Tag: debt

China to Sustain Top-Down, Debt-Fueled Investment in Major Projects and Security Capacities, Ex-Official Says

Dong Yu, now at Tsinghua, says via state media that Beijing-decreed, central govt bond-backed construction will continue into the next five years.

[from the Center for China & Globalization’s Pekingology]

by Zichen Wang, 10 August, 2025

The key concept in today’s newsletter is 国家重大战略实施和重点领域安全能力建设, in abbreviation in Chinese as 两重 liǎng zhòng.

In English, it is translated officially as the implementation of major national strategies and building up security capacity in key areas, hereinafter referred to as “Two Major Undertakings.”

The concept first appeared in official policy documents in the Chinese Premier’s Report on the Work of the Government [archived PDF] in March 2024.

To systematically address funding shortages facing some major projects for building a great country and advancing national rejuvenation, it is proposed that, starting this year and over each of the next several years, ultra-long special treasury bonds be issued. These bonds will be used to implement major national strategies and build up security capacity in key areas. One trillion yuan of such bonds will be issued in 2024.

By the end of the year, the yuan tag, despite being approved by the national legislature, had changed by 300 billion. The People’s Daily newspaper reported in December 2024.

As of now, the 700 billion yuan in ultra-long-term special treasury bonds allocated for the “two major undertakings” has been distributed in three batches to specific projects.

In 2025, the following year, the Report on the Work of the Government [archived PDF] says,

A total of 1.3 trillion yuan of ultra-long special treasury bonds will be issued, 300 billion yuan more than last year.

735 billion yuan will be earmarked in the central government budget for investment. We will put ultra-long special treasury bonds to good use, increase ultra-long-term loans and other types of financing support, and strengthen top-down organization and coordination to ensure greater support for the implementation of major national strategies and security capacity building in key areas.

A simultaneous Finance Ministry budget plan [archived PDF] rounds up the overall central government spending for the Two Major Undertakings to 800 billion yuan in 2025.

In yuan terms, the much-touted new government subsidies to households pale in comparison with the two major undertakings.

Also from the 2025 Report on the Work of the Government [archived PDF]:

Ultra-long special treasury bonds totaling 300 billion yuan will be issued to support consumer goods trade-in programs. This represents an increase of 150 billion yuan over the previous year.

This week, China announced this week that the phased free preschool education policy will cover all children in their final year of kindergartens, saving families 20 billion yuan. Childcare subsidies unveiled in July amount to 90 billion yuan. 

As Joe Biden repeated over the years,

Don’t tell me what you value. Show me your budget, and I’ll tell you what you value.

The National Development and Reform Commission said last month:

In 2025, a total of 800 billion yuan has been allocated for the “two major undertakings,” supporting 1,459 projects in key areas such as ecological restoration in the Yangtze River Basin, major transportation infrastructure along the Yangtze River, the New Western Land–Sea Corridor, high-standard farmland, major water conservancy projects, urban underground pipeline networks, the “Three-North” shelterbelt program, and the renovation of hospital wards.

Now that the 2025 money has been spent by July and China is drawing up its next Five-Year Plan for 2026-2030, will there be more such projects in the future?

In a column for the state-run China News Service this week, Dong Yu, previously Deputy Director-General of the Second Economic Bureau of the Office of the Central Financial and Economic Affairs Commission and, before that, an official at China’s National Development and Reform Commission (NDRC), pointedly said,

In the next step, during the formulation and implementation of the 15th Five-Year Plan, the “two major undertakings” will continue to occupy an important place, be organically incorporated into the new five-year plan, and form close alignment and sustained momentum with major national strategies, major plans, major projects, and key initiatives…

…Such a major strategy will be pursued with persistence—it will not remain rhetorical, nor will it be reversed abruptly.

He did not cite a source of information in his article.

Continuing with his lecturing style, Dong, now Executive Vice Director of China Institute for Development Planning, Tsinghua University, rebuked some unspecified market analysis that had observed the investments just were a one-time boost shot.

Some market institutions once analyzed that when China’s economy was facing short-term difficulties and challenges, the launch of the “two major undertakings” was mainly aimed at expanding investment in the short term to stabilize growth. Such a view clearly lacks a professional understanding of the decision-making intentions and logic, fails to properly grasp the relationship between the short term and the medium-to-long term, as well as between objectives and means, and inverts the proper order of priorities—a misconception that needs to be pointed out and corrected.

Dong also highlighted what he said was the unusual nature of the “strategic move,” including that central government debts fueled the investments, and they were selected “top-down,” rather than primarily relying on local government proposal or input.

The two undertakings were formally submitted for deliberation at the 2024 National People’s Congress after the central leadership made its decision and arrangements…

The central authorities have shown firm determination in this work, adopting the ultra-long-term special treasury bond—a macro policy tool that has rarely been used. Compared with several past issuances of special treasury bonds, the funding arrangement for the “two major undertakings” spans a longer cycle, has a broader scope of application, and will continue to advance in the next stage. It can be said that the scale and intensity are unprecedented. In 2024, a total of 700 billion yuan in ultra-long-term special treasury bonds was allocated, and in 2025, the figure is 800 billion yuan, all of which have now been fully disbursed.

The organization of the “two major undertakings” construction is top-down, completely different from the past practice in the investment sector where projects were determined through bottom-up applications. The purpose is to facilitate the smoother downward transmission of the needs of major national strategies. Relevant [central] government departments, by identifying shortcomings and weaknesses, specifying key areas, and refining project requirements, have ensured that the project list is no longer a collection of fragmented local items. Instead, projects are planned in an integrated manner by category and sector, with strengthened guidance for key regions, more targeted measures, and clearer standards.

Although an exhaustive list of the 1,459 projects does not appear to be available to the public, the “security capacity” build-up in the two major undertakings should be understood in broad terms, and Dong claims the investments put China on a sounder footing globally now that Donald Trump rules America again.

In recent years, the central authorities have emphasized security awareness and bottom-line thinking in development planning, a shift closely related to changes in the international situation. The closer China’s economy becomes intertwined with the global economy, the more comprehensive its considerations must be regarding issues such as food security, energy security, industrial security, and ecological security. The second “undertaking” in the “two major undertakings”—the strengthening of security capabilities in key areas—is precisely a forward-looking arrangement. The dramatic changes in the international environment since the beginning of 2025 have further underscored and confirmed the necessity of enhancing security capabilities, fully demonstrating that the central authorities’ thinking and deployment have been prescient and ahead of the curve.

Dong’s article via China News Service is fully translated below.

