The Political Economist

In the previous text I presented several economic hypotheses explaining why the developed world has entered what could possibly be a prolonged period of economic stagnation. In today's text ( note: long read ) I will present my own opinion, arguing that what we are experiencing is a temporary slowdown which could last for several decades, but one that could also provide the greatest opportunity for the next huge boost in living standards. I hypothesize that the underlying factor behind both the current temporary stagnation (particularly in productivity and real wages) and the upcoming rise in living standards is - technology .  As I've emphasized several times on the blog before, I believe we are currently, for the past 30 years, in the period of the Third Industrial Revolution . And in our times, it's only heating up, with the potential to bring to some new disruptive innovations that could change our world as much as the previous two industrial revolutions had. The ...

After summing up the successes and failures of my last years' predictions in the previous post, it's time to make new ones. Each year the same; I look ahead and try to anticipate the most important economic and political outcomes on a national, regional, and global scale. I tend to be quite precise ( see my track record ), but I always manage to overlook the importance of some events (like the Ukrainian crisis in my predictions for 2014 , or the refugee crisis for 2015). For the upcoming year one of the arcs will be 'Women in charge' . Why such a title? Well, primarily because by the end of next year we could have 5 out 10 most powerful political positions in the world held by women.  Angela Merkel, the EU (German) Chancellor, Christine Lagarde, Director of the IMF, and Janet Yellen, the Chairman of the Fed, could be joined by Hilary Clinton as the next President of the United States, and quite possibly Irina Bokova as the Secretary General of the United Nation...

This is becoming a sort of a post-Christmas tradition on the blog - each year in the weak after Christmas I offer a wrap up of the year by evaluating my last year's predictions . Once again, I have to say, it was a good year in terms of what I got right (I managed to even beat my own predictions from 2014 : 85% compared to last year's 75%), but there were a few events that went under my radar (the Greece situation triggered by Syriza's victory, and the refugee crisis).  The title of last year's predictions was: "2015: Back to Realpolitik and back to growth" . My main prediction was that most economies in the West would return to having steady rates of economic growth (which came true), and that debates over the economy will be overshadowed by the return of realpolitik and muscle-flexing between Russia and the West. I've also stated that "low oil prices will be the key in prompting a stronger recovery", which they were, and I managed to exclu...

Well, well, well, it seems the Cold War era is back upon us. And I'm not just saying this as a consequence of a holiday season James Bond movie marathon that I watched. No, it's real, or to be more precise it's - Realpolitik ! It seems that diplomats are setting the stage once again, and that the debate over Russia vs the West is likely to overtake the debate on the economy next year. Which is good on one hand as it implies that the economy is recovering so it's no longer the main focus of attention, but on the other hand it's bad since foreign policy standoffs only build uncertainty and are not good for economic recoveries. But overall the economy actually is expected to perform quite well next year (well, apart from Russia, but more on that below). Low oil prices will be the key in prompting a stronger recovery. The IMF links a 10% change in oil prices to roughly 0.2% change in global GDP. Prices that have fallen by 50% in the last 6 months are likely to be a s...

Japan has been such a perplexing country in terms of its economy for the past two decades. A country riven by a slow, government-driven recovery has tried everything: from massive monetary stimuli which has kept interest rates really low for the entire period, to massive fiscal stimuli which resulted in a >230% of Japanese debt to GDP (which is ok apparently since the majority of this debt is held by domestic entities - or is it? ). It's hard to think of any country going through the same painful experience. Up until today that is. It seems that a similar scenario awaits the UK and Europe - stagnant economies at least for a decade if not longer, with rising debt levels and low productivity.  However 20 years of no growth (the two lost decades) have finally taken its tolls and the idea was to replace them with something new and yet untried, so to speak. Abenomics , the set of economic policy measures applied by Japanese PM Shinzo Abe , appears to be just what the country n...