Washington just did it again! A currency bill was passed in the House today which seeks to impose trade sanctions against countries who manipulate their currencies... They are obviously targeting China, and the bill is deemed voter-friendly as the election is around the corner. What does this mean? This is just an anecdote of the "de-globalization" which has taken place following the financial crisis. As you may already know, globalization contributed to the above-trend growth seen in the past three decades during which financial and human capital were allocated more efficiently, leading to increased growth. However, developed countries are facing high employment in the aftermath of the credit bubble, politicians are being pressured to create jobs anyway they can, which is unfortunately counter-productive. Therefore, we are entering a period in which growth is going to be below-trend, negatively impacted by regulation, protectionism and aging population.
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