中央这一先手棋很不寻常

This Strategic First Move by the Central Authorities Is Highly Unusual

by Dong Yu, Executive Vice President, Institute for China Development Planning, Tsinghua University

The issuance of ultra-long-term special treasury bonds to support the implementation of major national strategies and the building of security capacities in key areas (hereinafter referred to as the “two major undertakings”) has become one of the hottest topics in China’s economy in recent years. Any observation of China’s present and future economic trajectory must include research and analysis of these two undertakings. More than a year has passed since the initiative was launched, making it both necessary and timely to evaluate its effectiveness, understand its operating mechanisms, and look ahead to its prospects.

The “Two Major Undertakings” Are by No Means Ordinary Policy Measures

In terms of decision-making background and process, as well as policy intensity and scope, the launch and implementation of the two major undertakings stand out from other policies. They represent a top-level design initiative.

Understanding a policy starts with its background. From the sequence of events leading to the proposal, this was a proactive, historic choice. The two undertakings were formally submitted for deliberation at the 2024 National People’s Congress after the central leadership made its decision and arrangements. The timing was significant: the 20th Communist Party of China National Congress had laid out a series of major long- and medium-term strategic initiatives that needed concrete engineering projects to push forward. China was midway through two Five-Year Plans, yet strategic advancement could not wait. The central leadership thus introduced the two major undertakings as a groundbreaking initiative.

Strategically, the undertakings directly address the needs of advancing long-term objectives. From the outset, they have been aimed squarely at the goals of Chinese modernization. By breaking down these goals into specific tasks and identifying the most difficult bottlenecks, the undertakings found their points of focus. Some of these tasks might take decades for other countries to achieve, but China has chosen not to delay—tackling them head-on at the starting stage of the new journey toward modernization. This model is uniquely Chinese and has been proven by history to be a key factor in China’s remarkable development successes.

The undertakings are also highly forward-looking—a “first move” by the central leadership. In recent years, national development planning has placed greater emphasis on security and on guarding the bottom line, in response to changes in the international environment. The closer China’s economy is linked to the global economy, the more comprehensive its considerations must be on food security, energy security, industrial security, and ecological security, and other issues. The second “major” in the initiative—security capacity building in key areas—is an arrangement made in anticipation of future challenges. The sharp changes in the international environment since 2025 have only highlighted and validated the necessity of strengthening security capacities, demonstrating that the central leadership’s thinking and arrangements were ahead of the curve.

The undertakings also have a strong overall and systemic quality, constituting a key move in macroeconomic governance. They focus on areas of outstanding importance to economic and social development and have a high degree of relevance to the overall development landscape. The policy toolkit they employ integrates investment, fiscal, science and technology, education, social, and ecological policies. This comprehensive package embodies the use of systems thinking to drive development and will significantly impact all aspects of the economy and society.

A Manifestation of Central Will

Extraordinary measures are for extraordinary tasks. The strategic objectives of Chinese modernization are long-term undertakings, and the two major undertakings provide the foundational support through systematic design and substantial funding.

The central leadership has committed to this initiative by adopting the rarely used macroeconomic tool of ultra-long-term special treasury bonds. Compared with previous special bond issuances, the funding for the two undertakings spans a longer cycle and serves a wider range of purposes, with plans for continued implementation. In both scale and intensity, this is unprecedented: 700 billion yuan in 2024 and 800 billion yuan in 2025, all of which has already been allocated.

In terms of priorities, it vividly reflects the principle of “concentrating resources to accomplish major undertakings.” The focus areas include urban–rural integration, regional coordination, high-quality population development, food security, energy and resource security, ecological security, and self-reliance and strength in science and technology—all crucial to building a strong nation and achieving national rejuvenation. These require coordinated planning and advancement. In just over a year, the high-level requirements have been translated into batches of concrete projects, reflecting the efficiency of implementation.

Project selection is guided by the principle that only the central government can resolve these issues. Some involve urgent development bottlenecks with significant obstacles that cannot be overcome by conventional means, such as scientific and technological breakthroughs, high-standard farmland construction, and upgrading the quality of higher education. Others are long-desired but previously unachievable projects that lack local willingness or capacity to implement, such as major cross-regional infrastructure, cross-basin wastewater treatment, and urban underground utility upgrades.

The organization of the “two major undertakings” construction is top-down, completely different from the past practice in the investment sector where projects were determined through bottom-up applications. The purpose is to facilitate the smoother downward transmission of the needs of major national strategies. Relevant [central] government departments, by identifying shortcomings and weaknesses, specifying key areas, and refining project requirements, have ensured that the project list is no longer a collection of fragmented local items. Instead, projects are planned in an integrated manner by category and sector, with strengthened guidance for key regions, more targeted measures, and clearer standards.

A Combination of “Hard” and “Soft” Measures

From the start, the undertakings were designed not only to fund “hard” engineering projects but also to include comprehensive arrangements for “soft” institutional and policy measures—an important innovation.

The emphasis on soft measures is pragmatic. Given the high importance and public nature of the projects, long-term mechanisms must be designed to ensure smooth progress during construction and sustainable operation thereafter. This includes drafting specialized plans to provide strategic guidance, introducing targeted policies to improve funding efficiency, and innovating institutional arrangements to safeguard implementation.

The implementation process is thus also a process of improving the investment and financing system, updating project management approaches, and enhancing investment effectiveness. In some sectors, soft-measure experiments have had positive impacts, creating healthy interaction with hard investments.

For example, the healthy operation of urban underground pipelines depends on sound maintenance mechanisms. Some local governments have attracted long-term institutional funds into major pipeline projects through debt or equity investment plans, stabilizing private sector returns via operational rights, government subsidies, and tax incentives. Others have introduced province-wide upstream–downstream gas price linkage, set reasonable water supply return rates based on market profits, and advanced the marketization of gas and water prices—reducing losses for public utilities and encouraging private investment.

Similarly, in the quality undergraduate expansion program, mechanisms play a guiding role: schools effectively implementing expansion plans receive increased support, while those performing poorly see reduced support; universities without expanded undergraduate admission plans are generally excluded from special bond funding. Disciplines and programs are adjusted dynamically to align talent training with economic and societal needs.

Directly Relevant to Everyone

The nature of the undertakings is not determined by project size but by their strategic objectives and significance. As long as they align with major national strategies, they are included—whether as large standalone projects, such as high-speed rail along the Yangtze River, or as “project packages,” such as Yangtze River wastewater treatment composed of multiple treatment facilities. This flexible, problem-oriented approach allows better alignment with public needs.

As projects break ground and enter operation, their benefits to people’s livelihoods will become increasingly evident. Observers should not see the undertakings as distant from daily life; they will bring tangible improvements to everyone’s quality of life.

