Recent media and analysts coverage of the global economy, especially that of the advanced economies has focused on the rising degree of uncertainty surrounding growth prospects for 2016 and 2017. Much of the analysis is shlock, tending to repeat like a metronome the cliches of risk of ’monetary policy errors’ (aka: central banks, read the Fed, raising rates to fast and too high), or ‘emerging markets rot’ (aka: slowing growth in China), or ‘energy sector drag’ (aka: too little new investment into oil).
However, the real four horsemen of the economic apocalypse are simply too big of the themes for the media to grasp. And, unlike ‘would be’ uncertainties that are yet to materialise, these four horsemen have arrived and are loudly banging on the castle of advanced economies gates.
The four horsemen of growth apocalypse are:
- Supply side secular stagnation (technology-driven productivity growth and total factor productivity growth flattening out);
- Demand side secular stagnation (demographically driven slump in global demand for ‘stuff’) (note I covered both extensively, but here is a post summing the two: http://trueeconomics.blogspot.com/2015/10/41015-secular-stagnation-and-promise-of.html)
- Debt overhang (the legacy of boom, bust and post-bust adjustments, again covered extensively on this blog)
- Financial fragility (see http://trueeconomics.blogspot.com/2016/01/19116-after-crisis-is-there-light-at.html)
In this world, sub-zero interest rates don’t work, fiscal policies don’t work and neither supply, nor demand-side economics hold any serious answers. Evidence? Central bankers are now fully impotent to drive growth, despite having swallowed all monetary viagra they can handle. Meanwhile, Government are staring at debt piles so big and bond markets so touchy, any serious upward revision in yields can spell disaster for some of the largest economies in the world. More evidence? See this:
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