhere, most politicians accept that it is in their interests to refrain from pressuring the central bank. It would be out of character, however, for US
By Stephen Grenville
03 Aug 18
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Company tax cuts: America versus Australia

The expert panel on the ABC’s Q&A program earlier this month was hopelessly confused in comparing Donald Trump’s cut in US company tax with the proposed company tax cuts in Australia. Although it’s often useful to compare domestic economic policy initiatives with those
By Stephen Grenville
27 Feb 18
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A new proposal to normalise US monetary policy

If financial markets were expecting clear guidance on future US monetary policy moves from the annual central bank get-together at Jackson Hole in Wyoming last month, they would have been disappointed. Fed Chair Janet Yellen confined her speech to setting out how much progress has been made in
By Stephen Grenville
11 Sep 17
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America: Full employment is not enough

On the surface the US economy has had a successful recovery from the 2008 Great Recession, with eight years of unbroken growth and unemployment well below 5% for more than a year. So why is the national mood so joyless? Why do many commentators attribute the unexpected Trump victory to economic
By Stephen Grenville
01 Aug 17
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Is the US economy at full employment?

After the painfully slow recovery from the 2008 great Recession, US unemployment is now 4.4%, well below the level commonly regarded as 'full employment'. This would suggest that the economy has reached capacity, with some arguing that the current lacklustre rate of growth is in fact 
By Stephen Grenville
30 May 17
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Are US Fed rate projections ‘behind the curve’?

Last Wednesday the US Federal Reserve raised the Fed funds rate for the third time since the 2008 financial crisis. Financial market commentators have worked hard over this eight-year period to create downside drama in the narrative of the return of interest rates from the abnormally low levels of
By Stephen Grenville
21 Mar 17
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Is Trump reigniting the currency wars?

In 2010 Brazilian Finance Minister Guido Mantega warned that a 'currency war' was underway. Europe, the United States and the United Kingdom were attempting to boost their limp post-2008 recoveries through quantitative easing (QE) policies, which not only lowered interest rates but also depreciated
By Stephen Grenville
07 Feb 17
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Trump’s trade protectionism

President Trump is off to a flying start on his promised trade protectionism, with executive orders on withdrawal from the Trans-Pacific Partnership and renegotiation of NAFTA, together with his threatened import duty on any US company off-shoring domestic jobs and his promise to make Mexico pay for
By Stephen Grenville
30 Jan 17
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