For example:

  • Urban underground pipelines: Upgrades to gas, water, and heating systems will greatly improve safety and resilience. Renovation of old gas pipelines is nearing completion, reducing accident rates by over 30%. Eliminating hidden risks in unseen places increases residents’ sense of security.
  • Food security: Gradually converting all permanent basic farmland into high-standard farmland will stabilize grain output and enhance food safety. Higher standards mean safer products, so people will eat with greater confidence.
  • Yangtze River protection: Building or upgrading over 60,000 kilometers of sewage pipelines in the Yangtze Economic Belt will greatly improve the river’s ecological environment and resolve long-standing public concerns.
  • Transportation: Creating the shortest Shanghai–Chengdu high-speed rail corridor (approx. 1,900 km) will connect the Yangtze River Delta, the middle Yangtze region, and the Chengdu–Chongqing area more quickly, cutting travel time nearly in half and boosting east–west connectivity.
  • Ecological security: Implementing the “Three-North” shelterbelt project over 130 million mu (93 million hectares), with good survival rates for trees, shrubs, and grasses, will safeguard northern ecological security and create new income opportunities.
  • Higher education: “Double First-Class” universities will see markedly improved conditions, with over 500,000 new standard dorm beds. Quality undergraduate enrollment will rise by 16,000 in 2024 and over 20,000 in 2025, giving more students access to quality education and ensuring basic living needs for those from low-income families.
A Bold Stroke in the History of Development

The two major undertakings are a major decision by the CPC Central Committee and the State Council, aimed at the overall strategy of building a strong country and achieving national rejuvenation. They play an irreplaceable role in advancing Chinese modernization.

They are not short-term measures but focus on medium- to long-term development. Some market institutions once analyzed that when China’s economy was facing short-term difficulties and challenges, the launch of the “two major undertakings” was mainly aimed at expanding investment in the short term to stabilize growth. Such a view clearly lacks a professional understanding of the decision-making intentions and logic, fails to properly grasp the relationship between the short term and the medium-to-long term, as well as between objectives and means, and inverts the proper order of priorities — a misconception that needs to be pointed out and corrected.

Since implementation began, the undertakings have provided important support for economic stability. Although their starting point was not short-term growth, the resulting investment has boosted employment and consumption, helping to expand domestic demand and stabilize growth. In the next step, during the formulation and implementation of the 15th Five-Year Plan, the “two major undertakings” will continue to occupy an important place, be organically incorporated into the new five-year plan, and form close alignment and sustained momentum with major national strategies, major plans, major projects, and key initiatives.

They will also bolster the country’s core competitiveness. As foundational support for Chinese modernization, they will strengthen factor security and resolve long-term bottlenecks, with far-reaching significance for shaping China’s development prospects. In an era of intensifying major-power competition, they will provide stable expectations and significantly enhance China’s capacity to manage international uncertainty. Such a major strategy will be pursued with persistence—it will not remain rhetorical, nor will it be reversed abruptly.

Though implementation has only recently begun, the undertakings’ historic role will continue to grow over time. In the future, looking back, they will surely stand as an important part of the “China story” and leave a bold stroke in the history of the People’s Republic’s development.

World-Watching: Minutes of the Monetary Policy Committee — Copom

272nd Meeting – July 29-30, 2025

[from the Central Bank of Brazil, 5 August, 2025]

