Market turbulence fuels warnings on health of global economy
By Nick Beams
30 March 2017
Both the International Monetary Fund (IMF) and
the Organisation for Economic Cooperation and Development (OECD) have pointed
to a modest uptick in the global economy over the coming year. But they have
warned that growth remains below that attained in previous recoveries and could
be rapidly disrupted.
They have two major concerns: the impact of the
Trump agenda, based on economic nationalism, on the global trading system and
the potential for financial volatility because of over-valuations of the stock
market and divergent interest rate policies by the world’s major central banks.
In its Interim Economic Outlook report, issued
earlier this month, the OECD said global growth could pick up modestly in 2018
to around 3.6 percent from a projected level of 3.3 percent this year.
But the OECD acknowledged that this slight
upturn will make little difference to the living conditions of broad sections
of the population.
Commenting on the report, OECD Secretary-General
Angel Gurria said: “Growth is still too weak and its benefits too narrowly
focused to make any real difference to those who have been hard hit by the
crisis and who are left behind.”
The report noted that the “strength of financial
market valuations appears disconnected to the outlook for the real economy,
where the growth of consumption and investment remains subdued.”
The US stock market has surged since the
election of Trump, largely on the back of hopes for major cuts in corporate and
personal tax rates and the prospect of a boost to companies, through generous
tax and write-off concessions, engaged in infrastructure projects.
The US stock market shuddered early this week,
experiencing significant falls following the failure of the Trump
administration to get its repeal of Obama’s health care legislation passed by
Congress. This was taken as a signal that the administration may have
difficulties with the passage of major tax cuts. While it has recovered
somewhat in the past few days, the underlying issue of what many regard as
over-valuation remains.
The OECD also pointed to the risk of global
financial market tensions as interest rates diverge across major markets. In
the US the Federal Reserve is engaged in rate tightening, with a minimum of two
further increases in its base rate this year, following an increase of 0.25
percentage points earlier this month. Across the Atlantic, the European Central
Bank (ECB) is maintaining its program of quantitative easing keeping interest
rates at ultra-low and in some cases even at negative levels.
The prospect of a growing divergence has
increased. Yesterday, San Francisco Federal Reserve chief John Williams, an
alternate member of the policy setting Federal Open Market Committee, warned
that investors should not “rule out” the prospect of more than a total of three
rises this year. His remarks reflect the view that the Fed should move rapidly
if there are any signs that tightening in the labour market provokes a push for
higher wages.
At the same time, the ECB has sought to dampen
speculation that a slight shift in the wording of its most recent statement,
when it removed a phrase saying it was prepared to act “with available
instruments,” might be the start of financial tightening. It said the decision
had been over-interpreted amid calls that, with an increase in European growth,
the ECB should revert to a more normal policy.
In addition to possible financial market
turbulence the IMF and the OECD are fearful of the consequences of the Trump
agenda of “America First” economic nationalism.
In a blog post issued on the eve of the meeting
of G20 finance ministers held earlier this month, IMF managing director
Christine Lagarde said that while the global economy was moving to a “better
position” it would be a mistake to assume it would automatically return to
“rude health.”
“In fact, there has rarely been a period when
policy choices have mattered more for what comes next, especially since there
are considerable risks to the outlook,” she wrote.
While not directly naming Trump, Lagarde
emphasised that “we should avoid self-inflicted injuries” and this required
“steering clear of policies that would seriously undermine trade, migration,
capital flows and the sharing of technologies across borders.”
But the G20 meeting, at the insistence of US
Treasury Secretary Steven Mnuchin, removed a clause from its communiqué
committing to “resist” protection.
The OECD is also concerned about the impact of
the Trump agenda on the global economy, noting that “uncertainties in many
countries about future policy actions and the direction of politics are high.”
It warned that a “roll-back of existing trade
openness would be costly with a significant share of jobs in many countries
linked to participation in global value chains.”
Such concerns were underscored by remarks
delivered on Tuesday by Australian Foreign Minister Julie Bishop to a meeting
of Australian ambassadors considering a “reset” of Australian foreign policy.
In a major speech delivered in Singapore this
month Bishop had noted that the output of goods was increasing faster than the
capacity of markets to absorb them. Addressing the country’s ambassadors, she
said that the US president was “driving an economic nationalist agenda” which
was reversing a trend that had contributed to economic growth.
In the post-war period, economic integration had
been “historically supported by the United States” and deepened by the opening
up of China but “in the last year a counter trend has gathered steam.”
The consequences of this “counter trend” were
the subject of remarks this week by IMF deputy managing director David Lipton
to government representatives and parliamentarians in Germany.
According to a report in Der
Spiegel yesterday, Lipton said that the greatest risk to the global
economy was not rising prices for commodities or financial and currency crises
but what he called a “geopolitical recession.” This was a reference to Brexit,
withdrawal of Britain from the European Union, which formally began this week,
and the increasingly protectionist policies emerging from the US.
THE
CONSPIRACY OF TRAITORS:
THE
CLINTON-OBAMA PLAN TO DESTROY DEMOCRACY IN AMERICA FOR GLOBALIST BILLIONAIRES
INCLUDING THEIR PAYMASTER GEORGE SOROS!
"When it comes to Islamic
terror or shariah imposition, Obama and other globalists preach a type of
defenselessness and impotence: something we have to abide. For many liberals,
virtue signaling, the epitome of vanity,
is more important than saving lives, even the lives of their countrymen."
Many making the accusations of xenophobia live in rarified societies and neighborhoods or in high-end and fashionable apartment buildings with security guards and doormen, immune from the consequences of Open Borders, loss of manual jobs, overseas nation-building, and the harmful effects arising from perfunctory background checks and superficial vetting.
OBAMA’S GLOBALIST
PARTY
AFTER THE DEATH OF
THE DEMOCRAT PARTY, ROTTED AWAY WITH CORRUPTION, BARACK OBAMA AND GEORGE SOROS
HAVE FOUND A NEW GLOBALIST-NAFTA PARTY TO SERVE THE SUPER RICH!
AFTER DESTROYING
THE DEMOCRAT PARTY and the AMERICAN MIDDLE CLASS, OBAMA NOW VOWS TO BUILD A
PRO-MUSLIM DICTATORSHIP FUNDED BY GEORGE SOROS AND OBAMA’S CRONY BANKSTERS.
Barack Obama and his henchmen would not have been
emboldened in their ostensible machinations to undermine an election and then a
presidency if it were not for the fecklessness of the Republican Party and the
blind eye as well as the tacit support of the mainstream media.
In what’s
shaping up to be a highly unusual post-presidency, Obama isn’t just staying
behind in Washington. He’s working behind the scenes to set up what will
effectively be a shadow government to not only protect his threatened legacy,
but to sabotage the incoming administration and its popular “America First”
agenda.
THE OBAMA CONSPIRACY TO DESTROY AMERICA:
DRUGS,
POVERTY and OPEN BORDERS
SOARING POVERTY AND DRUG
ADDICTION UNDER OBAMA
"These figures present a scathing indictment
of the social order that prevails in America, the world’s wealthiest country,
whose government proclaims itself to be the globe’s leading democracy. They are
just one manifestation of the human toll taken by the vast and all-pervasive
inequality and mass poverty
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