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Still on a crisis footing

Published Tuesday, November 10th, 2015

Is the global economy on its way up or on its way down? This is not a question we should need to ask seven years after a financial collapse and given the unprecedented level of monetary stimulus that has been thrown at the problem. Last week we saw the Bank of England fretting about the global economy and the downside implications for the UK economy. The week before Janet Yellen told the House Finance Committee that the global picture had improved. In its last review the IMF cut its global growth projection once again and yesterday the OECD followed suit.

The bottom line is that after so much gift aid the global economy should have achieved lift off by now. The fact that there is still doubt is alarming. It is easy to forget that QE is not the norm. It is a crisis policy still on the rise in Japan and Europe and still being rolled over in the UK and US. Last week the Bank of England, supervising supposedly one the world’s successful economies, voted 8 to 1 to maintain crisis-level interest rates. Neither the UK nor the US has exited QE or even begun the process.

In its latest review of members’ GDP growth the OECD is forecasting eurozone 2016 growth at 1.8%, the US at 2.5%, France at 1.3% and Germany at 1.8%. The OECD as a whole comes in at 2.2%, down from a 2.4% forecast made in September. These are stagnation rather than growth numbers. The rule of thumb in developed economies is that growth of 2% maintains but does not improve living standards.

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Posted by David Hufton