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Sat Aug 24, 2019, 08:09 PM

Analysis: One Crazy Day Showed How Political Chaos Threatens the World Economy

The series of economic and financial developments on Friday was a strange, bewildering, exhausting microcosm of why the global economy is at risk of a meltdown.

It showed the odd interplay at work between the Chinese government’s actions in the escalating trade war with the United States, the sober-minded global central bankers who have limited power to deploy and an American president whose public pronouncements often appear driven by grievance more than strategy.

President Trump arrived in France on Saturday for a meeting of the Group of 7 industrialized nations, having set the stage for fireworks and confusion. In one dizzying day, he had seemed to be searching for whom or what to blame for economic troubles, first using Twitter to call his own Federal Reserve chief an enemy of the United States and then to urge American companies to stop doing business with China.

And that was just while the markets were open. Later Friday, he said he would apply tariffs to all Chinese imports and increase those already in place.

The global economy may yet turn out fine; most economic data in the United States has been solid. But if a recession and breakdown in international commerce happens in the coming year, histories of the episode may well spend a chapter on the Friday collision of official actions in the government offices of Beijing, in the Grand Tetons in Wyoming and in the Oval Office.

It became clear in real time how the risks of an escalating trade war and the fraying of longstanding financial and political ties could quickly outpace the ability of central banks — the normal first responders to economic distress — to do anything about it.

President Trump’s shoot-first approach adds to the risks at a delicate moment, with major economies in Asia and Europe already teetering and policymakers’ capacity to contain the damage in question.

https://www.msn.com/en-us/news/politics/analysis-one-crazy-day-showed-how-political-chaos-threatens-the-world-economy/ar-AAGgIvh?li=BBnbcA1

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