  1. Update of the economic outlook and the Copom’s scenario1
    1. The global environment is more adverse and uncertain due to the economic policy and economic outlook in the United States, mainly regarding its trade and fiscal policies and their effects.
    2. Therefore, the behavior and the volatility of different asset classes have been impacted, altering global financial conditions. This scenario requires particular caution from emerging market economies amid heightened geopolitical tensions.
    3. Regarding the domestic scenario, the set of indicators on economic activity has shown some moderation in growth, as expected, but the labor market is still showing strength.
    4. In recent releases, headline inflation and measures of underlying inflation remained above the inflation target. Inflation expectations for 2025 and 2026 collected by the Focus survey remained above the inflation target and stand at 5.1% and 4.4%, respectively.
  2. Scenarios and risk analysis
    1. The inflation outlook remains challenging in several dimensions. Copom assessed the international scenario, economic activity, aggregate demand, inflation expectations, and current inflation. Copom then discussed inflation projections and expectations before deliberating on the current decision and future communication.
    2. The global environment is more adverse and uncertain. If, on the one hand, the approval of certain trade agreements, along with recent inflation and economic activity data from the U.S., could suggest a reduction in global uncertainty, on the other hand, the U.S. fiscal policy—and, particularly for Brazil, the U.S. trade policy—make the outlook more uncertain and adverse. The increase of trade tariffs by the U.S. to Brazil has significant sectoral impacts and still uncertain aggregate effects that depend on the unfolding of the next steps in the negotiations and the perception of risk inherent to this process. The Committee is closely monitoring the potential impacts on the real economy and financial assets. The prevailing assessment within the Committee is the increased global outlook uncertainty, and, therefore, Copom should maintain a cautious stance. As usual, the Committee will focus on the transmission mechanisms from the external environment to the domestic inflation dynamics and their impact on the outlook.
    3. The domestic economic activity outlook has indicated a certain moderation in growth, while also presenting mixed data across sectors and indicators.
    4. Overall, some moderation in growth is observed, supporting the scenario outlined by the Committee. This moderation, necessary for the widening of the output gap and the convergence of inflation to the target, is aligned with a contractionary monetary policy. Monthly sectoral surveys and more timely consumption data support a gradual slowdown in growth.
    5. At turning points in the economic cycle, it is natural to observe mixed signals from economic indicators—some leading, others lagging—as well as from comparisons between markets, such as the credit and labor markets.
    6. The credit market, which is more sensitive to financial conditions, has shown clearer moderation. A decline in non-earmarked credit granting and an increase in interest and delinquency rates have been observed. Moreover, regarding household credit, there has been an increase in the household debt–service ratio and a deepening of the negative credit flow—that is, households repaying more debt than taking on. It was emphasized during the discussion that some recent measures, such as private payroll-deducted loans, have had less impact than many market participants expected. Given the implementation agenda in this credit line, as well as the effects of introducing and removing taxes on other credit modalities, the Committee believes it should closely monitor upcoming credit data releases.
    7. In contrast to the credit market, the labor market remains dynamic. Both from the perspective of income—with real gains consistently above productivity—and employment—with a significant decrease in the unemployment rate to historically low levels—the labor market has greatly supported consumption and income.
    8. Thus, the Committee assesses that the signals from demand and economic activity so far suggest that the scenario is unfolding as expected and is consistent with the current monetary policy. The Committee reiterates that the aggregate demand slowdown is an essential element of supply–demand rebalancing in the economy and convergence of inflation to the target.
    9. Fiscal policy has a short-term impact, mainly through stimulating aggregate demand, and a more structural dimension, which has the potential to affect perceptions of debt sustainability and influence the term premium in the yield curve. A fiscal policy that acts counter-cyclically and contributes to reducing the risk premium favors the convergence of inflation to the target. Copom reinforced its view that the slowdown in structural reform efforts and fiscal discipline, the increase in earmarked credit, and uncertainties over the public debt stabilization have the potential to raise the economy’s neutral interest rate, with deleterious impacts on the power of monetary policy and, consequently, on the cost of disinflation in terms of activity. The Committee remained firmly convinced that policies must be predictable, credible, and countercyclical. In particular, the Committee’s discussion once again highlighted the need for harmonious fiscal and monetary policy.
    10. Inflation expectations, as measured by different instruments and obtained from various groups of agents, remained above the inflation target at all horizons, maintaining the adverse inflation outlook. For shorter-term horizons, following the release of the most recent data, there has been a decline in inflation expectations. For longer-term horizons, conversely, there has been no significant change in inflation expectations between Copom meetings, even though measures of breakeven inflation extracted from financial assets have declined. The Committee reaffirmed and renewed its commitment to re-anchoring expectations and to conducting a monetary policy that supports such a movement.
    11. De-anchored inflation expectations is a factor of discomfort shared by all Committee members and must be tamed. Copom highlighted that environments with de-anchored expectations increase the disinflation cost in terms of activity. The scenario of inflation convergence to the target becomes more challenging with de-anchored expectations for longer horizons. When discussing this topic, the main conclusion obtained and shared by all members of Copom was that, in an environment of de-anchored expectations—as currently is the case—greater monetary restriction is required for a longer period than would be otherwise appropriate.
    12. The inflation scenario has continued to show downside surprises in recent periods compared with analysts’ forecasts, but inflation has remained above the target Industrial goods inflation, which has already been showing weaker wholesale price pressures, continued to ease in the more recent period. Food prices also displayed slightly weaker-than-expected dynamics. Finally, services inflation, which has greater inertia, remains above the level required to meet the inflation target, in a context of a positive output gap. Beyond the changes in items, or even short-term oscillations, the core inflation measures have remained above the value consistent with the target achievement for months, corroborating the interpretation that inflation is pressured by demand and requires a contractionary monetary policy for a very prolonged period.
    13. Copom then addressed the projections. In the reference scenario, the interest rate path is extracted from the Focus survey, and the exchange rate starts at USD/BRL 5.552 and evolves according to the purchasing power parity (PPP). The Committee assumes that oil prices follow approximately the futures market curve for the following six months and then start increasing 2% per year onwards. Moreover, the energy tariff flag is assumed to be “green” in December of the years 2025 and 2026.
    14. In the reference scenario, four-quarter inflation projections for 2025 and for 2026 are 4.9% and 3.6%, respectively (Table 1). For the relevant horizon for monetary policy—2027 Q1—the inflation projection based on the reference scenario extracted from the Focus survey remained at 3.4%, above the inflation target.
    15. Regarding the balance of risks, it was assessed that the scenario of greater uncertainty continues to present higher-than-usual upside and downside inflation risks to the inflation outlook. Copom assessed that, among the upside risks for the inflation outlook and inflation expectations, it should be emphasized (i) a more prolonged period of de-anchoring of inflation expectations; (ii) a stronger-than-expected resilience of services inflation due to a more positive output gap; and (iii) a conjunction of internal and external economic policies with a stronger-than-expected inflationary impact, for example, through a persistently more depreciated currency. Among the downside risks, it should be noted (i) a greater-than-projected deceleration of domestic economic activity, impacting the inflation scenario; (ii) a steeper global slowdown stemming from the trade shock and the scenario of heightened uncertainty; and (iii) a reduction in commodity prices with disinflationary effects.
    16. Prospectively, the Committee will continue monitoring the pace of economic activity, which is a fundamental driver of inflation, particularly services inflation; the exchange rate pass-through to inflation, after a process of increased exchange rate volatility; and inflation expectations, which remain de-anchored and are drivers of future inflation behavior. It was emphasized that inflationary vectors remain adverse, such as the economic activity resilience and labor market pressures, de-anchored inflation expectations, and high inflation projections. This scenario prescribes a significantly contractionary monetary policy for a very prolonged period to ensure the convergence of inflation to the target.
  3. Discussion of the conduct of monetary policy
    1. Copom then discussed the conduct of monetary policy, considering the set of projections evaluated, as well as the balance of risks for prospective inflation.
    2. Following a swift and firm interest rate hike cycle, the Committee anticipates, as its monetary policy strategy, continuity of the interruption of the rate hiking cycle to observe the effects of the cycle already implemented. It was emphasized that, once the appropriate interest rate is determined, it should remain at a significantly contractionary level for a very prolonged period due to de-anchored expectations. The Committee emphasizes that it will remain vigilant, that future monetary policy steps can be adjusted and that it will not hesitate to proceed with the rate hiking cycle if appropriate.
  4. Monetary policy decision
    1. The Committee has been closely monitoring with particular attention the announcements regarding the imposition by the U.S. of trade tariffs on Brazil, reinforcing its cautious stance in a scenario of heightened uncertainty. Moreover, it continues to monitor how the developments on the fiscal side impact monetary policy and financial assets. The current scenario continues to be marked by de-anchored inflation expectations, high inflation projections, resilience on economic activity, and labor market pressures. Ensuring the convergence of inflation to the target in an environment with de-anchored expectations requires a significantly contractionary monetary policy for a very prolonged period.
    2. Copom decided to maintain the Selic rate at 15.00% p.a., and judges that this decision is consistent with the strategy for inflation convergence to a level around its target throughout the relevant horizon for monetary policy. Without compromising its fundamental objective of ensuring price stability, this decision also implies smoothing economic fluctuations and fostering full employment.
    3. The current scenario, marked by heightened uncertainty, requires a cautious stance in monetary policy. If the expected scenario materializes, the Committee foresees a continuation of the interruption of the rate hiking cycle to examine its yet-to-be-seen cumulative impacts, and then evaluate whether the current interest rate level, assuming it stable for a very prolonged period, will be enough to ensure the convergence of inflation to the target. The Committee emphasizes that it will remain vigilant, that future monetary policy steps can be adjusted and that it will not hesitate to resume the rate hiking cycle if appropriate.
    4. The following members of the Committee voted for this decision: Gabriel Muricca Galípolo (Governor), Ailton de Aquino Santos, Diogo Abry Guillen, Gilneu Francisco Astolfi Vivan, Izabela Moreira Correa, Nilton José Schneider David, Paulo Picchetti, Renato Dias de Brito Gomes, and Rodrigo Alves Teixeira.
Table 1

Inflation projections in the reference scenario
Year-over-year IPCA change (%)

Price Index202520262027 Q1
IPCA4.93.63.4
IPCA market prices5.13.53.3
IPCA administered prices4.44.03.9
Footnotes

1 Unless explicitly stated otherwise, this update considers changes since the June Copom meeting (271st meeting).

2 It corresponds to the rounded value of the average exchange rate observed over the ten working days ending on the last day of the week prior to the Copom meeting, according to the procedure adopted since the 258th meeting.

