Present Value Blog

Share Blog Postings:

Looks Talks Walks Like Global Limbo

Published by on

Christine Lagarde, Managing Director of the International Monetary Fund, has declared the current state of the global economy as the New Mediocre. Others, harking back to the profound pessimism after the end of World War II, fear that the global economy could slip into depression, or at least into prolonged stagnation. Indeed, there has been a sharp deceleration in the growth of global trade, with the drop in commodity prices posing problems for resource-based economies.

"For 2015 the world continued the  risks of further sliding into what I called a Great Malaise." Joseph E. Stiglitz

Optimists say 2016 will be better than 2015. That may turn out to be true, but only imperceptibly so. Unless we address the problem of insufficient global aggregate demand, the Great Malaise of the New Mediocre will continue.

It is true that China’s growth rate has slowed substantially, and there are plenty of reasons to believe that the deceleration is not temporary. 

Three fears now seem to be influencing market psychology: China, oil and the fear of a US or global recession.