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OECD Joins Chorus Of Global Confusion, Slashes Growth Forecasts As It Urges Rate Hike
On Tuesday evening we brought you a fresh look at the worrisome deceleration in the pace of global trade, on the way to reiterating a point we’ve been keen to drive home over the last six or so months. Specifically, the post-crisis world may have witnessed a kind of seismic shift wherein depressed global trade has become structural and endemic rather than cyclical and transient.
To quote WTO chief economist Robert Koopman. “It’s almost like the timing belt on the global growth engine is a bit off or the cylinders are not firing as they should.”
Yes, it is “almost” like that and as it turns out, the OECD is starting to come to the same conclusion even if they’re predisposed to cheer the relative strength of America’s cleanest dirty shirt economy. On Wednesday, OECD cut their forecast for global growth to 3% in 2015 and 3.6% in 2016. Here’s the full breakdown:
And here’s some commentary from OECD Chief Economist Catherine L. Mann:
“Global growth prospects have weakened slightly and the outlook is clouded by important uncertainties. Emerging economies have vulnerabilities that could be exposed by rising US interest rates and/or a sharper-than-expected slowdown in China, giving rise to financial and economic turbulence that could also exert a significant drag on advanced economies. Continued policy stimulus is warranted to support global demand, but the mix of policies will differ by country, and choices need to be consistent with financial stability and reviving long-run growth.”
Got that? Basically it’s a reiteration of a now familiar narrative: EM is one the verge of a meltdown caused by tremendous pressure on commodity currencies and depressed global demand (i.e. China). A Fed hike could tip the emerging world into crisis and that crisis would then feedback into DMs, exacerbating the already abysmal state of the post-crisis “recovery.”
But here’s where the picture becomes clouded.
As we’ve discussed at length, nervousness across the emerging world stems in part from uncertainty surrounding the Fed. That is, the more apparent it became that the FOMC had missed its window, the more nervous markets became and this added to the pressure on EM currencies. Now, in the wake of the yuan devaluation, these economies are at the brink and anything the Fed does will turn out poorly. Hiking risks plunging the entire EM space into chaos virtually overnight, but waiting just exacerbates the uncertainty and the capital outflows will likely pick up again after a brief period of respite. The OECD’s suggestion: hike now.
The Interim Economic Outlook calls for global macroeconomic policy to remain supportive of demand. Advanced economies should continue accommodative monetary and fiscal policies to ensure that the recovery gains momentum. The US Federal Reserve will soon need to begin to raise its policy rate at a gradual pace, given the solid growth of the US economy and concerns over asset prices. The timing of the first rate rise will make little difference to the outcome, but the pace of increase does matter.
The OECD's reasoning becomes a bit clearer when we consider the following quote from Mann: "Raising interest rates now would remove uncertainty in the markets. The path matters four times as much as the timing."
In other words, EM is doomed either way, so best to just provide some certainty and hope for the best in the near-term. In the medium-term, it's important to make sure the "path" is dovish. Here's what that looks like:
So essentially, the Fed needs to go ahead with a symbolic 25 bps hike and then from there, try to find the goldilocks "path" that's steep enough to provide it with enough rope to reverse course once the tightening triggers a meltdown in EM that feeds back into advanced economies, but not steep enough to exacerbate said EM meltdown. The only way it turns out any different is if you assume that months of uncertainty about the Fed, collapsing commodity prices, and the tumultuous fallout from the yuan deval have all served to push EM to the point that everything is now "priced in." Of course, there is probably no more dangerous phrase in all of capital markets than this one: "It's probably priced in."
In any event, the big picture takeaway is that slowly but surely, all of the very "serious" people are coming to the same conclusion. Namely that the outlook for global growth and trade is grim, especially by historical standards, and that - although OECD doesn't say this - should serve as a damning indictment of the idea that economic outcomes can be engineered from on high by central planners. The sad reality however, is that far from admitting that the coordinated Keynesian response to the crisis has failed and perhaps even exacerbated the slowdown in growth and trade by perpetuating a global deflationary supply glut, slowing growth will instead be trotted out as an excuse to double down on the very same policies that aren't working.
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Easily good for triple digits on the DOW.
The hill just got a little steeper
To all Zerohedge Germans/readers in Germany/people who like Germany/people who like Beer
https://www.change.org/p/city-of-munich-ban-the-intolerant-and-anti-isla...
