While I await some news on the Russian/US negotiations in Saudi Arabia- this piece from AEI, this surprising piece, will be linked and a few excerpts included below– read entirely at the link provided
Desmond Lachman joined AEI after serving as a managing director and chief emerging market economic strategist at Salomon Smith Barney. He previously served as deputy director in the International Monetary Fund’s (IMF) Policy Development and Review Department and was active in staff formulation of IMF policies. Mr. Lachman has written extensively on the global economic crisis, the U.S. housing market bust, the U.S. dollar, and the strains in the euro area. At AEI, Mr. Lachman is focused on the global macroeconomy, global currency issues, and the multilateral lending agencies.
Under US President Donald Trump’s erratic rule, the United States is now exhibiting all the symptoms, from high import tariffs and fiscal deficits, to oligarchy and flagrant corruption. Worse, the fallout cannot be confined to the US, and no multilateral bailout or structural adjustment plan can mitigate the damage.
WASHINGTON, DC – Having worked as an emerging-market economist for many years, first at the International Monetary Fund and then on Wall Street, I recognize an emerging-market economy in trouble when I see one. It pains me to say it, but the United States is showing many of the warning signs. Worse, by dint of its size, America’s actions have a much greater impact on the world economy than those of any run-of-the-mill emerging market.
One sure sign of a troubled emerging-market economy is excessive use of import tariffs to protect domestic industries. Such policies stifle competition, increase inflation, inhibit economic growth, and fuel widespread corruption by giving government officials the power to grant exceptions to tariffs on a case-by-case basis.
Another sure sign of a troubled emerging-market economy is a large budget deficit and a heavy burden of public debt. Here, too, the US checks the relevant boxes. At the start of Trump’s second term, the US was running a budget deficit of 6.5% of GDP, and US public debt was close to 100% of GDP, well on its way to exceeding the ratio at the end of World War II.
Judging by Trump’s proposed tax cuts, the typical emerging-market economy’s budget deficit may soon pale in comparison to that of the US. According to the Committee for a Responsible Federal Budget, the administration’s envisioned tax cuts would add between $5 trillion and $11 trillion to the US budget deficit over the next decade. That would take public debt to 140% of GDP by 2034 – or 50% above the debt ratio of the typical emerging-market economy.
Yet another sign of a troubled emerging-market economy flashes red when a handful of oligarchs wield outsize political influence – or even wield power directly – and when the government goes out of its way to undermine confidence in public institutions in general and the central bank in particular.
Something else that the US now has in common with many emerging-market countries is a highly erratic approach to economic policymaking, which creates an atmosphere of heightened uncertainty that undermines investor and consumer confidence. America’s two main trading partners are threatened with 25% tariffs one day, only to be granted a one-month reprieve the next. Government workers are fired en masse by Musk’s Department of Government Efficiency (DOGE) and then rehired, because it turns out that they performed essential functions like overseeing the US nuclear-weapons stockpile. No wonder the stock market has been swooning: investor and consumer confidence is tanking.