by Bill O’Grady

This week, we conclude our series by describing what we view as a new model for the superpower role, the Malevolent Hegemon.  We will discuss the differences between this model and the previous one.  With this analysis in place, we will examine the potential outcomes from this shift and conclude with potential market ramifications.

What is to be done?
Distortions to the U.S. economy have occurred as a result of its role as the global hegemon.  U.S. policymakers must decide how to address the inequality issue without triggering high inflation.  One solution to this dilemma is to exit the superpower role.  This would allow the U.S. to put up trade barriers and run trade surpluses; although potentially inflationary, it would likely increase employment opportunities for the bottom 90%.

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