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IMF Cuts Global Growth For The Fourth Time In 12 Months... But That's Not The Biggest Problem

Tyler Durden's picture




 

Moments ago the IMF did what it does best: it just cut its forecast for global growth yet again. Specifically, it said that "global growth for 2015 is projected at 3.1 percent, 0.3 percentage point lower than in 2014, and 0.2 percentage point below the forecasts in the July 2015 World Economic Outlook (WEO) Update. Prospects across the main countries and regions remain uneven. Relative to last year, the recovery in advanced economies is expected to pick up slightly, while activity in emerging market and developing economies is projected to slow for the fifth year in a row, primarily reflecting weaker prospects for some large emerging market economies and oil-exporting countries."

What is surprising about this particular estimate is that the IMF did not cut any of its core geographic regions: both Europe and China saw their 2015P GDP forecast remain unchanged (at 1.5% and 6.8%), while the US was raised modestly from 2.5% to 2.6% (it will soon revise this lower again). As a result, the driver for the cut in global growth was to a lesser extent Japan, which was revised from 0.8% to 0.6%, but it was the EM and oil exporters that saw the biggest cuts, with Russia (-0.4%), Brazil (-1.5%) and Canada (-0.5%) cut the most.

The culprit, indirectly, was once again China. To wit:

For most emerging market economies, external conditions are becoming more difficult. While currency depreciation will help net exports, the “pull” from advanced economies will be somewhat more modest than previously forecast, given their weak recovery and moderate prospects for medium-term growth. Capital flows to emerging markets have slowed in recent quarters, and the liftoff of U.S. policy rates from the zero lower bound is likely to be associated with some tightening of external financial conditions. And while the growth slowdown in China is so far in line with forecasts, its cross-border repercussions appear greater than previously envisaged. This is reflected in weakening commodity prices (especially those for metals) and reduced exports to China (particularly in some east Asian economies).

But the real punchline is that, as expected, the IMF which saw global growth at 3.8% one year ago, has cut its forecast 4 times in the past 4 quarters, and a 3.1% this is the lowest global growth rate going back to the financial crisis.

 

And while a Chinese growth cut is just a matter of time, even if the trajectory is all too clear...

 

... the biggest problem had nothing to do with any particular country's GDP growth, but with what has emerged over the past year as the biggest threat to global growth: the lack of trade. Sure enough, the IMF just cut its 2015P trade forecast from 4.1% to 3.2%, and putting the collapse in global trade in context, back in 2011 the IMF saw 6.9% in global growth. This number is now down nearly 60% 4 years later to a paltry 3.1% and sliding fast.

Why is this a problem? Because while central banks can reflate asset values all they want, they can't print trade, and a global world needs trade more than anything to grow.

Source: IMF

 

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Tue, 10/06/2015 - 10:39 | 6635339 froze25
froze25's picture

Looks just like what was going on before WW1 but with new actors in the staring roles.

Tue, 10/06/2015 - 10:46 | 6635379 Eirik Magnus Larssen
Eirik Magnus Larssen's picture

Those who remember history are condemned by those who repeat it.

Tue, 10/06/2015 - 10:49 | 6635386 StackShinyStuff
StackShinyStuff's picture

"They can't print trade"  But they sure as hell will try!

Tue, 10/06/2015 - 10:56 | 6635414 debtor of last ...
debtor of last resort's picture

Yes, they will try: TPP, TTIP, ZIRPTTTPP....

Tue, 10/06/2015 - 11:04 | 6635443 NoDebt
NoDebt's picture

There is no way they can believe their own forecasts.  Nobody could be that clueless.  I mean they HAVE TO KNOW the reality and they HAVE TO KNOW they're just spitting out propoganda.  Right?

Please tell me they know they're lying.  The alterntaive- that they DON'T know they're lying- is much more terrifying.

Tue, 10/06/2015 - 11:15 | 6635468 Dr. Engali
Dr. Engali's picture

All you really need to know is that: When it becomes serious you have to lie. Which is always when it comes to the IMF lizard people.

