The Global Economy's Wile E. Coyote Moment

Authored by Lakshamn Achuthan and Anirvan Banerji via,

Our prediction last year of a global growth downturn was based on our 20-Country Long Leading Index, which, in 2016, foresaw the synchronized global growth upturn that the consensus only started to recognize around the spring of 2017.

With the synchronized global growth upturn in the rearview mirror, the downturn is no longer a forecast, but is now a fact.

The chart below shows that quarter-over-quarter annualized gross domestic product growth rates in the three largest advanced economies -- the U.S., the euro zone, and Japan -- have turned down. In all three, GDP growth peaked in the second or third quarter of 2017, and fell in the fourth quarter. This is what the start of a synchronized global growth downswing looks like.

Still, the groupthink on the synchronized global growth upturn is so pervasive that nobody seemed to notice that South Korea’s GDP contracted in the fourth quarter of 2017, partly due to the biggest drop in its exports in 33 years. And that news came as the country was in the spotlight as host of the winter Olympics.

Because it’s so export-dependent, South Korea is often a canary in the coal mine of global growth. So, when the Asian nation experiences slower growth -- let alone negative growth -- it’s a yellow flag for the global economy.

The international slowdown is becoming increasingly obvious from the widely followed economic indicators. The most popular U.S. measures seem to present more of a mixed bag. Yet, as we pointed out late last year, the bond market, following the U.S. Short Leading Index, started sniffing out the U.S. slowdown months ago. Specifically, the quality spread -- the difference between the yields on junk bonds and investment-grade corporate bonds -- has been widening for several months.

That happens because the rising default risk for junk bonds during economic slowdowns makes their yields climb faster than those of investment-grade bonds, which are less likely to default. Notably, the yield differential is now close to the widest it’s been since late 2016, when the consensus was much more nervous about the economy.

All of this suggests that the consensus is again playing catch-up on the cyclical outlook, while international central banks, concerned about overheating, are even further behind, and mistaking last year’s synchronized growth upturn for a structural shift toward a “normal” economy. Of course, hawkish shifts in the face of economic slowdowns that policy makers don’t see coming rarely turn out well for the economy.

The current situation is reminiscent of Wile E. Coyote and the Road Runner cartoons. Intent of chasing his nemesis, the coyote almost always misses a sharp turn in the road, running right over a cliff edge.

He realizes too late that he’s in midair, and plunges into the chasm below. That’s the crux of the problem for international economies and markets in danger of being blindsided by the cyclical downturn in global growth.


Caloot Captain Nemo d… Sun, 03/11/2018 - 11:23 Permalink

Global synchro money inflation, equals global synchro fiat boom, (including population boom, food boom, skyscraper boom), equals global synchro debt boom, equals global synchro malinvestment, equals global synchro stall, and global synchro collapse.   Welcome to Austrian Business Cycle Theory.   All those confused Keynsian animal spirits must be smoking ben bernankes pipe.

In reply to by Captain Nemo d…

All Risk No Reward lloll Sun, 03/11/2018 - 15:23 Permalink

The Money Power Monopolist engineered debt-money bubble is supposed to end a debt-money bust...  that's the phase where they bankrupt most of the Muppets and strip them of their assets.

It is also the most entertaining for the dElites because the moron public will begin attacking each other and give the real ROOT CAUSE a near complete pass.

“The new law will create inflation whenever the trusts want inflation. From now on depressions will be scientifically created.”
~Congressman Charles A. Lindbergh, after the passage of the Federal Reserve act 1913.

“The one aim of these financiers is world control by the creation of inextinguishable debt.”
~Henry Ford

“In our time, the curse is monetary illiteracy, just as inability to read plain print was the curse of earlier centuries.”

~Ezra Pound

How To Be a Crook

Poverty - Debt Is Not a Choice

"The greatest shortcoming of the human race is its inability to understand the exponential function."
~Professor Albert Bartlett

The Crash Course - Chapter 3 - Exponential Growth

The Crash Course - Chapter 4 - Compounding Is The Problem

In reply to by lloll

NoWayJose Sun, 03/11/2018 - 11:13 Permalink

Sorry South Korea - I didn’t watch the gay-transgender-liberal Olympics on NBC, and since Trump was elected I have tried with pretty good success to BUY AMERICAN!

InnVestuhrr Sun, 03/11/2018 - 11:26 Permalink

Re-do the cartoon with Trump instead of coyote, cuz Trump will get all the blame, and he deserves it after idiotically tooting the stock market horn relentlessly.

DuneCreature Sun, 03/11/2018 - 11:29 Permalink

So the Zombies will be roaming the country side soon?

Thank goodness I live in the same town as Aunt Nancy.

It's a Sunday 4D - Dune Doom's Day Double feature!


<!>)))..  Guns Are An Aunt Nancy Necessary Good Thing To Have Around  ..(((<!>

Why? .. Why? .. Why? .. I tend to ask that a lot.

Because the bad guys and the government have guns. ... But then I'm being Uncle Unnecessarily redundant.

Yes, the bad guys have guns. ... Welcome to the real world.

Buckle up, because it gets worse if you find that first fact hard to swallow.

I know you good ZH readers out there just hate to see me post because I seem to always have some sort of bad news and fucked up shit to say about some unpleasant, hard to think about topic. Hard to deal with while sitting at the lunch cafe trying to eye ball the pretty girl at the next table or the waiter you just happen to have the hot drawers for. The groans and and snorts my posts elicit aren't very becoming and don't help your sex life at all, I realize.

