The Global Economy in Turbulent Times

CHAPTER 149 In Search of Growth¹

It’s already six years since the Great Recession. Yet the world economy remains stuck in the doldrums—set on a course that is uncertain and unsustainable. World demand is still weak, as reflected in falling oil and other basic commodity prices as the once-dynamic emerging markets’ slowdown fuels concern for the global outlook. Where spending had picked up, it is often the result of a dangerous new buildup of public and household debt.

Much of the financial reforms are still works in process—they have thus far only preserved the essence of an inherently fragile and unstable system. Too-big-to-fail remains a problem. Megabanks still don’t have adequate equity capital.² The global system remains dysfunctional. The euro-crisis was simply papered over, with an array of underlying problems remaining unresolved. Many have since resurfaced. Japan may also be on the edge of a downturn. Emerging nations—resilient soon after 2008—now face slower growth and unsettling debt problems of their own. The economies of Russia and Brazil are stagnant at best. Even China is vulnerable. Much of the global mess is of policy makers’ own making: in particular, the premature rush to fiscal austerity and the “kick-the-can-down-the-road” attitude in handling the series of euro crises. The pathway for this lopsided global economy to sustainable growth remains unclear.

October 2014 Assessment

Forecast updates were set for late September/early October 2014. On September ...