Reading the comments is awesome.
Fuck that and fire up the ovens, in any sane society that would be a declaration of war.
Rope and trees.
Anyone heard anything about this yet???? Sure seems to have gone under the radar.
http://www.cbc.ca/news/canada/montreal/silver-heist-montreal-shipping-co...
16 tons of silver stolen in Montreal.
No S_A I haven't
I saw your post last night but their is a safe bet that you will be seeing more of these confiscations like this one both big and small!
That's what our "owners" do... When we allow them to be owners that is!
If there isn't some sanity brought to this situation and soon that will be the end result -- not just in Germany, but all over Europe.
Maybe you guys should kick out Merkel for a change ? I'm sure she would already qualify for a nice pension... After all, she came with that 800k immigrants figure, that she is supposedly willing to accomodate (personally, I assume) out of the blue...
Fuck that and fire up the ovens, in any sane society that would be a declaration of war.
Oven(s) for whom?...
The paid for "ISIS" proxies that are vandalizing parts of Hungary and Germany with the financial support of the Western European and American governemt(s)?...
Or
Angela Merkel and friends who hired those "proxies"...
Then there is all the innocent ones in the middle that have nothing to do with either of the above that are legitimately starving without a home and are seeking refuge!!!
Don't fall for it UR, it'll be a setup or psyop. That's a pretty dodgy host site too.
My first reaction was that no one could be that stupid, not even someone trying to stir the pot... But it serves a greater good, the notion of indefinite multiculturalism without integration and assimilation that is popular in much of Europe and US is insanity.
Oktoberfest cancelled don't think its going to happen. LOL
@Haus-Targaryen:
Have you thought about the posibility that this might as well be a false-flag trick, planted by people/groups/institutions/governments to inspire outrage about Muslims and rake in support for their fascist ends?
To me, this kind of so-called Muslim excesses sounds just a little bit too crazy to be true. Just as if Muslims in Germany (and anywhere in the rich-white-western-world) are not keenly aware that they have to tread on eggs these days. Who benefits: can any Muslim hope to gain anything positive from such a petition; can any European government? Beware of manipulation from any side.
Slashes Growth Forecasts As It Urges Rate Hike
I don't care who you are.....that's genius there.
Infinite growth assertions from central bankers are not the solution -- only duck tape can work now.
Well, let me be clear -- duck tape can't cure stupid but it will muffle their words for a while....
Blah, blah, blah
Be patient, it's almost my birthday, that should fix things.
OECD cut their forecast for global growth to 3% in 2015 and 3.6% in 2016...
THAT'S SOME FUNNY SHIT RIGHT THERE BIRCHEZ.
Exactly! And we talking a tenth or two tenths in a GLOBAL forcast with what? +/- 8% margin of error?
Hmmmmmm.........
Fed rate hike in Sept. + US GovCo budget battle/possible GovCo shutdown in Oct. = ?
.gov shutdown in Oct with lickspittle McConnell and Drunkie Drunk Bohner in charge?
Oh the humanity!
In saner times, when demand was recognised as the driver of the economy, the US consumer was seen as the engine of the global economy.
With growing inequality, the US consumer has seen real wages stagnate since the 1970s. His consumption was maintained, first with debt, and then the illusion of wealth due to a house price bubble. He used his ever increasing house price as an ATM to borrow against to maintain consumption.
In 2008 things changed, the US consumer was maxed out on debt and his house was falling in price.
The once wealthy Western consumers have all had a similar experience.
Demand for Chinese products collapsed and China tried to keep things going with debt, hoping the West would soon be back on its feet.
With supply side economic theory being the order of the day, all the help has been put in at the top with nothing trickling down, because it doesn’t.
Capitalism trickles up though the following mechanism:
a) Those with excess capital invest it and collect interest, dividends and rent.
b) Those with insufficient capital borrow money and pay interest and rent.
With almost no welfare state in China its consumers constantly have to save for a rainy day, limiting their own consumption.
The world’s belief in supply side economics and trickle down is exactly the opposite of how Capitalism actually works, its demand driven and money trickles up.
Prepare for more solutions based on the opposite of how Capitalism actually works.
QE puts money in at the top, where it stays, blowing asset bubbles.
There is an inherent trickle up in the current system that allows the rich to take from the poor:
a) Those with excess capital invest it and collect interest, dividends and rent.
b) Those with insufficient capital borrow money and pay interest and rent.