Meeting information
Date: July 29-30 2025
Place: BCB Headquarters’ meeting rooms on the 8th floor (7/29 and 7/30 on the morning) and 20th floor (7/30 on the afternoon) – Brasilia – DF – Brazil
Starting and ending times:
July 29: 10:07 AM – 11:37 AM; 2:17 PM – 5:51 PM
July 30: 10:10 AM – 11:13 AM; 2:37PM – 6:34 PM
In attendance:
Members of the Copom
Gabriel Muricca Galípolo – Governor
Ailton de Aquino Santos
Diogo Abry Guillen
Gilneu Francisco Astolfi Vivan
Izabela Moreira Correa
Nilton José Schneider David
Paulo Picchetti
Renato Dias de Brito Gomes
Rodrigo Alves Teixeira
Department Heads in charge of technical presentations (attending on July 29 and on the morning of July 30)
André de Oliveira AmanteOpen Market Operations Department
Euler Pereira Gonçalves de MelloResearch Department (also attending on the afternoon of 7/30)
Fábio Martins Trajano de ArrudaDepartment of Banking Operations and Payments System
Luís Guilherme Siciliano PontesInternational Reserves Department
Marcelo Antonio Thomaz de AragãoDepartment of International Affairs
Ricardo SabbadiniDepartment of Economics
Other participants (attending on July 29 and on the morning of July 30)
Alexandre de CarvalhoOffice of Economic Advisor
André Maurício Trindade da RochaHead of the Financial System Monitoring Department
Angelo Jose Mont Alverne DuarteHead of Office of the Deputy Governor for Licensing and Resolution (attending on the mornings of 7/29 and 7/30)
Arnaldo José Giongo GalvãoPress Office Advisor
Cristiano de Oliveira Lopes CozerGeneral Counsel
Edson Broxado de França TeixeiraHead of Office of the Deputy Governor for Supervision
Eduardo José Araújo LimaHead of Office of the Deputy Governor for Economic Policy
Fernando Alberto G. Sampaio C. RochaHead of the Department of Statistics
Isabela Ribeiro Damaso MaiaHead of the Sustainability and International Portfolio Investors Unit (attending on the mornings of 7/29 and 7/30)
Julio Cesar Costa PintoHead of Office of the Governor
Laura Soledad Cutruffo CompariniDeputy Head of the Department of Economics
Leonardo Martins NogueiraHead of Office of the Deputy Governor for Monetary Policy
Marcos Ribeiro de CastroDeputy Head of the Research Department
Mardilson Fernandes QueirozHead of the Financial System Regulation Department
Olavo Lins Romano PereiraDeputy Head of the Department of International Affairs
Renata Modesto BarretoDeputy Head of the Department of Banking Operations and Payments System
Ricardo da Costa MartinelliDeputy Head of the International Reserves Department
Ricardo Eyer HarrisHead of Office of the Deputy Governor for Regulation
Ricardo Franco MouraHead of the Prudential and Foreign Exchange Regulation Department
Rogerio Antonio LuccaExecutive Secretary
Simone Miranda BurelloAdvisor in the Office of the Deputy Governor for Monetary Policy

The members of Copom analyzed the recent performance and prospects for the Brazilian and international economies, under the monetary policy framework, whose objective is to comply with the inflation targets established by the National Monetary Council. This document represents Copom’s best effort to provide an English version of its policy meeting minutes. In case of inconsistency, the Portuguese version prevails.

Economics-Watching: Kuwait: GDP Returns to Growth in Q1 2025 as Impact of Oil Output Cuts Fades

[from NBK Economic Research, 21 July, 2025]

by Mohammad Al-Shehri, Assistant Economist & Omar Al-Nakib, Head of MENA Research

Preliminary official figures show GDP expanding 1% y/y in Q1 2025 following seven consecutive quarters of contraction, helped by a less severe downturn in oil output. With the negative effects of earlier voluntary oil production cuts beginning to fade, oil GDP recorded only a marginal decline, the softest since Q2 2023. Growth in non-oil activity remained positive though eased, weighed by a moderation in the manufacturing, real estate, and transport sectors. The near-term outlook for GDP is one of positive growth, lifted by rising oil production after Kuwait started to restore 135 kb/d of oil output cuts between April and September 2025, while the non-oil sector should also register further steady gains.

Non-oil GDP growth softens in Q1 2025 after strong performance in Q4 2024

Growth in the non-oil sector weakened in Q1 2025, slowing to 2% y/y compared to 4% recorded in the prior quarter. (Chart 1.) The softer expansion in non-oil activity reflected, among other things, a moderation in the manufacturing sector, where activity grew at a still-solid 4.3% despite a decline in refined petroleum products output but slowed notably from the 12.2% reading registered in Q4 2024. Growth in other sectors including real estate, wholesale & retail trade, transport, and education also slowed. Offsetting the slowdown was stronger expansion in the non-oil economy’s largest segments: public administration and defense as well as financial intermediation and insurance, which grew 1% and 3.2% y/y, respectively. (Chart 2.)

Chart 1: Real GDP growth

Chart 2: Growth at sub-sector level (1Q25)

Oil sector logs marginal contraction, set to return to growth in Q2

The contraction in oil GDP eased significantly to -0.3% y/y from -5.7% y/y in Q4 2024, registering the softest rate of decline since Kuwait embarked on cutting oil production in Q2 2023 after participating in the voluntary cuts scheme with 7 other OPEC+ members. (Chart 4.) Kuwait’s oil production averaged 2.415 mb/d in Q1 2025, a 0.7% decline from the same quarter last year, according to OPEC secondary sources. However, oil sector fortunes are set to shift in Q2 2025 and thereafter, after the OPEC-8 member alliance started unwinding the 2.2 mb/d voluntary cut tranche in April 2025. Originally planned to be unwound over the course of 18 months, OPEC+ has accelerated the pace of supply hikes with output now on a path to be fully restored in September, a full year ahead of schedule. For Kuwait, crude production rose by 0.5% q/q in Q2 to 2.426 mb/d and is set to accelerate further to average 2.533 mb/d in H2 2025. With the oil market so far able to absorb the additional OPEC and global supply and oil prices currently holding near $70/bbl, an upside risk to our oil sector outlook involves the potential unwinding of the outstanding OPEC-8 voluntary cuts (1.66 mb/d), of which Kuwait’s share is 128 kb/d.

