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The global economic growth actually is in debt growth in subsidizing and bailing
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The Myth of Synchronized Growth and the Era of Secular Stagnation
Adapted from an interview with Real Vision.
We have been hearing from international bodies, from central banks that we were living in a synchronized growth territory. That we were seeing developed markets grow faster than what was typical while emerging markets were also growing in tandem. And that the economies were much healthier, that everything was much better, and that 2018 was a year in which we would see the confirmation of that synchronized growth trend and the reflation trade.
Well, it wasn’t the case. The case actually was that what we were being told was synchronized growth was actually synchronized debt growth. And that massive increase in debt that led to the highest level relative to GDP in history last year was creating massive problems, internal problems, in many economies that were getting used to cheap and easy money.
A very small, minuscule and completely moderate reduction in the balance sheet of the Federal Reserve of less than $260 billion, has created this reckoning. This reckoning that the reality that we were seeing globally was not a reality of higher growth, better productivity, and more positive surprises. But the reality that it was just debt led bump up of a much clearer trend of secular stagnation.
So what happens is that we will likely see solutions that, instead of cleaning the system, will be solutions that will basically lead to more secular stagnation. Why? Because what most central banks, what most governments will be doing, will be to try to avoid the pain. Avoid the pain of improving the economy.
What will they do then? What they will likely do is to perpetuate the problem via more demand-side policies. Therefore, this constant bailout of the less productive parts of the economies is actually more likely to be the “solution”.
What this leaves is higher debt because the misallocation of capital is actually incentivized, and malinvestment is actually promoted. Central banks being way behind the curve and at the same time, potential growth is being eroded.
We get out of crises in each of those countries with less growth than before and with higher debt. It’s a very, very difficult combination because if you think about what would be an ideal solution, it would be for governments to do less of what they are used to do. And governments never see the problem as a problem of excess supply. And even less, a problem of excess spending.
Governments always see the problems of economies as a problem of demand, making a wrong diagnosis. Then they incentivize malinvestment and excess debt expecting that the collateral damage of higher debt will end up in a little bit more growth.
We will continue to have governments that see that the critical part is not incentivizing saving and incentivizing adequate investment, but credit growth at any cost.
And so if we put it all together, the reason why in 2018 we are seeing markets react aggressively to global imbalances is not that this is news to anybody. It’s because, in 2017 and 2016, the consensus was building to believe that magic actually existed. And that synchronized growth, all this beautiful central planning magic, was actually going to happen.
But the reality is that there is a longer-term trend, which is that rising debt, more demand-side policies, and constantly subsidizing and bailing out the lower productivity sectors in order to avoid pain, generates lower growth, low productivity, and obviously, higher debt. Secular stagnation.
Daniel Lacalle has a PhD in Economics and is author of Escape from the Central Bank Trap, Life In The Financial Markets and The Energy World Is Flat.
noah • 2 hours ago "Governments always see the problems of economies as a problem of demand..."
... because they are blind to the economic reality behind Say's Law: the root of any ability to "demand" is the net income that results from producing and selling "supply."
So any time you have "a problem of demand" what you really face is a problem in supplying what the market most desires, at a price the market is willing to pay. If the market does not desire the labor, goods or services that I offer, then AS A RESULT I have a problem demanding any labor, goods or services that the market might offer.
The problem of my inability to demand is rooted in my inability to supply.
Getting another credit card to fund my desire to consume is not truly increasing my purchasing power, but rather it is simply pushing my need to generate purchasing power off into the future. Increasing debt allows for an increase in current consumption, but only at the expense of an increase in future obligations to earn and (re)pay.
Nathan Saunders • 10 hours ago Another great article by Daniel. The Central Bankers (CB) are stuck in their demand-sided paradigms, an old dog cannot learn a new trick. And yet the CB cannot name one thing you can spend money on that hasn't been produced already. It is smart supply which grows a sustainable economy - not stimulating demand. Yes, we will likely have stagnation for a long time- if the floor doesn't drop out before hand.
全球经济同步增长不过是债务增长？听这位经济学者怎么说
“为避免从根本上改善经济可能带来的阵痛，大部分央行和政府可能会采取需求端政策，不断地对经济中生产率低的部门进行救助。通过鼓励资本错配和不当投资，这种措施会导致债务上升，侵蚀经济增长潜力。”
2018年9月14日，阿根廷布宜诺斯艾利斯街头。图片来源：视觉中国
包括经济合作与发展组织（OECD，简称经合组织）在内的国际经济组织曾表示，全球主要经济体在2017年时隔10年首次实现经济同步增长。但一位经济学家给出了另一种解读。
《逃离央行陷阱》（Escape from the Central Bank Trap）一书作者、经济学博士拉卡耶（Daniel Lacalle）13日在米塞斯研究院网站（Mises Institute）撰文指出，所谓的全球经济同步增长只不过是全球债务的同步增长。出现这一结果的原因是，每当经济出现危机时，政策制定者倾向于从需求端刺激经济，而这种“短视”的做法将导致全球经济进入长期停滞期。
拉卡耶在文中称，我们长期以来不断从国际组织和全球央行那里听到：我们生活在一个经济同步增长的时期，我们正在看到发达市场的增长比通常情况更加快速，新兴市场也同步增长，经济更加健康，所有都变得更好，2018年，我们将会看到同步增长趋势，以及通货再膨胀交易。不过，实际情况并非如此。
实际情况是，这样的同步增长实际上是债务的同步增长。“我们在全球看到的，不是增长提速、生产率提高的现实，而只是债务累积引发的长期停滞的趋势，这一趋势目前正在变得愈加清晰。”文章称。
拉卡耶进一步指出，债务大幅增加导致债务对国内生产总值（GDP）比重达到历史最高水平，这给许多习惯了廉价和宽松信贷的国家带来了大量问题，尤其是内部问题。
据拉卡耶预测，大部分央行和政府未来将继续不惜一切代价促进信贷增长，这种政策可能会加重长期增长停滞——这是因为，同以往一样，为避免从根本上改善经济可能带来的阵痛，大部分央行和政府可能会采取需求端政策，不断对经济中生产率低的部门进行救助。通过鼓励资本错配和不当投资，这种措施会导致债务上升，侵蚀经济增长潜力。
拉卡耶指出，每次政策制定者动用需求端政策使得经济摆脱危机后，经济增长与之前相比都更加缓慢，债务水平也会变得更高。
“政府们总是把经济出现的问题当成需求问题，做出错误的诊断。然后，他们会鼓励不当投资和过度信贷，期待更高的债务会以更多一点的增长结束……但现实是，为了避免痛苦，会出现较长期的趋势，即债务增长、更多需求端措施，以及对低生产率部门进行不断的补贴和救助，从而导致增长放缓、生产率低下，以及债务升高，也就是长期停滞。”
