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Global Recession Arrives: Growth Will Fall Apart

It’s not often I agree with mainstream economic reports but this is one of those times, at least in terms of current assessment, but not what to do about the situation.
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Global Recession Returns

According to a Bloomberg report Here Comes a Global Recession.

“In our view, global growth is at a highly precarious point, after 2-3 years of relative calm,” the team of economists led by Willem Buiter said in their note, which is likely to exacerbate concerns about the world’s ability to withstand a pause in China’s stunning economic growth.

According to the article, “To avoid a recession and to avoid a greater slowdown in potential output growth than is warranted because of worsening demographics, the world needs a global version of what we would call ‘Abenomics plus,'” which in Citi’s terms would be easy monetary policy coupled with fiscal stimulus and structural reform that would include “material deleveraging.”

Keynesian Absurdity

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The idea that a country can spend its way to prosperity has been disproved time and time again. The most recent example is Japan where decades of fiscal stimulus building bridges to nowhere did nothing to stimulate the economy.

As a direct result of Keynesian and Monetarist silliness, Japan has the highest debt-to-GDP ratio in the developed world.

I challenge anyone to answer the question “What the hell happens as soon as stimulus is cut off?”

As as followup question I ask “Is Keynesian stimulus any different than heroin addiction where increasing amounts are needed to reach the same high?”

Mike “Mish” Shedlock

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