Christine Lagarde, Managing Director of the International Monetary Fund

Přerody roku 2016

Jan 5, 2016 Christine Lagarde

WASHINGTON, DC – Listopadové teroristické útoky v Paříži a příliv uprchlíků do Evropy, to jsou jen poslední příznaky ostrého politického a ekonomického napětí v severní Africe a na Blízkém východě. A tyto události nejsou v žádném případě izolované. Konflikty zuří i jinde a na světě žije téměř 60 milionů vysídlenců.

Rok 2015 se navíc může stát nejteplejším rokem v dějinách měření, během něhož mimořádně silný klimatický jev El Niño způsobil po celém Pacifiku meteorologické pohromy. A normalizace úrokových sazeb ve Spojených státech a zpomalení v Číně přispívá k nejistotě a vyšší ekonomické volatilitě po celém světě. Došlo k prudkému zpomalení růstu světového obchodu a pokles cen komodit způsobuje problémy ekonomikám založeným na zdrojích.

Jedním z důvodů, proč globální ekonomika tak klopýtá, je skutečnost, že ani sedm let po pádu Lehman Brothers není zajištěna finanční stabilita. Slabiny finančního sektoru v mnoha zemích přetrvávají – a na rozvíjejících se trzích rostou finanční rizika.

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0 Comments on this paragraph, 8 Comments on this article

John Brian Shannon Jan 10, 2016

Hi Christine,

Thank you for making your 2016 outlook available publicly here at Project Syndicate.

The symptoms -- from global political tensions to low aggregate demand and every other negative that you've alluded to -- is led by the problem.

And the problem is: For the first time in centuries, more than 50% of the world's wealth is concentrated in the hands of the 1%.

That's the problem right there. Every symptom flows from that imbalance.
_____
How does it affect a national economy and the personal finances of citizens in that national economy? And how can it affect the entire world economy?

Let's take the example of a small, remote town to keep it simple:

I visit the town and give "Jim" a $100. bill. (Free of charge) Now Jim, being one of the 'working poor' decides that money is going to put gas in his car, buy some food for his family, and a new pair of gloves for work.

Presto, the $100. is gone that day -- all of it spent in that local economy.

Economists LOVE the Jim's of this world. Money in = money out. That is: Efficiency of money! The Purity of Money, I call it.

From a single $100. bill, Jim and his family have benefited, the local gas station has benefited, as has the local grocery store and the local hardware store. (Not to mention their suppliers located far from that small town)

Q: Why did America become economically powerful especially since 1900?
A: Many, many, many, "Jim's" -- that's how.

Q: Why did other economies not become as economically powerful as the U.S.A. since 1900?
A: Not as many, "Jim's" -- that is, not as many people with disposable income helping to build the economy.

In the final analysis, **the more people who have disposable income, the better an economy performs.** That's what growing an economy is all about.

That's not the same as saying, **the more money small numbers of people have, the better the economy performs.**

It certainly isn't about corporate welfare, nor is it about international trade agreements, nor is it about tariffs or taxation! Yet, those are the false narratives that we tell ourselves because we've forgotten the fundamentals of growing an economy -- whether it's the local, national, or global economy.

The efficiency of money is highest among those with unmet needs, those people use their disposable income daily to purchase the things they need. $100 in = $100 out.

The more of those people we have, the stronger our economy.
_____

If I had travelled to that same small town and given a $100. bill (free of charge) to the town's only millionaire, he would have simply deposited that money into his bank account.

Where it would still be rotting away to this very day, doing nothing productive at all.

That is "Dead Money" it just sits there doing nothing and it ranks "Zero" on the efficiency of money rating.

*Even worse than that* is if he uses that money to invest in an economy that competes with our economy. China, for example.

Not only has $100. been taken out of our economy -- it's gone to strengthen a competing economy.

(Not that I have anything against China, and I certainly do wish them well! Just making the example)

Therefore, in the broadest possible context, when we economically empower two very different people, we end up with three very different outcomes!

One outcome is very good for our economy, the second outcome results in excess liquidity in our banking system, while the third outcome weakens us vs. competing economies.

And yet, due to the existing economic paradigm, that is exactly what we're driving towards every day of every year, since the time (and economic policies) of President Reagan.

