Broken Record

The OECD has become the latest mainstream Economist outfit to relent on growth. Two years ago, they had grown cautiously optimistic as reflation appeared in the back half of 2016. By the middle of 2017, positively giddy barely able to contain their increasingly rabid excitement:

The global economy is now growing at its fastest pace since 2010, with the upturn becoming increasingly synchronised across countries. This long awaited lift to global growth, supported by policy stimulus, is being accompanied by solid employment gains, a moderate upturn in investment and a pick-up in trade growth.

The text leaves no doubt as to what OECD’s Economists were thinking. Echoing more positive official sentiment around the world, 2017 was in their view a signal for the end of the Great “Recession.” Policy “stimulus” would finally be properly lauded for its designers’ collective patience and, in the words of many, courage.

But in that view was expressed a promise. This globally synchronized growth was not “it”, merely the first step toward it. The big payoff was set for 2018 and beyond – unquestionable acceleration!

In its March 2019 update, however, 2017 increasingly appears to have been the anomaly. Estimates for economic growth are now starting to be cut again, reminiscent of what ended up happening with 2014. Worse, the disappointment of 2018 doesn’t appear to be simply a delay before the promised payoff, rather toward the end of last year economic behavior outright refuted what was quoted above.

Particularly that part about “pick-up in trade growth.”

The pattern for the economy and therefore these forecasts is absolutely clear. When reflation registers in the data, predictions are raised and the good times are attributed to “policy stimulus.” Once all that fails, the dreaded but inevitable false dawn, forecasts are uniformly downgraded and nobody has a clue why.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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