Economy

The most important American in the world right now might not be Donald Trump. It could be Scott Bessent, the Treasury Secretary, who is exercising America’s financial muscle in highly interesting ways across the world. This week the US joined the Japanese government in an intervention to prop up the yen – the first time America and its ally have done so since 1998, at the height of the Asian financial crisis. Financial analysts have been critical of the move, especially Bessent’s promise to do "whatever it takes" to support Japan’s currency and his willingness to lift the $60 billion cap on the emergency facility. The fear is that, at a time when Federal Reserve chairman Kevin Warsh remains eager to tighten the balance sheet, Bessent is taking on more debt.

Remember the old quip about economists? “That’s all very in practice,” they say, “but how does it work out in theory?” Nobel laureate Paul Krugman of the New York Times is a splendid example of that sort of folly. On the evening of November 9, 2016, Krugman skirled that the election of Donald Trump would precipitate economic Armageddon. “If the question is when markets will recover,” he said, “a first-pass answer is never.” How could they recover since the nation had just elected an “irresponsible, ignorant man who takes his advice from all the wrong people,” that is to say, he didn’t take advice from people like Paul Krugman.Reality check: the day Krugman wrote that, the market closed at 18,589. In the last few days the Dow broke 50,000.

It began, as most things do under Donald Trump, with an idea that struck outside observers as a lark. An interested party – in this case, billionaire Ron Lauder – suggested to the President during his first term that the United States should acquire Greenland, a move that would represent the largest expansion of US territory since the purchase of Alaska from the Russians more than 150 years ago. The notion was reportedly considered and then left on the shelf, like so many ideas in Trump’s first term. Yet time away from the presidency gave it more resonance. Now the President is back on the case – and he seems very committed to the move, to the shock and horror of European observers who never took his Arctic ambitions seriously.

I hate to be the bearer of good news, but the US economy is doing quite well. A delayed government report shows that third-quarter GDP grew at 4.3 percent, hardly a record, but still healthy, the highest growth rate in two years. Last week’s inflation report showed a lower-than-expected number, and wage growth is exceeding inflation. Consumer spending is up, and, yes, the stock market is booming. Happy days are here again. The sky above is clear again. Many accounts on my X feed, which are either run by Democratic partisans or Iranian trolls or both, say that food-pantry lines are reaching record numbers this holiday season, and that poverty and homelessness are increasing even as the rich get richer. “Trump lies,” they said. Yes, and the sun is hot. What’s the point?

It is easy to criticise the Budget. The process was a chaotic mess. For many on the right, Rachel Reeves’s £26 billion tax raid to placate Labour MPs was a form of madness as well as badness. But good politics means understanding your opponents. One former No. 10 Tory thinks there was method in the madness: ‘It totally makes sense for Labour to move to the left.’ Nearly half of those who voted Labour last year would not vote for the party today. The number of voters fleeing Labour to the right – to Reform or the Tories – has remained steady since January at between 13 and 16 per cent, or one in seven of their 2024 voter base. Two-thirds of those votes have been lost to Reform.