By 2030, unless the politicians stop sitting on their hands and address this imbalance-creating-paradigm, the 1% will own 75% of the world's wealth.

If we think that we have low aggregate demand, political turmoil, economic volatility, and other negatives now, just wait until we hit that 1%=75% point. You'll also be able to add widespread social unrest and anti-government and anti-corporation sentiments to the list of eco-socio-political ills outlined in your fine essay.

You'll also be able to add widespread social unrest and anti-government and anti-corporation sentiments to the list of eco-socio-political ills outlined in your fine essay. (Much worse than now)

"Yes, the challenges confronting the world in 2016 are great." -- Christine Lagarde

(But not really that great, Christine. The leaders of WWII would rightfully take issue with that characterization, so would the leaders who were in power during the Cold War. In both cases, the fate of the whole world was 'on the line' whenever they made a decision, something they never shied away from doing)

But with the right policies, leadership, and cooperation, we can manage them to the benefit of us all." -- Christine Lagarde

Your point is well taken. But if politicians fail to act to remedy the present course to economic oblivion, the challenges of 2016 will be seen in retrospect as insignificant -- compared to the problems we'll face in 2030.

And we'll be right at that time to lay the blame for the 2030 problems at the feet of today's politicians, who've so far, been sitting on their hands waiting for these problems to go away on their own.

"...right policies, leadership, and cooperation..." are simply different words for: Changing the present economic course that rewards (a) accretion of wealth in the top 1% and (b) "Dead Money" and (c) investment of trillions of dollars in foreign economies.

"...to the benefit of us all..." Which means, economically empowering the bottom two quintiles in every country with real disposable income, so that they may become *net contributors* to each national economy, instead of *net drains*.

The bottom two economic quintiles in developed nations represent a 'net loss' to each of those economies.

Two-fifths of the citizens of our Western economies are net drains instead of net contributors. That's the challenge that we're not meeting, nor even talking about. And in the developed nations the top quintile adds more CO2 to the planet than the other four quintiles combined (almost) AND removes multi-billions of dollars per year from developed nation economies to invest in competing economies.

All in all, a recipe for disaster.

If we don't act NOW -- we'll all be wishing for the (comparatively tiny) "challenges confronting the world in 2016."

As always, very best regards, JBS
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Hergen Heinemann Jan 10, 2016

€ 900 billion into a bad bank and the moral-hazard-credit-bubble-nominal-growth can (and according to all available human experience will) restart until the next credit bust returns us to square one. OK, that is socialism of ultimate cleverness: take it from the haves and give it to the have-nots.
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Pingfan Hong Jan 9, 2016

"One reason that the global economy is so sluggish is that, seven years after the collapse of Lehman Brothers, financial stability is not yet assured". One may question the logic of this statement: when the world economy was growing at a much stronger rate in the years before the eruption of the finciancial crisis, was the financial stability assured?
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Rajeev Pandey Jan 8, 2016

Puzzle for you Madam,

There are ten people and resources to feed only nine. What happens to the tenth and why?

I ask you this puzzle and that relieves me of my duty. You have a choice whether you want to solve it or not.
- Rajeev Pandey Jan 8, 2016
  
  You can find me here.
  
  http://just-a-thought-from-thinair.blogspot.com/
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Pierre ratcliffe Jan 7, 2016

The dark skies overhanging system world for 2016 as described by IMF chief Christine Lagarde, pose a number of questions to me. What composes renewed but moderate growth in the US and why is such growth beneficial to the US and the world? What composes growth in the developing parts of the world and emerging markets and why such growth is beneficial to the world ie. growth in the developed countries? What is the share in growth, of the production of armaments, weapons and military infrastructure? What products do the developing countries have to purchase from the developed to sustain their own growth? We are all interconnected and interdependent; and being over 7 billion human doings, heading for 9 billion in 2030 because the 2 billion more are already in the wombs of the women of today, the skies can only become darker.
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Steve Hurst Jan 5, 2016

I understand that many have questions about the veracity of data coming out of China and India
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M M Jan 5, 2016

Dearest Christine. Many thanks for your enlightening article. The issues you raised are known and have been known for quite some time. The real question is “Goodwill” and where to find it. Your concluding paragraph “with the right policies, leadership, and cooperation, we can manage them to the benefit of us all” summons it, really.
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