Tue, 10/06/2015 - 14:06 | 6636195 froze25
Tue, 10/06/2015 - 11:15 | 6635471 KnuckleDragger-X
KnuckleDragger-X's picture

They can't tell the truth because that WOULD crash the world economy, so they hope for an 'unexpected' miracle. Everybody looks at the DM economies and pretends that the EM has no effect...right up until the defaults start.....

Tue, 10/06/2015 - 12:55 | 6635937 Ouagadoudou
Ouagadoudou's picture

U think u will like the plan B ?

Tue, 10/06/2015 - 11:34 | 6635582 Fahque Imuhnutjahb
Fahque Imuhnutjahb's picture

NIRPUSRIP

Tue, 10/06/2015 - 11:19 | 6635490 venturen
venturen's picture

Obama and his cronies never learned history....too busy on black studies and effective lying for profit

Tue, 10/06/2015 - 10:46 | 6635380 SickDollar
SickDollar's picture

funny you said that because Brzezinski said:

US should attempt to disarm Russians in Syria:

http://presstv.com/Detail/2015/10/06/432230/US-Syria-Russians-Brzezinski

Tue, 10/06/2015 - 11:00 | 6635426 Dr. Engali
Dr. Engali's picture

Judging from the comment section, nobody is buying his bullshit.

Tue, 10/06/2015 - 11:18 | 6635483 KnuckleDragger-X
KnuckleDragger-X's picture

OK, that was special. The Russians are there at the invitation of Syria, we are there because...ummm......

Tue, 10/06/2015 - 10:49 | 6635389 Bill of Rights
Bill of Rights's picture

They do seem to be reading from the book don't they...

Tue, 10/06/2015 - 10:53 | 6635409 two hoots
two hoots's picture

" the biggest threat to global growth: the lack of trade"

 

 

TPP passing will help lead us straight to globalization where every laboring US citizen will be thrown into the global wage rate pile.  Unlike some EU countries that protect their citizens and borders our leadership will sacrifice our future for a greater global socialist good; equality, equality at last.

 

Tue, 10/06/2015 - 10:41 | 6635348 asteroids
asteroids's picture

Notice how every projection is positive. Happy Happy. Until folks start reporting the truth. That things really aren't Happy Happy everywhere all the time. Assume they are lying to you and take it with a grain of salt or ignore them.

Tue, 10/06/2015 - 10:47 | 6635384 pods
pods's picture

"Recovery starts tomorrow."

Sign inside the IMF.

Tue, 10/06/2015 - 10:50 | 6635396 StackShinyStuff
StackShinyStuff's picture

"Free Beer Tomorrow"

Sign inside my local bar.

Tue, 10/06/2015 - 11:12 | 6635462 Gracy101
Tue, 10/06/2015 - 11:24 | 6635521 venturen
venturen's picture

funny the sign at the FED says "QE tomorrow and next year" been there for a number of years!

Tue, 10/06/2015 - 10:58 | 6635418 lincolnsteffens
lincolnsteffens's picture

Somehow these bankers and Gov. shills forget that the US consumer is tapped out and as it is the largest economy in the world, all others are suffering. Funny how that works when you leave the biggest part of the equation out of the discussion.

Tue, 10/06/2015 - 11:25 | 6635526 venturen
venturen's picture

They don't forget...they just run a biggest deficit and leave you with the bill. Then move their money offshore

Tue, 10/06/2015 - 10:42 | 6635351 viator
viator's picture

Thank the lord for professional Keynesian economists, what would we do without them?

But IMF projection for world growth is still a hockey stick, so we're all right.

Tue, 10/06/2015 - 10:46 | 6635352 JustObserving
JustObserving's picture

What has more integrity? IMF forecasts or toilet paper?

IMF is just a criminal organization that exists to serve its masters - USA and EU.

