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IMF Says Bernanke Is Wrong On Secular Stagnation
In the New “Paranormal” (as we’re fond of calling it) economies and financial markets are characterized by quite a few depressing and some outright bizarre dynamics. For instance, under NIRP, saving money will cost you money, but you are paid to take out a mortgage meaning that effectively, savers are subsidizing home loans in some parts of the world. Similarly, investors must now pay for the privilege of loaning European countries money and in some cases, these are countries whose sovereign debt was yielding 7% just a few years ago. Meanwhile, Japan is running the largest ponzi scheme in history and while the BoJ are monetizing every IOU the Japanese government cares to print, the central bank is simultaneously underwriting the country’s stock market by purchasing ETFs in droves. This epic distortion of financial markets was supposed to spur worldwide economic growth and save consumers from the deflationary bogeyman (because who doesn’t want to pay more for things?), but hasn’t really done a great job in either respect. Indeed it appears that the world may just have to get used to tepid growth and manipulated markets until some central planner somewhere finally allows everything to normalize a process which, thanks to the countless market distortions CB policy has wrought, will be exceptionally painful.
In the mean time, Ben Bernanke and Larry Summers (and of course Paul Krugman had to chime in) have taken to trolling each other’s blogs to “debate” secular stagnation and now the IMF is out with their take on whether, in the new normal, the world’s productive capacity may remain stuck in low gear for the foreseeable future. Here’s more:
In the years since the global financial crisis many economies have witnessed slower expansions in one or more of these key components of potential output growth (see chart 1). Lower potential growth in advanced economies has been driven in roughly equal measure by slower capital accumulation and labor growth—due primarily to adverse demographics. In emerging market economies much of the decline is attributable to slower productivity growth…
As economic conditions improve and activity recovers, investment growth should pick up, fostering a gradual recovery in productive capital growth in many advanced economies. However, prospects for the labor force are grimmer. As chart 2 shows, demographic factors are likely to act as a brake on growth in many advanced and emerging market economies, as populations age and workers retire…
In other words, the good old days aren’t coming back...
Productivity growth is not expected to pick up under current policies. In emerging market economies, past technological improvements and enhanced educational attainment have allowed these economies to narrow the gap between themselves and advanced economies. Although more strong growth can still be achieved from further improvements in these areas, the returns to education and innovation are unlikely to be as large as they were initially, when these economies were further from the technological frontier. This suggests weaker productivity growth in these economies in the future.
For their part, advanced economies should see productivity growth near recent rates in coming years. Still, the rapid pace of expansion seen in the late 1990s and early 2000s—fueled by the exceptional information-communication-technology boom—is unlikely to be restored.
In sum, these scenarios suggest that potential growth in advanced economies is likely to remain below precrisis rates, while it is expected to decrease further in emerging market economies in the medium term.
The IMF goes on to ask whether there's a global slump in real private investment (spoiler alert: yes there is and it's broad-based and endemic in advanced economies)...
The sharp contraction in private investment during and since the global financial crisis combined with the subsequent weak recovery is largely an advanced economy phenomenon. For advanced economies as a whole, private investment during 2008–14 declined by 25 percent compared with forecasts made in early 2007, before the onset of the crisis. The weakness in investment is evident across almost all advanced economies, although some economies saw a limited contraction in private investment and a more rapid recovery, due, for example, to mining and energy booms, as in Australia, Canada, and Norway.
...and the problem cuts across categories...
...and is particularly acute in business investment due to depressed economic activity...
How might weak economic activity cause business investment to decline? A standard implication of theoretical models is that firms reduce investment when opportunities for selling their products are limited. A weak current and prospective economic climate and, hence, low current and expected sales are thus likely to deter firms from investing in new capital. Weak product demand can also hamper investment through the “financial accelerator” channel, in which credit markets amplify and propagate both real and monetary shocks across the economy.8 For instance, a drop in sales may damage a firm’s financial position, constraining its ability to repay loans and borrow to finance further investment.
