The IMF has just published a new blog by Maurice Obstfeld, who is the Economic Counsellor and Director of Research at the International Monetary Fund. He says:
As the year 2018 begins, the world economy is gathering speed. The new World Economic Outlook Update revises our forecast for the world economy's growth in both 2018 and 2019 to 3.9 percent. For both years, that is 0.2 percentage points higher than last October's forecast, and 0.2 percentage points higher than our current estimate of last year's global growth.
This is good news. But political leaders and policymakers must stay mindful that the present economic momentum reflects a confluence of factors that is unlikely to last for long. The global financial crisis may seem firmly behind us, but without prompt action to address structural growth impediments, enhance the inclusiveness of growth, and build policy buffers and resilience, the next downturn will come sooner and be harder to fight.
Every government should be asking itself three questions today. First, how can we raise economic efficiency and output levels over the longer term? Second, how can we support resilience and inclusiveness while reducing the likelihood that the current upswing ends in an abrupt slowdown or even a new crisis? Third, how can we be sure to have the policy tools we will need to counter the next downturn?
The blog is well worth reading for the answers to these questions that it suggests, even if I do not agree with it all. This, however, is indisputable, I think:
Our view is that the current upturn, however welcome, is unlikely to become a “new normal” and faces medium-term downside hazards that likely will grow over time. We see several reasons–to some extent reflected in our medium-term growth projections–to doubt the durability of the current momentum
We're not heading a for a new normal.
A crash is far more likely. And the odd thing is that the current upturn, built as it is on sand, is empowering more people to say so, precisely because it is so obviously the lull before the storm.
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All bubbles eventually burst but I am totally puzzled as to how long the Premier League football bubble can continue to inflate. Is this the one bubble that the poor will happily continue to pour money into even when they can no longer afford to eat? This is a serious question, by the way.
It will collapse when the n umber of on line television services begins to collapse
So not yet, but maybe soon, I’d suggest
Rod White says:
January 22 2018 at 2:56 pm
“All bubbles eventually burst but I am totally puzzled as to how long the Premier League football bubble can continue to inflate.”
Well, Rod I share your mystification about the football bubble. But then I stopped being even remotely a ‘supporter’ a long time ago. I was always more interested in cricket and even that interest waned a long time ago and I couldn’t name the current team.
I think it has to do with success by association and a (misguided in my opinion) sense of belonging to a ‘tribe’ with a collective interest. ‘We’ need our heroes apparently and football stars are rather like any other entertainment celebrities.
The ‘need’ for celebrities is so great that on the odd occasions I see a celebrity panel on quiz programmes on telly I’m now surprised if I even know who these ‘celebrity’ contestants are.
Millions of people know more about the lives and loves, the trials and tribulations of the characters in Coronation Street, Emmerdale and Albert Square than they do about their real-world neighbours.
I think that’s a bit weird.
Crash or not – I remain to be convinced that it will change anything in the short or medium term.
I mean look at America – where various Government departments have not got budget. And here in the UK we face BREXIT with a Government who really do not know how to go about it (just as bad as above – no budget and no intellectual capacity to deal with it).
The worry for me remains that all the powerbase that enables this sort of stuff to happen will do is just carry on re-inventing themselves and throwing in distracting non issues – for example about how we would not be able to fight a war with Russia (never a good idea anyway looking at history) to keep us occupied.
The other worry is that the crash will just lead to more pleading from the markets to deregulate more or open up the public sector to more ‘investment’ in order to make up their loses.
If there is no government they have no one to plead to…
From an emotional perspective there is a huge dilemma with this evolving situation. On the one hand we ‘progressives’ want to see the demise of neo-liberalism asap in order for it to be replaced with a more egalitarian, democratic and economically efficient governmental model. On the other hand we know that if/when it crashes, as predicted by you and other well-informed cognoscenti, those most likely to suffer the consequences will be those least equipped to do so, as is always the case.
Ideally a new ship would already be afloat and functioning as the old one sinks. But that’s rarely, if ever, the case. Hence, it feels as if we’re at an historically crucial moment when a small, albeit growing, number of ‘revolutionaries’ (visionaries) are articulating the need for change but the majority (at least 51%) are relatively comfortable with the status quo and convinced by its rhetoric. Addicted to the material crumbs thrown to them, psychologically they cling to the message that things are getting better, and that to jump ship would be a reckless gamble. Safer to stick with what and who you know, i.e. the Hegelian strategy of ‘Problem — Reaction — Solution’.
Therefore, in the current socio-political climate, do you think it possible to achieve the requisite radical ‘régime change’ without real downward, negative pressure on society? And how destabilising would that be? Maybe the only way forward is either via the ‘left-field’ (action in an unexpected region) or simple revolution via street protests.
Am I being overly pessimistic?
Now on the blog John
THIRD, HOW CAN WE BE SURE TO HAVE THE POLICY TOOLS WE WILL NEED TO COUNTER THE NEXT DOWNTURN?
the tools are there, just bloody use them
Neil,
That’s IMF code for saying that we can no longer resort to slashing interest rates in the face of a crisis like we used to because the interest rates are already just about zero.
The impression I get is all they have to do is plead to the Cabinet or the desperate Tory Leader. Not the Government we know it.
What gets me is the supposed accuracy of figures like these. A 0.2% growth since October is just 1/500. Is that reliably detectable?
Give or take 0.5%
Richard Murphy says:
January 22 2018 at 11:07 pm
“Give or take 0.5%”
Yes, but is it meaningful?
Precision in numbers is not much help really without an understanding of what they mean.
I was following a rather fatuous exchange the other day about the (precise) number of people of voted for or against in the Brexit referendum. Since nobody (really nobody) knows what it was those people were voting for the figures have little validity or utility in my estimation.
Something similar applies to GDP growth figures. Just because one (or more) sector of the economy is operating ‘profitably’ (like the finance sector for example) doesn’t tell one much about the real state of affairs.
““Give or take 0.5%”
Andy,
I thought that was a really amusing and meaningful answer with respect to Frank’s question. I would give it 2nd thoughts if I were you.
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