Growth heading back into positive territory in 2025

Growth in total GDP is set to remain on a positive trajectory in the near term, buoyed by further steady expansion in non-oil economic activity and increased oil production. Non-oil GDP is set to benefit from the government’s reform drive which includes the recent passing of the debt law that could catalyze the implementation of key development projects and the potential approval of the ‘mortgage’ law later in 2025, which could spur higher household borrowing and consumer spending. Economic indicators for Q2 2025 pointed to a healthy pace of non-oil economic activity. The key ‘output’ and ‘new orders’ balances in the non-oil private sector PMI gauge both averaged a very robust 57+ in Q2 2025, real estate activity continued to expand at a robust pace with earlier price falls in the residential sector abating, while credit growth stood at a healthy 5.5% y/y in May, and could benefit in coming months if interest rates are reduced further.

Nonetheless, there are also downside risks to the outlook. Local consumer spending growth (according to central bank card transactions data) turned negative in Q1 2025, extending the weakening trend now observed for more than a year. The government’s ongoing fiscal consolidation push will also weigh on wage and job growth. Overall, we see GDP growing 1.9% this year, boosted by expansions in both the oil and non-oil sectors of 1.2% and 2.5%, respectively.

Chart 3: Contribution to non-oil growth

Chart 4: Oil production and oil GDP

Read this article as an archived PDF.

Economics-Watching: BRICS Currency Creates Dilemma for the Dollar

by Christopher Whalen, from China Daily

The term “BRICS currency” typically refers to a hypothetical or proposed unified currency for the BRICS grouping. It’s not a single, physical currency currently in use, but rather a concept for a potential future monetary system that some suggest will reduce the dominance of the U.S. dollar in international trade and finance.

Is BRICS currency cooperation about immediate de-dollarization or long-term financial sovereignty? The answer is that BRICS cooperation may include reducing long-term dependence on the dollar as a means of exchange. The dollar is involved in more than half of all trade and 80 percent of all foreign exchange transactions. BRICS currency cooperation aims to gradually reduce the group’s dollar dependency, but challenges remain.

The BRICS concept came about not because the dollar is unsuitable as a means of exchange or unit of account, but rather because of the use of the dollar by Washington as a weapon. As I note in my book, Inflated: Money, Debt and the American Dream, the special role of the dollar in U.S. finance allows the U.S. government to impose harsh compliance and reporting requirements on foreign nationals and institutions. The U.S. is an arbitrary hegemon and does not follow reciprocity with other countries.

The global role of the dollar is an anomaly, the byproduct of two world wars had left the other antagonists broke by the time the Bretton Woods Agreement was signed in July 1944.

Choosing the fiat paper dollar as the default global reserve currency more than seven decades ago reflected the fact that the United States was one of the victors and possessed the wealth that gave Washington unchallenged economic leadership. Prior to World War I, the United Kingdom’s pound sterling was the global standard, but importantly, this paper currency was backed by gold — the only money that is not debt. The dollar, too, was backed by gold — until 1933, when the Franklin Roosevelt administration confiscated gold in private hands to prevent his government from collapsing.

Pound notes started to circulate in England in 1694, shortly after the establishment of the Bank of England. The paper pound helped to fuel the expansion of the British Empire, in large part because the only competing form of money was physical gold. When Britain and other nations left the gold standard in the 1930s, it was due to the deflation caused by the Great Depression rather than a deliberate choice.

The 19th-century rule attributed to English journalist and businessman Walter Bagehot says that in times of crisis, lend freely at a high rate against good collateral. Yet since the currency devaluation and gold seizures of 1933, fiat currencies and below-market interest rates have been the rule. In a global scheme in which the government occupies the prime position, the operative term remains “financial repression”, whereby governments control markets and artificially suppress rates of return on debt. For this reason, the dollar is losing its role as a store of value to gold.

The fact that the dollar continues to trade strongly versus other currencies reflects the reality that as the main means of exchange globally, the dollar cannot be easily replaced. One reason for this continued support for the dollar is that the trade in petroleum and other commodities is so large that it requires an equally large currency to accommodate it. Also, neither the Europeans nor the Japanese, the only two possible alternatives, are willing to risk the external deficits or inflation that the U.S. suffers as the host for the global currency.

What global currency will replace the fiat paper dollar? None. As this article is being written, gold is the second-largest reserve asset for central banks after the dollar. “The initiation in 2002 of the Shanghai Gold Exchange was of great strategic significance, both for gold and the global monetary system,” notes veteran gold fund manager Henry Smyth in an interview in The Institutional Risk Analyst. “Now it is completely clear what happened.”

Smyth and many other observers see the creation of the SGE in 2002 as the return of gold to the international monetary system. But while gold is growing in importance as a reserve asset for many countries, it does not mean that the role of the dollar as a global means of exchange or unit of account is about to change.

The dollar will remain the dominant asset. And even then, displacing the dollar will require a major change in the international monetary system, a change that is already underway.

The author is the chairman of Whalen Global Advisors LLC in New York and the author of Inflated: Money, Debt and the American Dream published by Wiley Global (2025).

Economics-Watching: Kuwait’s Banking Sector Posts Solid Credit Growth in October

[from NBK Group’s Economic Research Department, 21 November, 2024]

Kuwait: Solid credit growth in October driven by household credit. Domestic credit increased by a solid 0.4% in October, driving up YTD growth to 2.9% (3.2% y/y). The recovery in household credit continued, with growth in October at a solid 0.5%, resulting in a YTD increase of 2.4%. While y/y growth in household credit remains a limited 2.3%, annualized growth over the past four months is a stronger 4.7%. Business credit inched up by 0.2% in October, pushing YTD growth to 3.6% (2.9% y/y). Industry and trade drove business credit growth in October while construction and trade are the fastest growing YTD at 17% and 8%, respectively. In contrast, the oil/gas sector continued its downtrend, deepening the YTD decrease to 13%. Excluding the oil/gas sector, growth in business credit would increase to a relatively good 5% YTD. Looking ahead, the last couple of months of the year (especially December) are usually the weakest for business credit, likely due to increased repayments and write-offs, but it will not be surprising if the recovery in household credit is generally sustained, especially given the commencement of the interest rate-cutting cycle. Meanwhile, driven by a plunge in the volatile public-institution deposits, resident deposits decreased in October, resulting in YTD growth of 2.4% (4.2% y/y). Private-sector deposits inched up in October driving up YTD growth to 4.5% compared with 10% for government deposits while public-institution deposits are a big drag (-14%). Within private-sector KD deposits, CASA showed further signs of stabilization as there was no decrease for the third straight month while the YTD drawdown is a limited 1%.

