Op-Ed: There is a long campaign to put the US economy back on track

Op-Ed: There is a long campaign to put the US economy back on track
Op-Ed: There is a long campaign to put the US economy back on track

It's OK if you want to see this as a light-hearted takeoff on "The Art of the Deal," but please do take this seriously: With the initial inflation and fiscal conditions we now have, a huge pressure on our capital markets to finance a mega stimulus would send the bond vigilantes heading for the hills and would put a crashing end to the equity markets' Trump rally.

Why? Because the Fed will not be able to accommodate that. The Fed is poised to resume its interest rate hikes, and it would be unwise to believe the bromides that the Fed will do that "gently and slowly." Once the tightening process gets under way, markets will be expecting the next move, because inflation will not be going down in an accelerating economy.

Structural and foreign trade policies are equally complex, but the scope for policy action there is much bigger than in the monetary-fiscal policy mix.

Reasonable deregulation measures to improve market efficiency can make a significant contribution to economic growth. Healthcare, education and labor market policies are also essential to increase the volume and quality of human capital – a key condition to a more productive labor force and to an increasing growth potential of the economy. Also, adjustments to the corporate tax code are an important part of foreign trade policies, and so are revisions to unbalanced trade agreements.

CNBC

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