The World’s Central Banks Aren’t Following the Fed’s Lead Anymore
Diverging paths on interest rates are a sign that America’s global influence is diminishing.
All politics, the saying goes, is local. Is the same true of economics? In the past, not so much. Right now, more and more.
Cast your minds back to the 1990s and early 2000s—the era of go-go globalization, and the unipolar moment for US economic heft and geopolitical power. Stock markets around the world marched to the beat of Wall Street’s drum. Central banks moved in line with the Federal Reserve or faced the consequences as hot money flooded in or fled out, placing currencies and price stability at risk. America’s friends benefited from access to US markets, investment and technology, all of which helped propel their prosperity. America’s foes labored under the weight of sanctions and export controls that kept them isolated, technologically backward and poor. The diverging fortunes of the Soviet Union, a foe that collapsed, and China, a friend (at least back then) that boomed, are a case in point.