Chart 1: Kuwait credit growth

(% y/y)

Source: Central Bank of Kuwait (CBK)
Chart 2: UK inflation

(%)

Source: Haver

Egypt: IMF concludes mission for fourth review, sees external risks. The IMF concluded its visit to Egypt after spending close to 2 weeks, holding several in-person meetings with the Egyptian authorities, private sector, and other stakeholders. The IMF released a statement mentioning that the current ongoing geopolitical tensions in the region in addition to an increasing number of refugees have affected the external sector (Suez Canal receipts down by 70%) and put severe pressure on the fiscal front. The Fund acknowledged the Central Bank of Egypt’s commitment to unify the exchange rate, maintain the flexible exchange rate regime, and keep inflation on a firm downward trend over the medium term by substantially tightening monetary policy. It also highlighted that continued policy discipline was also a key to containing fiscal risks, especially those related to the energy sector. The Fund, as always, re-iterated the need for promoting the private sector mainly through an enhanced tax system and accelerating divestment plans of the state firms. Finally, it also said that the discussions would continue over the coming days to finalize the agreement on the remaining policies and reform plans. However, the release did not provide any clear hints about the conclusion on the government’s earlier request to push the timeline of some of the subsidy moves.

Oman: IMF completes article IV with a strong outlook for the economy in 2025. Oman’s economy continued to expand with growth reaching 1.9% in the first half of 2024 (versus 1.2% in 2023), despite being weighed down by OPEC+ mandated oil production cuts as non-oil GDP grew a stronger 3.8% y/y in H1 (versus 1.8% in 2023). The fiscal and current account balances remain in a comfortable situation evident by a decline in public sector debt and the recent rating upgrade to investment grade. The Fund expects Oman’s economic growth to see a strong rebound in 2025, supported by higher oil production. It also believes that fiscal and current account balances will remain in surplus but at lower levels. Key risks to the outlook stem from oil price volatility and intensifying geopolitical tensions. The IMF also mentioned that further efforts are needed to raise nonhydrocarbon revenues through more tax policy measures and the phasing out of untargeted subsidies which should help in freeing up resources to finance growth under the government’s diversification agenda.

UK: Inflation rises more than forecast, reinforcing BoE’s caution on rate cuts. UK CPI inflation increased to 2.3% y/y in October from 1.7% the previous month, slightly above the market and the Bank of England’s forecast of 2.2%. On a monthly basis too, inflation rose to 0.6%, a seven-month high, from September’s no change. The steep rise was mainly driven by an almost 10% rise in the household energy price cap effective from October. Core inflation also accelerated to 3.3% y/y (0.4% m/m) from 3.2% (0.1% m/m). While goods prices continued to fall (-0.3% y/y), service prices rose at a faster rate of 5% from 4.9%. Recently, the Bank of England had cautioned about inflation quickening next year (projecting a peak rate of 2.8% in Q3 2025), citing the impact of higher insurance contributions and rising minimum wages as outlined in the latest government budget. Therefore, with inflation rising above forecast, the bank will likely slow the pace of monetary easing after delivering two interest rate cuts of 25 bps earlier, with markets now seeing only two additional cuts by the end of 2025.

Eurozone: ECB warns of fiscal and growth risks in its latest Financial Stability Review [archived PDF]. In its most recent Financial Stability Review (November) [archived PDF], the European Central Bank warned that elevated debt and fiscal deficit levels and anemic long-term growth could expose sovereign debt vulnerabilities in the region, stoking concerns of a repeat of the 2011 sovereign debt crisis. Maturing debt being rolled over at much higher borrowing rates raising debt service costs poses risks to countries with little fiscal space and leaves certain governments exposed to market fluctuations. The bank also emphasized the risks of high equity valuations, low liquidity and a greater concentration of exposure among non-banks. Moreover, it sees current geopolitical uncertainties and the possibility of more trade tensions as heightening risks. The Eurozone’s current government debt-to-GDP ratio stands at 88%, but the underlying data suggest a much more precarious situation with Greece, Italy, and France’s ratios at 164%, 137% and 112%. Recently, concerns about France’s high fiscal deficit (around 5.9% of GDP) and elevated debt levels saw yields on the country’s bonds rise steeply, widening the spread gap with German bonds to the highest level in over a decade.

Stock marketsIndexDaily Change (%)YTD Change (%)
Regional
Abu Dhabi (ADI)9,405-0.23-1.80
Bahrain (ASI)2,043-0.373.62
Dubai (DFMGI)4,7610.6117.26
Egypt (EGX 30)30,588-0.33 23.18
GCC (S&P GCC 40)7090.09-0.52
Kuwait (All Share)7,353-0.087.86
KSA (TASI)11,868-0.07-0.83
Oman (MSM 30)4,6090.002.10
Qatar (QE Index)10,4380.12-3.62
International
CSI 3003,9860.2216.17
DAX19,005-0.2913.45
DJIA43,4080.3215.17
Eurostoxx 504,730-0.454.60
FTSE 1008,085-0.174.55
Nikkei 22538,352-0.1614.61
S&P 5005,9170.0024.05
3m interbank rates%Daily Change (bps)YTD Change (bps)
Bahrain5.86-1.29-66.34
Kuwait3.940.00-37.50
Qatar6.000.00-25.00
UAE4.433.81-89.96
Saudi5.50-4.75-73.14
SOFR4.52-0.09-81.13
Bond yields%Daily Change (bps)YTD Change (bps)
Regional
Abu Dhabi 20274.665.0033.9
Oman 20275.496.0033.0
Qatar 20264.686.0016.1
Kuwait 20274.693.0035.0
Saudi 20284.961.0043.9
International 10-year
US Treasury4.411.7755.3
German Bund2.340.3531.2
UK Gilt4.472.6093.0
Japanese Gov’t Bond1.071.045.4
Exchange ratesRateDaily Change (%)YTD Change (%)
KWD per USD0.310.04-0.05
KWD per EUR0.32-0.46-1.98
USD per EUR1.05-0.49-4.47
JPY per USD155.430.5010.19
USD per GBP1.27-0.25-0.62
EGP per USD49.670.3461.00
Commodities$/unitDaily Change (%)YTD Change (%)
Brent crude72.81-0.68-5.49
KEC73.780.74-7.26
WTI68.87-0.75-3.88
Gold2,648.20.8028.40

Disclaimer: While every care has been taken in preparing this publication, National Bank of Kuwait accepts no liability whatsoever for any direct or consequential losses arising from its use. Daily Economic Update is distributed on a complimentary and discretionary basis to NBK clients and associates. This report and previous issues can be found in the “News & Insight / Economic Reports” section of the National Bank of Kuwait’s web site. Please visit their web site, nbk.com, for other bank publications.

