In a recent New York Times article, Neil Irwin examines the state of the world economy and the rut it has found its way into. Throughout 2018, it appeared as if the global economy was finally recovered from the financial crisis that occurred in 2008 and making positive gains. However, indicators from around the world have made it clear that the issues that have started to plague the economy are not going anywhere anytime soon. It is becoming apparent that low growth and low inflation are becoming the new economic norm around the world. The contributing factors to this are things such as an aging workforce, a large international savings glut, and shortage of demand. Irwin goes on to explain how in the future, low growth means the economy can easier slip into a recession, and low-interest rates will make it harder for the financial sector to pull the economy out of it.
In fact, things have slowed down so much that following the Federal Reserves most recent rise in interest rates, former Chair Janet Yellen said its very possible that the end of the cycle could be near, and that could be the last raise in interest rates we see before we shift towards another recession. The article goes on to explain that the current world economy could not handle a negative shock, as there is not enough growth providing a cushion to absorb one. Irwin also notes that the United States is in a particularly vulnerable spot, given the trade wars and the government shutdown that has recently occurred.
Moving forward, I am concerned about an oncoming downturn in the economy given its stagnant pattern. I am interested to see how the United States responds to the current state of the economy and how other large economies such as China make decisions moving forward as the decade-long pattern of low growth is here to stay.
https://www.nytimes.com/2019/01/27/upshot/world-economy-low-growth-low-interest-deflation.html
2 comments:
Interesting article and the reasons for slow growth are certainly troubling. They also do not appear to be issues that are easily fixed. Do you know of any ways that the largest economies of the world could come together to try and create higher growth rates among them. Possibly governments could work to make their business climate more competitive or they could rely on increased government spending to temporarily provide a jolt to the world economy and growth. In many articles such as this I have seen many questions going forward, with few solutions being offered. Not a good combination!
Slow growth seems to be a problem. Do you think Artificial Intelligence might be able to increase growth? AI should allow for a lot of automation and might be able to do things a lot faster than humans. However, it is debatable wether the advantages outweigh the costs behind the development of AI systems. Besides AI, Big Data could also play a huge role in increasing growth.
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