Bullish economists are so yesterday

From Peter Martin:

1468971283699

Brexit has forced the International Monetary Fund to abandon plans to lift its forecasts for global economic growth, forcing a downgrade with more to come if its “benign” assumptions don’t hold.

“The Brexit vote implies a substantial increase in economic, political and institutional uncertainty, which is projected to have negative macro-economic consequences, especially in advanced European economies,” it said in its economic update released in Washington on Tuesday.

The fund’s chief economist Maury Obstfeld said Brexit had “thrown a spanner in the works”.

The new forecasts downgrade this year’s global growth from 3.2 per cent to 3.1 per cent and next year’s from 3.5 per cent to 3.4 per cent and slices 0.9 points off next year’s forecast for Britain, cutting it from 2.2 per cent to 1.3 per cent.

Yeh, it’s Brexit’s fault. Not.

This global business cycle stinks and the downgrades were coming anyway as China slowed again and the US tightened. Fact is, the only thing keeping the cycle going at all is stimulus of all varieties so why do these folk keep upgrading growth outlooks as if some wonderful private sector virtuous cycle will magically appear? The answer of course is that if they don’t then the headwinds will get even worse via the crashing confidence fairy.

The world is undergoing a secular deleveraging coupled with a demographic accident that has years, probably decades, to run.

Get over it!

David Llewellyn-Smith
Latest posts by David Llewellyn-Smith (see all)

Comments

    • Brexit might cure climate change!

      As consecutive nations exit the shackles of EU groupthought and control, the compulsion to adhere to various climate edicts pronounced from some pampered collective will subside. Interest in the issue will decline at a rate equal to the science’s ability to forecast and the people of free nations and their Governments will again be able to rejoice in sensible energy policies and the rewards of cheap energy derived therefrom.

  1. From memory, the IMF global forecasts have been wrong for 20 plus years, but certainly since 2008.

    You’ve got to smile. Democracy has always been a “spanner in the works”.

  2. “The world is undergoing a secular deleveraging”

    Us consumer has been deleveraging, US corporate a different story. And China, UK, many Euro countries and of course Australia are going quite the opposite way. But the common denominator seems to be these countries have housing bubbles. Rising debt is financing house price appreciation, not consumption. Likewise with corporates, rising debt is paying for stock buybacks and dividends rather than invested in capex for growth.

    • “Rising debt is financing house price appreciation, not consumption. Likewise with corporates, rising debt is paying for stock buybacks and dividends rather than invested in capex for growth.” Ding, ding, we have a winner!