Penn Wharton: U.S. Budget Model

The U.S. Fiscal Imbalance: June 2022

[from Penn Wharton, University of Pennsylvania]

We estimate that the U.S. federal government faces a permanent fiscal imbalance equal to over 10 percent of all future GDP under current law where future federal spending outpaces tax and related receipts. Federal government debt will climb to 236 percent of GDP by 2050 and to over 800 percent of GDP by year 2095 (within 75 years).

Read the full analysis [archived PDF].

View the data [archived XLSX].

Brief based on work by Agustin Diaz, Jagadeesh Gokhale and Kent Smetters. Prepared by Mariko Paulson.

European Central Bank’s Macroprudential Bulletin

The European Central Bank’s Macroprudential Bulletin provides insight into the work they are currently doing in the field of macroprudential policy. Their goal is to raise awareness of macroprudential policy issues in the euro area by making their ongoing work and thinking in this field more transparent, and to encourage broader discussion on these key issues.

January 2022, Issue 16

Reforming money market funds

Money market funds perform a key function for the financial system by linking the short-term funding and cash-management needs of various market participants. Proposals to reform the regulation of these funds and enhance the sector’s resilience are assessed in this issue of the Macroprudential Bulletin.

Assessing possible reform proposals

At the onset of the coronavirus pandemic, money market funds proved particularly vulnerable when faced with severe market disruption. This article looks at specific policies to address the liquidity risk of these funds and ensure they can deal with large and unexpected outflows under similar periods of stress.

[Archived PDF of full article]

The impact of a public debt quota on money market funds

Public debt assets tend to be easier to draw down and sell during market stress than private sector debt. Having a minimum public debt quota for private debt money market funds could increase their shock-absorbing capacity. What are the costs and benefits of such a proposal?

[Archived PDF of full article]

Looking Backwards and Forwards at the Same Time

Janus and Bi-Directional Smarts

The Roman god Janus looks backwards and forwards at the same time and learning to be somewhat Janus-like is very conducive in the metaintelligence (i.e., larger overview) quest.

There’s a useful French phrase, “reculer pour mieux sauter” which means like a high jumper, you have to take steps backwards to jump higher. In other words, learn to look bi-directionally at the world.

First look back, then forward.

Here’s a concrete example:

W. Arthur Lewis, the “father” of development economics, originally from the Caribbean, taught at Princeton. He won the Nobel in 1979 and wrote various classics such as Growth and Fluctuations, 1870-1913 (1978).

Lewis writes:

In this book we shall not be attempting to give formal or complete explanations of why fluctuations occurred. Like the captain of a ship navigating in stormy seas, we shall need to identify the waves, without needing an exhaustive theory of what causes waves.

When analyzing these fluctuations economists have identified four different cycles, distinguished by length of periodicity, each of which is named after the economist who first wrote about it:

the Kitchin (about three years)
the Juglar (about nine years)
the Kuznets (about twenty years)
the Kondratiev (about fifty years)

(W. Arthur Lewis, Growth and Fluctuations, 1870-1913, 1978, page 19)

Lewis gives us a quick overview of how we got to the era covered by his book:

“The essence of the industrial and agricultural revolutions in the first three quarters of the nineteenth century was in new ways of doing old things—of making iron, textiles and clothes, of growing cereals, and of transporting goods and services. In the last quarter of the nineteenth century the revolution added a new twist—that of making new commodities: telephones, gramophones, typewriters, cameras, automobiles and so on, a seemingly endless process whose twentieth century additions include aeroplanes, radios, refrigerators, washing machines and pleasure boats.”

(Growth and Fluctuations, 1870-1913, page 29)

Professor Norman Stone in his masterpiece on WWI calls this late nineteenth century explosion of material change and inventions the greatest fast quantum leap in world history in transforming the world.

If one reads these lines with a “Janus mind” we wonder, looking forward from the Lewis book and its era:

  1. How does his catchy metaphor of waves in the ocean relate to fluctuations and cycles? When Ben Bernanke (Fed Chair) describes recent decades as “The Great Moderation” does he mean to imply that Lewis-type waves disappeared or got much smaller?
  2. Can computers and mobile phones really match cars and planes in profundity of impact? Or is it only the tremendous spread of mobile or smartphones in the Global South that can?

In fact, the recent economic history classic, Robert Gordon’s The Rise and Fall of American Growth argues against the assumption of endless technical change as a growth accelerator or endless frontier:

In the century after the Civil War, an economic revolution improved the American standard of living in ways previously unimaginable. Electric lighting, indoor plumbing, home appliances, motor vehicles, air travel, air conditioning, and television transformed households and workplaces. With medical advances, life expectancy between 1870 and 1970 grew from 45 to 72 years. Weaving together a vivid narrative, historical anecdotes, and economic analysis, The Rise and Fall of American Growth provides an in-depth account of this momentous era. But has that era of unprecedented growth come to an end?

Gordon challenges the view that economic growth can or will continue unabated, and he demonstrates that the life-altering scale of innovations between 1870 and 1970 can’t be repeated. He contends that the nation’s productivity growth, which has already slowed to a crawl, will be further held back by the vexing headwinds of rising inequality, stagnating education, an aging population, and the rising debt of college students and the federal government. Gordon warns that the younger generation may be the first in American history that fails to exceed their parents’ standard of living, and that rather than depend on the great advances of the past, we must find new solutions to overcome the challenges facing us.

A critical voice in the debates over economic stagnation, The Rise and Fall of American Growth is at once a tribute to a century of radical change and a harbinger of tougher times to come.

  1. Why does one not read of the four cycles mentioned by Lewis (i.e., Kitchin) and the rest listed above in today’s business and financial press? Has there been some great discontinuity?

If you apply a “Janus mind” to the past (described by Lewis) and our sense of the future (described by techno-pessimists like Gordon) you get a more thoughtful sense of “the human prospect.”