NO GLOBAL RECOVERY YET / THE TELEGRAPH

No global recovery yet

By Ambrose Evans-Pritchard

Last updated: October 25th, 2013

 

The world economy is still becalmed. World trade volume fell 0.8pc in August. The next cycle of growth has not yet reached "escape velocity".

We continue to be in a contained global depression, punctuated by bursts of weak growth that peter out. It is not a disaster. It is not healthy either.

This from the Dutch CPB world trade monitor (PDF):

 

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This from Capital Economics on the faltering expansion in global manufacturing:
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They say the latest flash drop in global PMIs is a "warning sign".

The next month will be crucial.
If you have a job and own equities and property you may feel great.

Money printing and QE à l'outrance have fuelled a delicious asset boom. You may not even be aware of the problem. (A lot of people were able to close their eyes in the 1930s. Indeed, it was great time for some.)

But I have a jaundiced view bordering on contempt for stock markets and the uber-rich – and if that is your interest and perspective, don't read me.

I follow the real economy. What I see is a pervasive malaise. Real output is still below its 2007-2008 peak in large parts of the world. Long-term unemployment is endemic in the OECD bloc. The system is firing on two cylinders.

The reason for this is the rising global savings rate, now a record 25pc. This drains demand, but creates excess capital that drives up the price of wealth assets. The GINI coefficient measuring inequality is near extreme highs in most of the world. Karl Marx has never been so relevant.

Now why is the savings rate so high, and it is self-correcting over time? Here we get to the nub of the matter. For a Marxist column later.