Well, I'm sorry but someone has to give you depressing thoughts and there's no sense letting the government and its terror peddling propaganda machine (CNN and the DHS) have all the fun mentally dragging you down into the muck.

You see, they (the government) have a hidden agenda and I DON'T!

Well, Ok, I have an agenda but it's not hidden. (But I don't give it away for free either. .. If you want my agenda mail me a 20 dollar bill (cash or silver only) and a self addressed stamped envelope and I'll send you a copy of The Dune Agenda and a free bonus DaCreature Post Decoder ring.)

We All Have An Agenda - Some Are Nefarious - Some Not

Hidden Agendas In Plain Sight

Alright back the Aunt Nancy Necessary and why she stays armed to the teeth. ..... It's not the street bad guys she's worried about here in Hicksville WV. Those she can shame into a new career choice or twelve step program. I've seen her do it, right here in the A&P parking lot. .... She's a Sunday school teacher and she's had lots of experience with rowdy brats who always want something. ... Kids at Sunday school want this and they want that and they can't sit still either. ...Trust me, when Nancy says 'no' you don't ask twice. You sit down and be quiet when she gives you 'That Look' too. ..... Aunt Necessary gets results at ALL ages. ... An amazing woman.

No, Aunt Nancy stays armed to the nines because of the government.

The only reason the government doesn't fear the wrath of Nancy is because they haven't looked her in the eyes yet. .. Except at the DMV and I don't think Aunt Necessary has ever spent more than sixty seconds in line there. .... Those guys and girls at the DMV HAVE seen 'That Look' and that look can cut even an extra long 'Friday lunch break' very short from the DMV lobby all the way down the street to the local dinner. .. I don't know how her gaze penetrates straight through all those masonry walls but maybe Clark Kent was a distant relative of Aunt Nancy.

Yep, if Aunt Nancy ever goes to Washington DC it will be a whole new place when she gets through 'looking the place over'. I'd bet money on it too. .. If she comes back home from DC to get her bigger gun and night vision gear I'm flying to Mexico until the dust settles.

You see, as nice and pleasant as Aunt Nancy Necessary can be she still doesn't solely rely on charm, wisdom and trust, she carries a snub-nosed 357 Magnum in her handbag. .. I once ask her why she carried that and she told me it was because of rude crooked federal agents in reflective sunglasses. .. She can't tell if they are looking her in the eye when they're talking to her and she wants to make sure they are paying attention when she's lecturing them. .. She'll get those sunglasses off of their face one way or another. ... I know how Aunt Nancy is. She's a damn good pistol shot. She had another distant relative named Oakley, I think.

There see, that wasn't too bad a read over lunch, now was it?

Live Hard, Aunt Nancy Demands That The Kids Clean Their Rooms Just Before She Takes Them All To The River Swimming For The Rest Of The Day, ..........She's Terribly Stern And Mean Like That, Die Free

~ DC v8.8


DuneCreature Baron von Bud Sun, 03/11/2018 - 14:38 Permalink

Now Baron, IF I were a herb partaker I probably wouldn't be up so early spewing. ... It's the coffee that does it to me. .... Yes, it does come from Jamaica so maybe there was mix-up at the dock or something.

Stranger things HAVE happened in my adventures though the opium triangle back in the Jurassic era. ... If I recall my new little native cook girl mistook some sort of dark hashish nuggets she found at the local market for chocolate chips and baked a big batch cookies for the whole camp of safari happies. ...

Expedition morale soared until we realized two days later we were hopelessly lost......and out of cookies.

Live Hard, I Need To Try Some Of That Blue Mountain Fresh Grind In The Old Display Hookah In The Den To See If It Makes My Next ZH Post Any MORE Entertaining,.... I Just Hope I Don't Get Lost Going The Extra Mile For My ZH Friends, Die Free

~ DC v8.8

In reply to by Baron von Bud

InnVestuhrr Sun, 03/11/2018 - 11:33 Permalink

This is the real reason why the FED has been trying to push up rates, ie so that they can lower them again to juice the economy again.

I loaded up on bonds during the interest rate upturn and will be harvesting huge capital gains on the next round of QE, NIRP, etc

FlKeysFisherman Sun, 03/11/2018 - 12:33 Permalink

Central Banks will just print up more secret money and spread it to their friends. Remember the 17 trillion the FED printed and gave to their European counterparts without informing the public?

How many other times have they done this?

Last of the Mi… Sun, 03/11/2018 - 13:44 Permalink

The Federal reserve is the Hadron collider of the financial world. Their insulated naked greed like all shielded government or quasi-government agencies like the FISA courts will always lead to expensive experiments that fail with little or no inclination or responsibility to share them openly. Eventually they'll split some financial sub-atomic particle one too many times and kill us all. It's a foregone conclusion with any agency with little or no oversight. With the ability to devalue every dollar you've ever earned in a nanosecond for the sake of covering their mistakes, it could go on for a long long time, but in the end society can only absorb so much debt and taxes before there is a catastrophic failure.

analyser Sun, 03/11/2018 - 18:01 Permalink

Living in Europe, i think the continent is dead......just waiting for italy default , then deutsche bank is gone and some other french is over like ( like the famous article of charles munger in Slate : Basically, it is over )


PhiPhi Sun, 03/11/2018 - 20:11 Permalink

Many of us expected Wile E. Coyote to look down and take the plunge years ago but he had the Acme Hover Boots on and an evil grin on his face.  Now waiting for the hover boots fail in the spectacular way that Acme products always do.