The IMF Itself Is a Criminal Organization 

To understand this story, you have to reel back to the birth of the IMF. In 1944, the countries that were poised to win the Second World War gathered in a hotel in rural New Hampshire to divvy up the spoils. With a few honourable exceptions, like the great British economist John Maynard Keynes, the negotiators were determined to do one thing. They wanted to build a global financial system that ensured they received the lion's share of the planet's money and resources. They set up a series of institutions designed for that purpose – and so the IMF was delivered into the world.

 

The IMF’s official job sounds simple and attractive. It is supposedly there to ensure poor countries don’t fall into debt, and if they do, to lift them out with loans and economic expertise. It is presented as the poor world’s best friend and guardian. But beyond the rhetoric, the IMF was designed to be dominated by a handful of rich countries – and, more specifically, by their bankers and financial speculators. The IMF works in their interests, every step of the way.


http://www.realclearworld.com/2011/06/03/the_imf_itself_is_a_criminal_or...

Tue, 10/06/2015 - 10:58 | 6635417 two hoots
two hoots's picture

or

 

The IMF is as useless as a wet roll of toilet paper?

 

Tue, 10/06/2015 - 10:42 | 6635355 Calculus99
Calculus99's picture

Because while central banks can reflate asset values all they want, they can't print trade.

I'm sure some of their 'models' say they can. 

That right there is the problem.  

Tue, 10/06/2015 - 10:42 | 6635356 Captain Benny
Captain Benny's picture

Looks like a lot of optimistic check marks.

Tue, 10/06/2015 - 10:43 | 6635357 Urban Roman
Urban Roman's picture

they still haven't figured out that it can be a negative number

Tue, 10/06/2015 - 10:43 | 6635361 PleasedToMeatYou
PleasedToMeatYou's picture
Citigroup: Investors should be 'brave' and buy stocks

 

As investors peer over the precipice, Citi says "C'mon!  Waddaya, some kinda chicken?"

 

Tue, 10/06/2015 - 10:45 | 6635367 RockySpears
RockySpears's picture

   and on that bad news, The FTSE rises.

Tue, 10/06/2015 - 10:45 | 6635368 FreeShitter
FreeShitter's picture

Looks like WWIII.

Tue, 10/06/2015 - 10:47 | 6635383 Consuelo
Consuelo's picture

Gold trade note.

 

 

Tue, 10/06/2015 - 10:53 | 6635410 Dr. Engali
Dr. Engali's picture

How do you trade or plan when you have big currency swings and asset prices are so distorted that it's difficult to value anything? Not only that, but we have major over capacity issues in all sectors and major missallocation of capital issues all thanks to years of ZIRP. But that's not the worst, things are really going to get bad when fed shoves NIRP down our throats to maintain the status quo.

Tue, 10/06/2015 - 11:27 | 6635539 venturen
venturen's picture

wrong question....the FED doesn't seem to meet it LGBT quote....Jenner for FED!

Tue, 10/06/2015 - 11:06 | 6635449 Gracy101
Gracy101's picture

Has it got something to do with this?

http://www.cdbaby.com/cd/thatguybloke

 

Tue, 10/06/2015 - 11:09 | 6635454 youngman
youngman's picture

Print trade.....the opposite will happen...trade protections are coming..just like the first great depression...the politicians just cant stop themselves....

Tue, 10/06/2015 - 11:14 | 6635467 Insurrexion
Insurrexion's picture

*Way off topic----

 

New York federal prosecutors just charged the former U.N. General Assembly President, John Ashe with accepting more than $1 million bribes...

Tue, 10/06/2015 - 11:21 | 6635498 venturen
venturen's picture

darn...I thought it was going to be Corzine?

Tue, 10/06/2015 - 11:20 | 6635495 venturen
venturen's picture

how odd...raising asset prices for the wealthy...doesn't help people with falling incomes. Maybe Krugman could explain?

Tue, 10/06/2015 - 12:29 | 6635838 BigWillyStyle87
BigWillyStyle87's picture

Almost at escape velocity........full speed ahead!

Tue, 10/06/2015 - 13:52 | 6636123 Grandad Grumps
Grandad Grumps's picture

I think Christine LaGarde has a hockey fetish. She sure seems to like their sticks.

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