The start of the year has not been an easy one for financial markets. The Federal Reserve is continuing its policy of trimming its bond purchases by $10 billion a month, and the immediate result has been a sharp pullback of the currencies, and to some degree equities, of countries such as Indonesia, Turkey, India, South Africa and Argentina. The reason? According to traders, commentators, and even the head of Brazil’s central bank, Fed policy will trigger interest rate rises around the world, staunching the flow of easy money that has purportedly fueled global growth — and leading to struggles everywhere.
The Edgy Optimist
In a widely-read statement in his annual foundation letter, Bill Gates took an unabashedly optimistic approach to the world this week. Not only did he tout the massive material progress evident everywhere in the world over the past decades, but he also predicted that as more countries accelerate their transformation from rural poverty to urban middle class societies, poverty as we know it will disappear within the next two decades. “By 2035, there will be almost no poor countries left in the world,” Gates wrote. “Almost all countries will be what we now call lower-middle income or richer.”
In an unabashed endorsement of government action to alleviate the plight of the poor, this week President Obama commemorated the 50th anniversary of the War on Poverty with his own call for new policies to address the continued struggles of tens of millions of Americans.
Over the past four weeks, we’ve had a run of undeniably good news. A panoply of data has shown that the U.S. economic system appears to be on firm ground. More people have jobs, albeit not necessarily sterling jobs, and the pace of overall activity as measured by GDP is at the highest level in two years, expanding at 4.1 percent annually. On the political front, Congress passed a budget for the first time in more than three years, which suggests a period ahead where Washington tantrums do not threaten to upend whatever delicate equilibrium currently exists.
After three years of sclerosis, Congress is poised to at last pass an actual budget. We’ve been so consumed with the dysfunction of the parties on Capitol Hill that this feat appears significant. In fact, it should be routine. Yet in the context of the past few years, it is anything but.
In his speech at the Center for American Progress this week, President Obama devoted considerable time to an issue suddenly much in discussion: the minimum wage. This is not a new debate. In fact, it neatly echoes the last time Congress raised the minimum wage, in 2007, which echoed the debates before that. Few economic issues are such sweet catnip to ideological camps, and there is precisely zero consensus about whether these minimums have positive, negative or no effect.
Twitter’s initial public offering last week was everything that Facebook’s botched offering a year and a half ago was not: the stock was reasonably priced; management wooed investors; and the company neither promised the moon nor the stars, and was rewarded with a substantial amount of cash raised, a stock that went up more than 75 percent, and a valuation of $25 billion.
The Obamacare blame game is in full swing, and without other news to fill pages and airtime, it’s likely to continue for some time. Attention is shifting from the myriad problems with the official website Healthcare.gov, and toward the health plans that are being canceled, even though President Obama promised that they would not be.