World Economic Outlook

IMF Urges Obama To "Tackle Poverty" As It Tells Yellen To Overshoot Inflation Target

In its latest staff statement on the annual analysis of the U.S. economy, the IMF again demonstrated why economists have become the butt of financial jokes, when in the same report it first urged the Fed to "overshoot" its 2% inflation target, clearly unaware of the dramatic shift in sentiment that unorthofox monetary policy no longer works to stimulate inflation, and in fact quite the opposite, while at the same time it cut its US GDP forecast yet again, from 2.4% to 2.2%, and concluded that, drumroll, there is "an urgent need to tackle poverty."

Steve H. Hanke's picture

In January, the International Monetary Fund (IMF) told us that Venezuela’s annual inflation rate would hit 720 percent by the end of the year. The IMF’s World Economic Outlook, which was published in April, stuck with the 720 percent inflation forecast. What the IMF failed to do is tell us how they arrived at the forecast. Never mind. The press has repeated the 720 percent inflation forecast ad nauseam.

Frontrunning: April 13

  • China trade surprise gives stocks a lift (Reuters)
  • JPMorgan profit hurt by drop in investment banking revenue (Reuters)
  • About 40,000 Verizon workers launch strike (Reuters)
  • Regulators Set to Reject Some Big Banks’ ‘Living Wills’ (WSJ)
  • More Startups Are Getting Lower Valuations Than Joining the Billion-Dollar Club (BBG)
  • Closures and court cases leave Turkey's media increasingly muzzled (Reuters)

IMF Again Cuts Global Growth Forecast As It Warns Of "Secular Stagnation"

Moments ago the IMF did what it does better than anyone (with the exception of the Fed): it once again admitted its forecast of world growth had been too optimistic, and as a result in its just released quarterly World Economic Outlook report, it cut its forecast for 2016 global GDP growth from 3.4% to 3.2%, and from 3.6% to 3.5% for 2017. Indicatively, back in July 2014 the IMF was forecasting 4.0% GDP growth in 2016. It is now 20% lower.

"There Is A Lot Of Fear In The Market" - Stocks, Futures Slide After Yen Soars

Two days after stocks slid in a coordinated risk-off session, and one day after a DOE estimate of US oil inventories sent US stocks surging while the failed Allergan-Pfizer deal unleashed torrential hopes of a biotech M&A spree leading to the single best day for the sector in 5 years, sentiment has again shifted, this time due to a violent surge in the Yen as the market keeps testing the resolve of the Japanese central bank to keep its currency weak, and so far finding it to be nonexistent.

Our Economic Growth System Is Reaching Its Limits In A Strange Way

Growth now is slowing because of all of the entropy issues involved. People in China cannot stand any more pollution. Too many laborers in developed countries are being marginalized by globalization and by competition with ever more intelligent machines that can replace much of the function of humans. None of this would be a problem, except that we have a huge amount of debt that needs to be repaid with interest, and we need commodity prices to rise high enough to encourage production. If these problems are not fixed, the whole system will collapse, even though there seems to be a surplus of energy products.

The Keynesian Recovery Meme Is About To Get Mugged, Part 2

At the end of the day, the Fed led central bank money printing spree of the past two decades resulted in what is functionally a massive dollar short. Once the Fed stopped expanding its balance sheet when QE officially ended in October 2014, it was only a matter of time before all the “near-dollars” of the world would come under enormous downward pressure in the FX markets. Our Keynesian witch doctors believe that sinking currencies are a wonderful thing, of course. They claim making your country poorer is a good way to stimulate export growth and a virtuous cycle of spending and growth. But there is another thing. It is also a good way to generate capital flight and the ensuing chaos that creates.

The Fed's Painted Itself Into The Most Dangerous Corner In History - Why There Will Soon Be A Riot In The Casino

The chart below crystalizes why the Fed is stranded in a monetary no man’s land. By the time of next week’s meeting the federal funds rate will have been pinned at about 10 bps, or effectively zero, for 84 straight months. After one pretension, delusion, head fake and forecasting error after another, the denizens of the Eccles Building have painted themselves into the most dangerous monetary corner in history. They have left themselves no alternative except to provoke a riot in the casino - the very outcome that has filled them with fear and dread all these years.

Frontrunning: November 10

  • Bonds Rise as China Drags Down Metals, Selloff in Stocks Resumes (BBG)
  • European Stock Rally Runs Out of Steam Amid China Growth Concern (BBG)
  • Obama's immigration action blocked again; Supreme Court only option left (Reuters)
  • Ukraine: Cyberwar’s Hottest Front (WSJ)
  • With $170.4 Million Sale at Auction, Modigliani Work Joins Rarefied Nine-Figure Club (NYT)
  • IEA Sees OPEC Market Share Growth in 2020 as Rivals Stagnate (BBG)

Why Did The Market Surge In October? Here Is The U.S. Treasury's Explanation

We have heard many explanations for the torrid market rally since last September, ranging from the rational - short squeeze - to the generic - "bad news is good news under central planning" to the deranged - "ignore the news, the U.S. economy is actually stronger and China is recovering." And now, courtesy of the U.S. Treasury's Office of Financial Research, here is the official explanation from the government itself.

Oil Market Showdown: Can Russia Outlast The Saudis?

Despite the intense pain they are suffering in the low price Crudedome, both the Russian and Saudi governments profess for public consumption that they are committed to their volume and market share policies. This observer believes the two countries cannot long withstand the pain they have brought upon themselves - and this article only scratches the surface of the negative impact of low crude prices on their economies. They have, in effect, turned no pain no gain into intense pain no gain and set in motion the possibility neither will exit the low price Crudedome under its own power.

Is Russia Plotting To Bring Down OPEC?

Russia can be seen as maneuvering to split OPEC into two blocs, with Russia, although not a member, persuading the “Russian bloc” to isolate Saudi Arabia and the Gulf Arab OPEC members within OPEC. This might persuade the Saudis to seek a compromise with the have nots.