Imagine that you want to buy a home. You might find a real-estate agent to show you around, which is a very 20th-century way of doing things. Or you might go 21st century and use the Web to research prices and available properties and to take a few virtual tours.
The 12-nation Trans-Pacific Partnership trade deal signed Monday is poised to become an election-year piñata as the Obama administration works to get it through Congress. Hillary Clinton, who supported the TPP when she was secretary of state, came out against it on Wednesday: “I don’t believe it’s going to meet the high bar I have set.” Sen. Bernie Sanders, her rival for the Democratic presidential nomination, issued a caustic statement: “It is time for the rest of us to stop letting multinational corporations rig the system to pad their profits at our expense.”
WSJ review of The Leading Indicators.
The mass movement engulfing Egypt exposes a fact that has been hiding in plain sight: In a decade during which China has brought more people out of poverty at a faster rate than ever in human history, in a period of time where economic reform has been sweeping the world from Brazil to Indonesia, Egypt has missed out.
For all the talk about the problems of Greece and their implications for the euro zone, there is another currency that presents equally profound problems: the U.S. dollar. The dollar is, as everyone knows, the world's reserve currency, and it widely seen as a boon and an anchor for the emerging global economic system. It is also the only thing standing between the United States and its own moment of reckoning, and that is not a good thing.
So we're almost there. The Dow is flirting with 11000 for the first time since October 2008—after falling to a low of 6500 in March last year. Now seems an appropriate time to ask whether the dramatic recovery of stocks is sustainable and to speculate about what comes next.
As the economic crisis has eased in recent months, a questionable international consensus has emerged: The global economy needs to be rebalanced. "We cannot follow the same policies that led to such imbalanced growth," President Barack Obama said during his Asia trip last month. European Central Bank head Jean-Claude Trichet declared in September that "imbalances have been at the roots of the present difficulties. If we don't correct them, we'll have the recipe for the next major crisis."
Global markets sank sharply at the end of last week on fears that Dubai World, a subsidiary of the government of Dubai, was on the verge of defaulting on approximately $60 billion of the emirate's $80 billion in total debt held by creditors world-wide. The rush of news stories added to the wildfire of panicky speculation, with headlines ranging from "Dubai Default Risk May be Big US Bank Problem," to "Dubai Shows Limits of Government Rescues."
Consider what happened in 1946, when a cash-strapped Great Britain turned to the U.S. for a loan. For 30 years or more, the British had been consumed by the threat of a rising Germany. Two wars had been fought, millions of lives had been lost, and the British treasury was dramatically depleted in the process. Britain survived, but the costs were substantial.
Despite grim predictions, most major U.S. companies have reported positive earnings for the second quarter of 2009. Given how wrong past predictions have been, the fact that earnings have blown away expectations shouldn’t be so surprising. Still, the numbers are genuinely impressive: More than 73% of the companies that have reported so far have beaten earnings estimates—and stocks have rightly rallied.
Twenty years ago, in the wake of the suppression of the student movement that had taken over Tiananmen Square, it seemed as if China's brief opening to the world had come to an end. In fact, 1989 marked the beginning of China's supercharged path to economic reform. The results have been tremendous: China is now the second pillar of the global economy and is increasingly vital given the vulnerability of the United States.
'Wall Street, as we knew it, is dead. The system that allowed the U.S. economy to be a dynamic innovator has been fundamentally broken and the implications of these structural changes have yet to be fully felt." It's now commonly accepted that the economic meltdown has forever changed the nature of the financial industry. But the words above weren't written in the past weeks. They were penned by financial analyst Richard Wayman in 2003, after investigations by then New York Attorney General Eliot Spitzer led to a structural shift in the relationship between research and investment banking following the stock-market collapse of 2001-02.
The recent economic news has been dismal, and it's now almost universally assumed things will get worse before they get better. Conventional wisdom also dictates that this recession will be longer, deeper and cause more long-term pain than any financial crisis since the Great Depression.
The incoming Obama administration will face formidable challenges, but global economic collapse is no longer imminent. That may be small short-term comfort to the markets and Main Street. But having stared down the abyss, governments around the world appear determined to address root issues. The G-20 gathering of the world's major powers in Washington on Nov. 15 was only the beginning of a long and constructive process of revising the global system.
Soon enough, America's financial crisis will wind down -- maybe in a month, maybe in a year. Yet regardless of when, this crisis marks the beginning of a new era for the U.S. For more than six decades, from the end of World War II in 1945 until now, the U.S. was the hub of global capital and capitalism. In the years to come, it will remain a vital center, but not the center.
The decision by the Federal Reserve to loan insurance giant AIG $85 billion in return for as much as 80% ownership of the company is by any measure dramatic. The takeover early last week of Fannie Mae and Freddie Mac represented the culmination of years of intermingling of public and private interests. Even if the intervention was imperative, its scope is startling.
Don't count out the U.S. consumer. For the past decades, that has been a ready rebuttal against predictions of economic doom and gloom for America and the world. The average American's spending capacity has proven more resilient than anyone could have predicted. At various points over the last 60 years it has supplied the ballast for companies domestic and world-wide.
Wall Street Journal Review of Parting The Desert.
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