Wednesday, October 7, 2015

IMF Should Be Warning of Economic Contraction Rather Than Stagnation

Industrial production in Germany and Spain fall sharply on a monthly basis as the IMF warns of economic stagnation to G7 economies. While the business cycle transition from prosperity to liquidation is clearly underway, few recognize it, especially in the United States. As long as the public reads headlines that characterized the US economy as on track despite slowing global growth, they believe the US will carry the world through the economic soft patch. They will vent their anger towards leaders when this expectation is smashed by reality of the invisible hand.

Germany's unexpected and sharp contraction in industrial production confirms China's economic weakness that many eagerly dismiss as merely a hiccup with a high growth rate trend. This hiccup is clearly slowing the German and US economy. The all too common human behavior of whistling past the graveyard has blinding the majority to the onset of these trends.

Headline: IMF warns of stagnation threat to G7 economies

The International Monetary Fund is warning that the weak recovery in the west risks turning into near stagnation after cutting its global economic growth forecast for the fourth successive year.

In its half-yearly update on the health of the world economy, the Washington-based fund predicted expansion of 3.1% in 2015, 0.2 points lower than it was expecting three months ago and the weakest performance since the trough of the downturn in 2009.



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