China and Europe are in a slump, but the US economy is profiting from their pain thanks to low interest rates
- American workers’ wages are rising and so is their spending, as poor growth elsewhere means low interest rates and, therefore, bargains everywhere
But relatively strong US growth amid sluggishness elsewhere is not what economics textbooks would predict. Whatever happened to the tightly integrated world economy that the International Monetary Fund and the World Bank have been advocating – and more recently extolling – since World War II?
The 10-year US Treasury bond is yielding about 2.1 per cent, and in April, the streaming service Netflix issued junk bonds at a rate of just 5.4 per cent. Borrowing costs are currently lower than at any time since the founding of the US Federal Reserve in 1913 or, in Britain’s case, since the Bank of England was established in 1694.
If a Rip Van Winkle economist were to wake up today after a decades-long sleep and see only those numbers, he or she would assume that one-fifth of Americans were unemployed and standing in queues outside soup kitchens. Instead, the US jobless rate is at its lowest level since Neil Armstrong took his famous first step onto the moon’s surface 50 years ago.