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Make-Work Capital sees the economy as capital versus labor, and so is establishing a global monetary function in China, to encapsulate and replace labor with machines, the New World Order, same as the old. Income is completely arbitrary accordingly. Labor’s response is Nature, and determines its own income to balance at desired gravity. If the middle class wants to eat cardboard, drink sewage and breathe smog, by participating in make-work nonsense, that is up to the middle class.
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It's contained!!!!!!
"Ben Bernanke, Larry Summers and Paul Krugman" all in the same sentence? Would love to see all three in a Cage match with pink tights and masks.
I'd love to see all three at the gallows....
along with Hillary, Jarret, Frank, waters, reid, jackson lee, boxer, fienstien, cummings et al? That would be EPIC and just worthy of our forefathers..
Yeah and many more.
But the clue here Is??? IMF says?
We got one crook calling the next crook trying to spread blame.
IMF? The original vulture. calling Bernidiot misguided? Who gave him his marching orders? Whom, pray tell,is running a new blog of excuses and a book tour. IMF is who exactly? Trying to "distance" from any fallout that they themsleves caused,
Same mafia, just like it always was. Hang every single one of these bastards. Nice try. There is no gutter that all these power mad psychopaths will be able to hide in. Only hope I live to see it.
Like rats on a sinking ship. (and I mean no disrespect to rodents). The big kids will start to feed off each other's miscues and individuals will be thrown to the lions for the benefit of the masses. Hopefully the masses will not be happy with the few and will demand them all.
If economists knew anything at all,
there would be some evidence of that by now.
Perhaps there is some evidence that they know that "we" are all too stupid to call bullshit on their 'knowledge'.
Soooo incorrect. And what the FED and IMF and others count on. Evidence is certainly in that people wish to live productive lives. Economists? Politicians? Banking elite? desire is to "elevate" the discussion beyond common sense and ordinary work/productive effort.
To elevate this non productive theory into realms where logic is trumped by gibberish and cooked books. Where every meaningful stat is false. Where the "cloud" they compute from is revered; even though it has no meaning or purpose or value except theft,
Nice gig. Where do I apply? People are not, in many cases, stupid, Just have no time to wade through the endless garbage and lies. What the frig happened? I worked every day of my life and actually did something.
Bernak? IMF must be nice to suspend moral compass every day. To go to the office with the express mandate of rape. And beyond the act of rape but how to make the rapist shine as a savior.
929 million of 'us' should have the time to wade through the endless garbage and lies. I have a job and I try to wade through it. Perhaps ignorant is a better word, but regardless, they 'know' enough of us 'don't know'....
http://www.zerohedge.com/news/2015-01-09/labor-participation-rate-drops-...
And I didn't think I was going to laugh today. ...evidence of that by now. Man, I'm making bumper stickers immediately!
The economic unit is the Company of machines.
Humans are irrelevant.
As the global economy deviates further from the equilibrium state due to accelerating central bank thievery, true producers of wealth have lower propensity to invest time, effort, and real capital (not ponzied financial claims) to bring about real productivity growth and incremental output. Increasing numbers prefer to hunker down in gold, the most attractive fiat (whatever that is), or the tangible assets whose price is least distorted by global QE (whatever those are), and the real economy dies as a result. Levered lemmings speculate wildly, producing nothing of value, while clueless, foolish Keynesians point their fingers at each other, as more sense it is CYA (cover your ass) time.
What is productivity anyway? On an energetic basis, almost all business are unproductive. And the energy industry is getting there, especially oil in the USA.
"Productive" will be defined as whatever the government decides to throw money at....think Solyndra...
Translation of IMF speak into layman speak:
Economy sucks because there is no demand. All you monkeys(Bernanke, Krugman) pushing on supply is doing dipshit.
The IMF versus Bernanke. Hmmm... who do I not believe more? This is a tough call.