Guest Post: Hope And Hurdles In 2014

Tyler Durden's picture

Authored by Pingfan Hong, originally posted at Project Syndicate,

The world economy has experienced another year of subdued growth, having failed to meet even the most modest projections for 2013. Most developed economies continued trudging along toward recovery, struggling to identify and implement the right policies. Meanwhile, many emerging economies encountered new internal and external headwinds, impeding their ability to sustain previous years’ economic performance.

Nonetheless, some positive developments in the latter part of the year are expected to gain momentum through the coming year. Indeed, according to the United Nations, the world economy is likely to grow by 3% in 2014 – notably stronger than the 2.1% annual rate estimated for 2013.

Among developed countries, the eurozone has finally extricated itself from a protracted double-dip recession; the pace of growth in the United States has continued to accelerate; and Japan’s expansionary policies seem to be working better than anticipated. For the first time since 2011, all major developed economies are expected to align themselves on the same upward trajectory, possibly triggering a virtuous cycle that lifts the entire global economy.

While the US Federal Reserve is poised to begin tapering its bond-buying program – so-called quantitative easing (QE) – developed-country monetary policy will remain largely accommodative in the next two years, creating a salutary environment for continued strengthening of the financial sector and the real economy. Moreover, European and US fiscal-austerity programs are expected to be scaled back, if not terminated, in the coming year, alleviating the concomitant drag on growth.

In the developing world, large economies like Brazil, China, India, and Russia have managed to halt the slowdown that they have been experiencing in the last two years. In some cases, growth has even begun to quicken, albeit moderately. Meanwhile, African countries’ growth prospects remain relatively robust, buttressed by increasingly effective economic governance and higher infrastructure investment to accommodate rapid urbanization.

But these economies are also facing tough macroeconomic-policy tradeoffs, owing to volatile capital flows, commodity prices, and exchange rates, which are accompanied in some countries by inflationary pressure and widening budget deficits. Fortunately, many developing countries are undertaking critical reforms – covering areas like social security, income distribution, the financial sector, taxation, energy, transportation, education, and health care – which should improve their longer-term potential growth rates.

Another positive development is the $1 trillion trade deal reached, after 12 years of impasse, at the World Trade Organization’s recent ministerial conference in Bali. Although the agreement failed to meet the ambitious goals set out in Doha in 2001, and is not expected to boost world trade in the short run, it has renewed faith in the multilateral trading system – and thus confidence in the global economy’s future.

But the global economy is still subject to significant downside risks. Among the most important stems from the uncertainty associated with the unwinding of QE by major central banks. The Fed’s recent announcement that it would begin to taper QE in January did not generate any financial turbulence, largely because markets had already undergone sizeable adjustments last summer, when the Fed first indicated its plans to move in this direction. But there is no guarantee that the eventual unwinding of QE will go smoothly – especially given that the policy has caused major central banks’ balance sheets to swell in recent years.

A disorderly unwinding of QE could cause long-term interest rates to rise too high too fast, triggering a sell-off in global equity markets, a sharp reversal of capital flows toward developed countries, and a spike in emerging economies’ external-financing risk premiums, as occurred in mid-2013. This could lead to a hard landing for emerging economies with large external deficits and deteriorating budget balances. In fact, falling capital inflows led to sharp currency depreciations in Brazil, India, Indonesia, Turkey, and South Africa earlier this year – and, in some of these countries, depreciation pressures are again intensifying.

China, which is less susceptible to external shocks than its fellow emerging economies, is also experiencing rising risk, stemming from its shadow-banking sector, mounting local-government debt, a growing housing bubble, and widespread overcapacity. The good news is that the Chinese authorities have acknowledged these risks, and seem to be taking steps to minimize them.

Furthermore, while the eurozone has made some progress in the last year, it remains subject to substantial fragilities, with credit conditions extremely inhospitable in some member countries and aggregate demand exceptionally weak. At the same time, unemployment rates have skyrocketed, reaching as high as 27% in Greece and Spain.

For their part, Japan and the US are facing policy-related uncertainties. The effects of the long-awaited “third arrow” of Abenomics – namely, structural reforms aimed at supporting Japan’s long-term growth – are yet to be seen. And, although the US has managed to reach a bipartisan agreement on the budget, political wrangling over the debt ceiling and other fiscal issues may continue to plague policymaking.

In short, while the global economic outlook for 2014 has improved, policymakers worldwide must remain vigilant about downside risks and strengthen international cooperation. Developments in 2013 provide strong incentive for policymakers to do so.

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jim249's picture

Rainbows and unicorns.

DoChenRollingBearing's picture



Well, I hope that Mr. Hong is right ("optimistic if things go right", my term), but I have grave doubts that we will have a decent year, worldwide.  

What has been solved?

Who has gone to jail?

Whose debts are down?

The US and (I would think) others' labor participation rates are very low.


It looks like our bearing business in Peru will come in at 3% or so better than our big 2012.  While lower growth than we have seen before, that is 3% better than 2012.  Our bearing business maybe correlates some 0.6 (kind-of well) with the Peruvian economy, which has been growing as well, though more subdued.

markmotive's picture

Name a time in history when there were no downside risks.

