The Bank of Mum and Dad still shows all the scars of bailing out an errant son in every line of an ugly balance sheet. But Junior is on the mend. The “Junior” in question is the US consumer, whose property market fuelled high spirits of yesteryear show many signs of being tamed. Middle-aged caution has taken over. It may be duller but at least the insurance quote on the car no longer makes you wince.
Let’s just assume some passing fairy waved her magic wand one morning as you stumbled out of bed cursing that blasted alarm. Rather than the usual bleary-eyed commute, this fairy has the power to transform you, body and soul into the Eurozone economy. Once you had recovered from this interesting turn of events, what would the different parts of your body stand in for? Let’s say the brain would stand in for the government, the limbs for all those factories and offices keeping you constantly on the move, whilst all the veins stood in for the banking system irrigating the whole body with money being pumped round. In this analogy, the blood would be the money and the heart that regulates it all would be the central bank.
Rather than centuries of experience of managing the flat-lands, only a juvenile decade has passed since the Great Financial Crisis felled interest rates, $13tn and counting of bonds trading at sub-zero rates now standing in for economic life below sea-level. However, unlike the Dutch, there is little evidence that swamp drainage is a virtue which the captains of the world’s central banks can lay claim to.
The Sino-US trade and tech war has entered a new and more concerning phase as July marked the first anniversary of its initiation – when President Trump imposed a 25% tariff on $34 billion worth of Chinese goods. A year of on-and-off negotiations – and respective up-and-down headlines driving the markets – has seen this escalate to some $300 billion now.