To combat the massive trickle up inherent within Capitalism you need the following:
1) Those at the bottom have to be paid enough to keep the whole food chain above going.
2) There is a redistribution from the rich to the poor via taxes.
3) Helicopter money fed in at the bottom.
With none of the above currently sufficient to curb the trickle up, the system is dying through lack of demand.
Take your Keynesian ass over to Krugman's blog...
+100 Batman11
And ZIRP adds to blowing asset bubbles
@Batman11
Not sure why so many down votes....................Guess peeps just don't understand how the system should work.
LOL!!! "Capitalism" also requires that bad management and bad businesses fuck off and die, NO BAILOUTS!!!!
Capitalism has not existed for quite a while you stupid fuck.
THANK YOU!!!
Please point out in Batman11 post he mentions BAILOUTS of banks and big business?
The fact that he believes this is a capitalist system is enough to tell us he has no idea what he is talking about.
He does not, that is the point dumbass, he is being a disingenous fuck.
Yet another moron. Go get yourself some coffee assfuck.
Even worse, Law, were the selective bailouts to their buddies while 90% of the american people were left high and dry and sorely sodomized.
Clearly you have no clue what capitalism is. In a capitalist system businesses have the right to succeed or fail based on their own merit, there is no such thing as too big to fail. Our current financial system is corporatism pure and simple.
I don't think he was saying we have a capitalist system.
He was just explaining how it should work..........................and how they are fucking it up.
while neglecting to mention that it should work through failure...
disingenuous cunt.
I hit the up arrow before I got to the part where you blamed "supply side economic theory." That in fact is incorrect - it is "trickle down" not "supply side. There is a difference. Trickle down can be used in either supply side or demand side (Keynesian) policy sets. It involves the theory that if you give money to the rich (either through tax cuts or ZIRP) it will "trickle down" to everyone else. It does but only to Bently dealerships and high end resorts. It is not an effective way to improve the economy, regardless of which side employs it.
True supply side would involve rate normalization, not ZIRP, and regulatory relief as well as a reduction in the size of government spending (not tax rate cuts), as Spending = Taxes (current + deferred). This would provide incentives to entrepreneurs to open new businesses (which are noticably absent in this "recovery").
You simply cannot consume without first producing something (Says Law). So capitalism actually "works" by excess production funding consumption, not the other way around.
BLAH BLAH ...BLAH BLAH BLAH.......THE EMERGING MARKETS "HAVE" BEEN MELTING DOWN [PRESENT TENSE]. THE UNWIND OF THIS RIDIUCULOUS GAME OF ILLUSIONS BASED ON PHANTOM WEALTH CREATED BY A PRINTING PRESS MUST END - WE ALL MUST PAY THE PRICE OF SUBSCRIPTION!!!
LET US BEGIN!
Speak for yourself.
Year end Wall Street bonuses have yet to be paid.
Maybe we'll talk somtime March 2016.
Until then, keeping working for peanuts and paying taxes sheep.
Well, well, well. Whadda ya know? Maybe globalization wasn't such a great idea afterall.
globalization was thier last throw of the dice ......................since then it's been CB's kicking the dice down the road
The Fed knows that the inflation numbers are complete bullshit. Real inflation has been with us for a while...
They will hike rates, they will be too late, same as it ever was...
The liabilities are what they are...
Which is why I expect a .25 rate hike and an announcement of a resumption of QE (as needed) to bolster the flagging global economy as rates "normalize." Yes, it's winning ugly but what else can they do?
Kick that can!
The real economy could be fixed over night by eliminating the personal income tax. Real producers would then get to keep ttheir earnings and would invest those earnings productively.
Not quite as real producers will still get screwed on their input cost if a select few can access all the free money they want and drive prices up. Sorry, you need to fix the monetary system as we all know how a "let the majority eat cake" monetary system turns out.
Or are you really that stupid?
Confusion? Why, oh why, is that? Are the chartists not providing us with correct data?
Oh, right, NO ONE knows the truth as real accounting is dead. GAAP is dead.....or is that redundant?
"Puzzlement and Confusion", indeed.
Rich folk are NOT investing in real production or growth. They are buying paper. Lots of it. Don't worry it is ALL HIGHLY RATED by the most reliable companies.
Did you ever wonder where the former Enron accountants went?