Topic Category: U.S.

The oil industry, and perhaps the global economy, is standing at a crossroads. Down one path, the storm is over — and it has been a major storm. Tens of thousands of jobs lost, billions of dollars in capital evaporated, and the promise of energy independence broken. Yet down this path is the promise of recovery and renewed growth, albeit slow.

It’s a presidential election year so the quadrennially-maligned U.S. trade deficit is taking its lumps. Donald Trump says the trade deficit means the United States is losing at trade, and it’s losing because U.S. trade negotiators aren’t smart enough. Bernie Sanders believes the trade deficit deprives the economy of production and good jobs. Meanwhile, some of the economics commentariat argue that trade deficits are bad because they represent a burden on future generations — a debt that must be repaid.

Two months after negotiators reached a deal six years in the making, the Trans-Pacific Partnership is in trouble. Prospects for ratification of this deal by this Congress appear to be somewhere between questionable and doubtful. That could change in the months ahead, but if the TPP spills over to the next Congress and administration — with all of the uncertainty that portends — President Obama will have his own miscalculations to blame. That and Hillary Clinton.

The Federal Reserve has kept its target range for the federal funds rate at 0 to 0.25 percent since December 2008. This is often referred to as the Fed’s “zero interest rate policy,” or ZIRP. The purpose of near-zero overnight rates — and forward guidance to convince markets that those rates will be maintained — has been to affect the entire rate structure: keeping all rates lower than they would have been in a free capital market.

The Federal Reserve’s unconventional monetary policy has pumped up asset prices by suppressing interest rates and has misallocated capital. It’s time to end the mispricing of assets and let markets determine rates without interference from the Fed. Waiting to normalize monetary policy will further inflate asset bubbles and make the ultimate normalization of rates more costly.

Influential members of the Saudi Arabian government believe that the United States — the kingdom’s most valuable strategic ally since 1945 — has abandoned Riyadh on a host of regional issues, most notably Iran’s nuclear program. As the Saudis respond by seeking to enhance their political and economic relations with countries other than the United States, France sees an opportunity to supplant Washington as Riyadh’s closest ally.

The idea that there’s a trade-off between inflation and unemployment seems embedded in the Federal Reserve’s psyche. The Fed has not increased its benchmark federal funds target rate since 2006. It’s waiting to see if a tighter labor market will push up wages and prices, so the Fed can achieve both full employment and its inflation target of 2 percent.

Media outlets love to highlight the next big thing. Trend spotters love to say they know about it, and investment bankers love to bet on it. As a twenty five year Silicon Valley veteran, I’m always astonished on how often they miss what’s big. That’s probably why, when the next big thing comes out, most of us are shocked since we think the technology came out of nowhere.

America’s “secret sauce” has provided tremendous advantages that no other country can. The “secret sauce” includes the U.S. system of free market capitalism, capital markets, rule of law, separation of church and state, entrepreneurialism, balance of power, the welcoming of immigrants, and a brilliant Constitution. Combined, these factors have promoted stability and created an environment empowering people to unleash their creativity to achieve their dreams.