Remember the stagflation years? Maybe the current
world economic environment is just in an enduring lethargy awaiting the bottom to fall out. Seldom has flat performance lingered
as long as it has. Meaningful expansion, under a zero interest rate strategy has failed. Even much lower oil prices have not
jump- started the engine of growth. Prospects for an upturn and a return to producing constructive activity still seem to
be years away. Or is this a permanent outlook that baffles business executives and frustrates creative entrepreneurs. For
the rest of us, waiting and hoping for a viable economy has become wishful thinking at best.
The WSJ reports, Lagging Growth Plagues Economic Policy Makers.
“Many
of the largest emerging markets are slowing or contracting, even before the potential shock waves expected if the Federal
Reserve starts raising interest rates. Other risks—a potential Greek default and eurozone exit, financial bubbles, the
Ukraine-Russia standoff and China’s slowdown—are drawing increasing worry as policy makers hoped to build momentum
for measures to finally boost global growth prospects.
“The world economy is not out of the woods,” said Agustín Carstens, Mexico’s
central bank governor and chairman of the IMF’s policy-setting committee. He said easy-money policies that policy makers
backed to help pull the global economy out of the 2009 recession have led to more risk-taking in financial markets than in
the real economy, an imbalance that made him uncomfortable.”
More from the Journal in G-20 Warns of Threats to Global Economic Recovery.
“Renewed
G-20 support for easy-money policies—essentially backing currency depreciation as a tool for promoting growth—underscores
concern about the global economy getting stuck in a low-growth rut. It also marks an implicit acknowledgment of the failure
across the globe to enact longer-lasting structural overhauls to major economies after years of relying on short-term spending
and other temporary stimulus programs.”
Maintaining
the same easy money policy for favorite friends, while starving small business or charging usury rates on personal loans is
a formula designed to prevent productive business ventures and much needed consumer spending after years of tightening one’s
belt to the point of continuous discomfort.
Revealing
the intent to devalue currencies is a guarded way of saying that prices on essential goods and services will rise, while the
purchasing power of one’s money will buy less. Anyone who shops knows this is the same pattern that has been with us
for years.
Compare reality to the prognostication
out of the World Bank in Global Economic Prospects to Improve in 2015, - “After growing by an estimated 2.6 percent in 2014, the global economy is projected to expand by 3 percent this
year, 3.3 percent in 2016 and 3.2 percent in 2017.”
Even the belly of the beast acknowledges not all is rosy.
“Risks to the outlook remain tilted to the downside, due to four factors.
First is persistently weak global trade. Second is the possibility of financial market volatility as interest rates in major
economies rise on varying timelines. Third is the extent to which low oil prices strain balance sheets in oil-producing countries.
Fourth is the risk of a prolonged period of stagnation or deflation in the Euro Area or Japan.”
So where is this projected growth over the next few years going to come from?
Looking to Asian economies for salvation just does not square with sentiment that covers this region. Positive spin given to global economic outlook by WTO, IMF isn't justified offers this viewpoint.
“It is often said that healthy trade flows help the global economy go round. The general pattern for decades
has been trade expansion far outstripping global growth, but this has all unravelled in recent years as economic downturn,
financial turmoil and geopolitical risks have all taken their toll. Global trade flows are barely keeping pace with world
GDP growth.”
Prepare for the big
push to sell the fruits of increasing international trade with the recent news and announcement on “fast track authority”.
However, Parsing the Trans-Pacific Partnership agreement reveals the facts that you are being told to ignore or dismiss.
“In truth, the American economy will suffer severely. This is because
the TPP will hammer two main drivers of economic growth – domestic investment and “net exports.
Domestic investment will fall
because the TPP will push even more American factories offshore to Asia.”
Now analyze this outlook and factor in that domestic disposable income is still sinking. Where
is the purchasing power going to come from to ramp up significant growth? The rest of the world may well trade more among
their own trade alliances, but how can the United States benefit when “the Administration has publicly identified increasing
offshore investments by U.S. companies as a top TPP goal”, as stated in the same Hill article?
It looks like the main benefit of a
temporary strong dollar will generate even more offshore acquisitions by corporatists to finish off the de-industrialization
of America. So where is the purported much valued growth supposed to come from?
Up to this point, the serving of untenable current debt obligations has not even been factored
into the equation. Growing one’s way out of debt has always been a valid strategy, but the circumstances intended to
diminish wealth producing economic activities impacts the ability to pay old indebtednesses, much less develop new healthy
and mutually beneficial trade.
Commerce
is a balancing act that needs to yield a reasonable gain and benefit for all parties. This standard no longer exists in the
globalized transnational formula.
The
United States has been on this internationalist path for decades and has been severely harmed over that period of time. Since
the financial meltdown of 2008, the intensity of the loss in prosperity has expediently grown.
Looking to further monetary sophistry will never create the conditions for a
thriving and growing world economy. Do not be deceived. Oppose the Trans-Pacific Partnership Economic Enslavement and the Transatlantic Trade and Investment Partnership Betrayal, before the only growth will be reflected in a negative balance of trade totals.
James Hall – April 22, 2015
