Posted on 05/26/2015 6:06:34 PM PDT by 9thLife
The world economy is disturbingly close to stall speed. The United Nations has cut its global growth forecast for this year to 2.8pc, the latest of the multinational bodies to retreat.
It leaves a thin safety buffer against any economic shock - most potently if China abandons its crawling dollar peg and resorts to 'beggar-thy-neighbour' policies, transmitting a further deflationary shock across the global economy.
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Each of the past four US recoveries has been weaker than the last one. The average growth rate has fallen from 4.5pc in the early 1980s to nearer 2pc this time.
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The US cannot easily launch a fresh New Deal. Public debt was just 38pc on GDP when Franklin Roosevelt took power in 1933, and there were few contingent liabilities hanging over future US finances.
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It is now more likely than not that US economy has dropped through the Fed's stall-speed threshold of two consecutive quarters below 2pc growth. Exactly how far below is unclear. The Fed uses its own growth measure - gross domestic income (GDI) - and this data has not yet been published.
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Mr Perkins said China is now in a “classic debt deflation spiral” as excess capacity holds down prices.
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Russia, Brazil, Argentina, and Venezuela are all contracting sharply, casualties of the China-driven commodity bust. The UN says the growth rate for the emerging market nexus (ex-China) has dropped to 2.3pc from an average of 6.5pc in the glory years of 2004-2007.
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HSBC's Mr King says the global authorities face awful choices if the world economy hits the reefs in its current condition. The last resort may have to be "helicopter money", a radically different form of QE that injects money directly into the veins of economy by funding government spending.
(Excerpt) Read more at telegraph.co.uk ...
Thanks for the book recommendation.
You’re welcome.
I learned about this book from Dave Brat (the guy who unseated Eric Cantor, if you don’t know who he is). He mentioned it often in his stump speeches when he was running for Congress last year.
Spot on commentary. You’re more likely to get stopped out by your local, county and state regulatory (why does that word always remind me of the word ‘strangulation’?) regime, than the Feds. Oftentimes, it’s the locals enforcing some Federal rule as well.
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