The global economy is in bad shape and getting worse

[marmar]

by Nouriel Roubini


NEW YORK (Project Syndicate) — The International Monetary Fund and others have recently revised downward their forecasts for global growth — yet again. Little wonder: The world economy has few bright spots, and many that are dimming rapidly.

Among advanced economies, the United States has just experienced two quarters of growth averaging 1%. Further monetary easing has boosted a cyclical recovery in the eurozone, though potential growth in most countries remains well below 1%. In Japan, “Abenomics” is running out of steam, with the economy slowing since mid-2015 and now close to recession. In the United Kingdom, uncertainty surrounding the June referendum on continued European Union membership is leading firms to keep hiring and capital spending on hold. And other advanced economies — such as Canada, Australia, Norway — face headwinds from low commodity prices.

Things are not much better in most emerging economies. Among the five BRIC countries, two (Brazil and Russia) are in recession, one (South Africa) is barely growing, another (China) is experiencing a sharp structural slowdown, and India is doing well only because — in the words of its central bank governor, Raghuram Rajan — in the kingdom of the blind, the one-eyed man is king. Many other emerging markets have slowed since 2013 as well, owing to weak external conditions, economic fragility (stemming from loose monetary, fiscal, and credit policies in the good years), and, often, a move away from market-oriented reforms and toward variants of state capitalism.

Worse, potential growth has also fallen in both advanced and emerging economies. For starters, high levels of private and public debt are constraining spending, especially growth-enhancing capital spending, which fell (as a share of GDP) after the global financial crisis and has not recovered to pre-crisis levels. That fall-off in investment implies slower productivity growth, while aging populations in developed countries — and now in an increasing number of emerging markets (for example, China, Russia, and Korea) — reduce the labor input in production.

The rise in income and wealth inequality exacerbates the global saving glut (which is the counterpart of the global investment slump). As income is redistributed from labor to capital, it flows from those who have a higher marginal propensity to spend (low- and middle-income households) to those who have a higher marginal propensity to save (high-income households and corporations). ....................(more)

http://www.marketwatch.com/story/the-global-economy-is-in-bad-shape-and-getting-worse-2016-05-02

[DJ13]

1. This is the end result of all attempts to stimulate the economy being targeted solely at the 1%

They dont NEED more money to spend, they already spend what they want without the giveaway.

The world's governments need to bolster the bottom economic classes if they want the money to be circulated.

[bhikkhu]

2. "Worse" being on the assumption that growth is good

A counter-argument would that growth has directly resulted in the climate change predicament we are in, and accelerated growth would accelerate our problems going forward.

[TreasonousBastard]

3. And here we have a serious problem...

there are large parts of the world where not only is the individual income almost nonexistent, but it's increasing on the young-- over 50% unemployment of men in their '20's in some areas.

This is how starvation, revolutions, and other unpleasant things happen.

One answer would be to invest in industries, say, cleaning up the rivers-- that, however, no matter how nice it would make the planet and how many it would employ, does not seem to be in the cards.

[dreamnightwind]

4. Yes

Unfortunately, as I understand it, our economies are not designed to gracefully decelerate, which as you point out is what is needed for the sake of the planet and our own survival. I've been waiting to see how they intend to do this, and keep seeing nothing but the same old paradigm, grow or die. It's the axiom of capitalism, I suppose.

I'd think we could have less babies, produce more of our goods locally, cooperate rather than compete, travel less (with web conferencing this is increasingly feasible) and ship less goods, not to mention that with the slow-down there would be less of a push for resource extraction from other countries, hence less wars, and the U.S. military is supposedly the single greatest polluter on the planet.

[lakeguy]

5. this is true

in a debt based economy you have to grow because you have to make both a profit and pay off interest. then your company grows and you take out more loans that also have to be paid. we need to change the economic system.

i think it's going to take a major crash before we change though. unfortunately we just had one and nothing changed. so it will have to be worse than that i guess.