A Financial Times report, "World Economy Still on Life Support," pours more cold water on the notion that conditions are returning to "normal."
The world economy “remains on life support” from central banks and has deteriorated since last autumn, the latest Brookings Institution-Financial Times tracking index shows, despite some recent signs of stabilisation.
Economic weakness extends across the Group of 20 leading economies, according to the TIGER (Tracking Indices for the Global Economic Recovery) index, but advanced economies have deteriorated more than developing countries.
Although financial markets recovered significantly in the first quarter of the year as investors welcomed the European Central Bank’s massive injection of liquidity into the eurozone’s banks, the outlook for growth and jobs has become more precarious almost everywhere except in the US.
Professor Eswar Prasad of the Brookings Institution said: “The global economic recovery is still sputtering due to a lack of robust demand, policy tools that are stretched to their limits and unable to muster much traction, and enormous risks posed by weak financial systems and political uncertainty.”
No doubt highly-paid pseudo-analysts and the usual contingent of permabulls will zero in on the claim, noted above and later in the article, that the U.S. is faring better in relative terms than the rest of the world.
But they'll probably forget to mention two things: 1) our economy also remains on substantial life support from the Fed (if not, why have they kept interest rates near zero and allowed their holdings of securities to balloon to nearly $3 trillion?); and, 2) a great many of the export markets that helped keep U.S. businesses afloat (in the face of weak domestic demand) are likely to be hit by recession in Europe, slowing growth in China, Europe, and weakening demand everywhere else.
I know, I know. I just need to be a bit more positive -- right?