The market will keep going as it is until oil prices once again push the limit. That's the catalyst for the next (and last) financial crash.

peakgrowth2014's picture

Gail is on the money again. One of the sharpest commentators of the hour

Clinteastwood's picture

I calll bullshit on this whole article/thread.  Unless TPTB give up the whole global warming carbon futures tax the world for the new world order meme, there will be no economic recovery, just an ever-worsening depression.  The only thing keeping it from being MUCH WORSE RIGHT NOW is ZIRP and massive fiat printing worldwide.........and that is failing at an ever more rapid rate.  Obozo and many other policymakers should (but won't) reverse course and go for energy (economic) developlemt.  But absent that, we have an intentional world wide clusterfuck brought to you by those who want a crisis, thinking they'll have their own way once it all goes to hell in a hand bucket.  Too bad they haven't figured out some of us will be there to stick it in their nose at the appropriate ripe moment.

i-dog's picture


"policymakers worldwide must remain vigilant about downside risks"

Ya think?!

"and strengthen international cooperation"

Wot! ... like the EU? ... and the Trans-Pacific Partnership? Get real!! That is exactly the major part of the problem ... Central Planning on steroids!

This article is pap dressed as prose.

Harlequin001's picture

'Most developed economies continued trudging along toward recovery,...'

I knew we were in trouble with this article when I got as far as this...

lewy14's picture

Hey. Hey Clint. You don't get it, man.

Nothing you said was inconsistent with the article.

The article is talking about the macro economic conditions of the elite; of the capital investment system, of the payment system. The conditions of the average person do not figure more than a throwaway line about southern European unemployment (which has an upside for the PTB; low inflation pressure gives ECB more room to print).

Yes, printing is the only thing holding the roof up. As we said in second grade... well Duh! 

The PTB love this; finally, they have control over the roof... the economic machine is becoming ever more ensared in the brambles of the State, and the State has access to all the levers it needs now.

There will be time for a crisis, but I doubt it will be 2014. Party on Wayne. Party on Garth.

(Looking forward to all the Great War retrospectives... the guns of August, Home by Christmas... China's breakout is now years away, not decades... but not months, either.)

TheFourthStooge-ing's picture

This Chinese citizenism author of the article cannot cope with the past. He has to deny let's say something like the biggest wealth transfer in humanity's history. Other than weaving from whole cloth a fabled present to form the future basis of a fabled past, what is this supposed to mean?

Speaking of denial, this article is in deep. Nice narrative, supported by no evidence. Those guys have no past, no records, only propagandist web weavery. The author misrepresents the situation in a typical Chinese citizenism way, with can kickery performed expertly.

That is why you play football. Kicking the can in row z...

The author must come back to reality. Otherwise, Pingfan Wrong.

ChaosEquilibrium's picture

Clueless over "improving World growth".....sorry if you are that fucking naive and stupid...I will not waste my time reading the rest of your "opinion?"!

mc225's picture

yeah, i was like 'growth' -- 'wut?' 



new game's picture

only real growth is population, and that is the real problem...

mother earth has a very upset tummy.

(oh, growth of debt toward further servitude)

A Lunatic's picture

Washington D.C's hopes become the hurdles of tomorrow........

BandGap's picture

TSHTF when ObamaCare extensions cease. Watch. Most people do not realize the costs YET, they have yet to get their own personal letter in the mail telling them what this flaming turd means. It's almost as if a shitty website covered for what was inside, while giving people time and room to run for cover.

Watch. The fuse was lit in October. Goes boom in January. BOOM.

DoChenRollingBearing's picture

Trenchant and true comment gets a big green. Obamacare is going to hurt many Americans and will very much hurt our economy.

" for cover."


kridkrid's picture

The fuse was lit decades ago. It's a debt based monetary system with interest attached at the creation of "money" that is the fuse and pending explosion. Obamacare May actual work to extend the fuse by forcing people into taking on more debt to simply make ends meet. The conclusion is the same, however.... Collapse. Only a matter of time. This article was rubbish.

dick cheneys ghost's picture

bingo....we seem to have gotten off track here of late, but it is the debt based-credit based monetary system that is collapsing....everything else is just a sympton of the inevitable collapse.......

i give you trav7777 from 2010 ZH

''This is just the camel's nose of austerity.

see, rich tribers like Mort own a TON of claim tickets to the upcoming liquidation in the form of USTs.  They want them ALL PAID BACK.  Out of your kids' organs if necessary.

Notice how they've shaped the public opinion toward "let's slash and burn and suffer."  We see this on ZH where there are people who are actually begging for mass suffering to come.

Austerity is the IMF's prescription for looting via deflation.  DO NOT BE MISLED by it.

The solution is to ABANDON the debt model and repudiate the claim tickets of shylocks like Mort.  Look, what Rothschild figured out is that if he could start a money-as-debt racket, the math would inevitably bankrupt the sovereign and then he could own the whole fucking country.  That is the POINT of usury!  For fuck's sake, recognize that. 

