New Year’s Resolutions for the world’s biggest economies
Here we are – the start of a New Year and 365 fresh new pages to write. These are exciting times for most of us, but I bet in the first few days of 2016 there are already those suffering from pangs of guilt.
Yes I’m talking about those New Year’s resolutions: binary promises which we seem destined to break but which we perhaps need to motivate ourselves to higher standards.
So I thought I would come up with resolutions for some of the world’s biggest economies.
THE UNITED STATES
Here’s an easy one to stick to in 2016: we pledge not to make the world of finance discuss and debate ad nauseam when the Federal Reserve will hike interest rates for the first time since the global financial crisis. Yes, Janet Yellen & co finally did the historical deed in the last month of 2015, with a muted market response.
In 2016, they will need to be careful about how often they lift borrowing rates further and how well they communicate it to the markets. No one wants a repeat of 1994 when the US markets panicked, losing 10 per cent after being surprised with seven interest rate increases in just one year.
CHINA
How about for the New Year we stick to just one economic plan? So let’s not shock global markets again with a sudden move to weaken the Chinese currency by the most in 20 years after allowing it to strengthen by a third for the past decade. China also needs to decide whether or not it really wants freer markets. In 2015, China repeatedly bailed out its stock markets, with state owned banks and insurers buying up stocks when markets fell.
JAPAN
Just stop making the same New Year’s resolution every year, and failing to keep it. Stop promising to find inflation that’s been elusive for more than 10 years.
In 2015, we saw the Japanese economy barely escape a technical recession for the second time in two years. It was only avoided after a revision to GDP calculations. And this despite a record stimulus programme by the country’s central bank. Consumer prices have also barely budged, even with sales taxes at their highest in history. Japan can’t seem to find sustainable inflation, with the latest numbers showing a declining trend heading into the end of the year.
EUROPEAN UNION
Pledge to stay together. Every year there’s a new threat to break apart the union. Last year it was Greece and its ongoing economic drama. This year, Britain is looking to renegotiate the terms of its membership and, if the country doesn’t get the concessions it is looking for, Prime Minister David Cameron says the prospect of exiting the EU is real. So get used to hearing the term “Brexit” in 2016.
As for our own personal New Year’s resolutions, whether it’s losing weight, quitting smoking or drinking less, like the world’s biggest economies, all we can really do in 2016 is try.