Thursday, February 25, 2016

David Keohane — Citi: Increasing chance that winter is indeed coming

The growing threat to the global outlook rests on poor fundamentals, which include the pre-existing fragilities related to the structural and cyclical slowdowns in China and its unsustainable currency regime, broken EM growth models, excessive leverage across many countries and sectors, and rising regional risks (Brexit) and geopolitical risks (including in Russia, Turkey and Syria, the South China Sea, and North Korea).
These fundamental concerns are aggravated by a crisis of confidence that is in part fuelled by a growing worry that, should conditions deteriorate, they may not elicit an effective policy response.…
The Financial Times — FT Alphaville
Citi: Increasing chance that winter is indeed coming
David Keohane
ht Brad DeLong


Dan Lynch said...

Warren Mosler has been pointing out for some time that the US economy is decelerating.

It hasn't fallen off a cliff yet, and maybe it won't. Steve Keen thinks we're looking at a "lost decade" or two.

With private debt levels still high, and with governments all over the world drinking neoliberal kool-aid, where is growth going to come from?

Matt Franko said...

Plenty of metaphor here from the Citi guy...

Dan there has been $700B annual non-productive rent removed from the US economy at least dont know about the ROW a lot out there WAS the rent...

So maybe we dont get 'growth' ex post as measured in NIA terms but imo production is going to increase in the places where the rent has been removed as long as leading numismatic flows remain steady to up like we are experiencing here in the US currently ... this increase in US productive contribution will have positive effects in US domestic employment and US corporate profits of some magnitude...

Michael Norman said...


Why do you keep referencing Mosler, who has been wrong for years? He's approaching Schiff-levels of wrong forecasts. If the economy goes into recession five years from now from something totally unrelated are you going to say he "called" it? Please, stop worshiping him already. The guy's totally wrong.

Dan Lynch said...

@Michael I do not worship Mosler -- just ask Mosler -- but I do agree with Mosler about the importance of aggregate demand and sectoral balances.

It is a statement of fact that the U.S. economy is decelerating and much of the industrialized world is already in recession.

Whether the U.S. is heading into a recession as Mosler seems to believe, or whether we merely face Japanese-style stagnation as Keen believes, I don't know. Very few of us can predict the future.

You have criticized Mosler's assumptions without articulating an alternative model.

@Matt if production increases who is going to purchase the increased production? Because if no one purchases it then inventory builds up. Eventually businesses will have to start laying off and cutting back on investment.

Q4 GDP revised on higher inventories