Writing in today’s FT (paywall), Larry Summers reports on last week’s IMF summit in Washington. It’s a sombre column.
“The pervasive concern”, he writes,
was that traditional ideas and leaders were losing their grip and the global economy was entering into unexplored and dangerous territory.
IMF growth forecasts issued before the meeting were “again revised downwards”. (Note the ‘again’.).
“While recession does not impending in any large region”, he continues,
growth is expected at rates dangerously close to stall speed. Worse is the realisation that the central banks have little fuel left in their tanks.
Containing [recessions] generally requires 5 percentage points of rate cutting. Nowhere in the industrial world do central banks have anything like this kind of room even making allowance for the effects of unconventional policies like quantitative easing. Market expectations suggest that it is unlikely they will gain room for years to come.
The problem is that:
After seven years of economic over-optimism there is a growing awareness that challenges are not so much a legacy of the financial crisis as of deep structural changes in the global economy.
Which of course is one of the factors which led to the Brexit vote and the rise of Trump. Interesting therefore to hear a leader of the global elite coming round to the same conclusion.
Better late than never, I suppose.