Mr. Global Economy - Health Check
Comment of the Day

October 11 2012

Commentary by David Fuller

Mr. Global Economy - Health Check

My thanks to a subscriber for this erudite and witty assessment by Satyajit Das. Here is the opening:
As requested, I have undertaken an extensive examination of Mr. Global Economy, both physical and psychological.

Patient History…

The patient's history includes a seizure in 2007/ 2008 -financial losses, banking problems, a major recession etc. Liberal injections of tax payer cash avoided catastrophic multiple organ failure assisting a modest recovery.

Governments ran large budget deficits in the period after the crisis. Interest rates around the world were reduced to historic lows, zero in many developed countries.

With interest rates constrained at zero, central banks have adopted "innovative" treatments, referred to as quantitative easing; the fashionable appellation of a more old fashioned procedure - printing money. Balance sheets of major central banks have increased from around US$6 trillion to US$18 trillion, an unprecedented 30% of global gross domestic product ("GDP").

As evident from the anticipation of and reaction to decisions by the US and European central bank to provide further support, the global economy is now addicted to monetary heroin. Increasing doses are necessary for the patient to function at all.

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