The whole POINT of tribe carpetbaggers in the south was to lend to blacks for the PURPOSE of acquiring their entire years' worth of sharecrop!  It's a way to make your MONEY work so that you do not have to.  And the con is so insidious that you can make PRETEND money turn into real things WITHOUT work.  It is the way of the PARASITE.

Only the very intelligent understand the mathematical inevitability of usury.  The stupid simply see the rich getting richer without working while the poor work harder and harder and go backwards.  Institutional Usury lets money "make" money without work and it INEVITABLY bankrupts the poor and stupid...this is why it and its purveyors have been reviled as con artists throughout history.

Usury mathematically leads to bankruptcy and liquidation.  Once the machine of geometric compounding is set into motion, there is a very short window to get out, after which it CANNOT be stopped and will proceed to its final, foredestined outcome.''

kridkrid's picture

What the fuck was that?

kridkrid's picture

What the fuck was that?

logicalman's picture

I was waiting for the /sarc

NoDebt's picture

I could have done a better job writing this article and I'm a known-idiot on ZH.


Greenskeeper_Carl's picture

"The eurozone seems to be getting out of its double dip recession" tell that to the average citizen of Greece, Spain, etc. all those countries keep hitting a new unemployment record. That sounds more like a depression to me, not an exit from a "recession"

Chupacabra-322's picture

2014 More

Illegal wars of aggression
More Criminal arming, funding & training via the Criminal State Dept / CIA via Turkey, NATO & Saudi Ariabia.
More NSA- Illegal Global espionage, data mining & Sping.
More Militarized Authoritarian Fascist Totalitarian Police State
More unemployment.
More loss wages.
More criminal Presidental Executive orders
More crimes from DHS, DOJ, BATF, CIA, FBI, IRS, Federal Reseve, CONgress.
More wealth transfer.
More fake economic numbers.
More Monsanto
More criminal Supreme Court decisions.
More economic Bankster terrorism
More Criminal CIA drug running money laundering through the TBTFBankster tax payer bailed out Criminals.

More of the same Criminal Federal Government .

ChaosEquilibrium's picture

Watching Cramer on Mad Money trying to convince his 'audience,ie. retail wannabe traders' NOT to sell into this coming decline and buy/stay invested......all the way down!


Some advice to all the so-called investor's calling into Cramer's show.........If you are calling into Cramer---YOU are the FOOL/SUCKER/ASSHOLE AT THE TABLE...YOU SHOULD NOT BE INVESTING/TRADING..  SELL everything and go to CASH.....and YOU deserve EVERYTHING coming YOUR FUCKING WAY!


that is all.....Happy Holidays!

whatthecurtains's picture

Two unexpected things will happen in 2014 that will shake the markets:

1)  Iran will detonate a nuclear device underground.

2)  Roubini will get to keep his giant hot tub.

Decimus Lunius Luvenalis's picture

Honestly, the more I read this sycophantic regurgitation the more I am firmly convinced that the world of finance and investment is complete fuck-all.  If your actually had insight into the economy or markets, would you be publishing it? No.

new game's picture

that is nsa's job. seriously, what other reason would you spy? to game the fucking system.

yes it robs us all of liberty, but that "unintended" consequence is a ptb win win...

remain debt free, 2014.

resist marketing of your mind to want the shit from china, especially electronics!

money in non-traditional bank-huge impact here.

out of any paper type market.

be a cheap fuck-resist the suv gas guzzle type trans.

get rid of top dead cyclinder syndrom

self health care.

buy local, but don't fall for the liberal meme

live green but reject the fruit loops that profess to be green.

pedal power, gardening ect. for financial reason. once again reject the green fruitloop oboma luvers...

2014 another year of minimalism

less money, more enjoyment of life... 

disabledvet's picture

This financially driven recovery seems really sloppy this go around. The ingredients were the same: no interest rates too low, no bank too big to fail, no business or industry too important to be downsized or outsourced. With all the debt created to finance "basic services" the only solution offered has been ultimately "the creation of more debt." The game changer as I see it is the shale revolution. I don't know how long it will at last...I've read ten years...but this does give a comparative advantage beyond belief to those who are frugal with their energy resources. It has already moved the dollar substantially higher relative to all world fiat save the pound, euro and yuan. What it hasn't done is lead to massive production gains or outsized trade advantages that the USA can roll over into real economic growth and an increase in real wages. The failure of the ACA is definitely a move backwards as well. The system continues to reset. Detroit going Chapter 9 is the way forward I think for much of the country. As the Fed winds down "stimulus" the reality of those flush with riches versus those simply headed into oblivion will become as stark as it is real. The bottom line is we don't have a lot of breadwinners this go around. The irony is we truly have massive amounts of cash simply lying around doing nothing..."stranded capital" in the sense that it never gets used in the first place. That's what's gotta change for there to really be a "light at the end of the tunnel."

savagegoose's picture

yeah and i thought the world economy  was fucked!

new game's picture

cartoon of the decade-7 billion sheeple heading step by step to the cliff...