Last week, this weblog reported the persevering with excellent news that global financial exercise has launched into the strongest and most synchronised interval of enlargement since 2010. Global progress is operating nicely above the long run development, particularly within the superior economies.
Is this simply one other false daybreak? This week, I’ll look at the potential causes of the development and progress and talk about its sustainability. On the constructive aspect, there are indicators that a few of the headwinds which have suppressed global demand since 2010 might be abating, implying that actual rates of interest might now be under the equilibrium price, with secular stagnation starting to fade considerably.
On the destructive aspect, there are few indicators of restoration on the availability aspect, and a few indications of extra danger taking in asset markets. Some economists are subsequently suggesting that the global financial system might be “bipolar”, with rising dangers that the present interval of agency progress in exercise could be punctured by a sudden surge in danger aversion in asset markets.