Pulse: Growth Outlook and Business Cycle
The annual World Economic Forum (WEF) will convene this week in the ski resort of Davos. The WEF, which was founded in 1971 by Klaus Schwab (who at age 80, continues to run the organization) is an annual meeting of the global economic, business and political power elites. (Tidbit: the aggregate annual compensation of the two dozen global leaders of industry attending Davos is estimated at $300 million). While uber-elitist, the Davos meetings do reflect the major issues of the day and are useful sounding boards for discussing global economic and financial matters.
Every year we ask our EconVue contributors to prognosticate about the coming year. Although many people value economics as a way to forecast the future, most economists are historians rather than visionaries. However, if one understands current trends and events, then it is possible to make some educated guesses about the future. At the very least, it helps us create scenarios, both likely and unlikely, that challenge the conventional wisdom. Which is exactly our mission at EconVue.
THE WEEK IN FINTECH 12/08/17
The Payments Elephant
I moderated a meeting of the Chicago Payments Forum this week to discuss payments developments in 2017 and how they will affect business in 2018 and beyond. In putting together the overview, it occurred to me that right up front we had to address the elephant in the room: bitcoin.
At Money2020 at the end of October, I heard a number of people talk about it as a new "asset class," a statement I saw quoted almost daily as bitcoin's price rose steadily.
The IMF’s message in its latest global economic forecasts (World Economic Outlook, 7/24/2017) is broadly unchanged from its April version. The global economic recovery is gaining momentum and broadening in 2017, after a two-year slowdown. Global output is expected to grow by respectively 3.5% and 3.6% this year and next. However, the IMF states that the projected composition of growth will be slightly different, with slower-than-anticipated growth in the United States compensated by faster growth in the eurozone, Canada, Japan and emerging markets.
Last October, mulling over the economic environment the next President would face, I sent Hillary Clinton memos on how she should provide some stimulus to sustain the current expansion and raise incomes by boosting business investment and productivity. Alas, she did not become President; but that didn’t change our current economic challenges. To be sure, President Trump’s manifold troubles may preclude Congress from doing anything meaningful until after the 2018 elections. But if that’s not the case, here’s some advice for both sides.
The Organization for Economic Cooperation and Development (OECD) recently released its semi-annual economic outlook. Three major themes emerge from the report. First, the global economy is gradually emerging from a five-year (2012-1016) low-growth trap, and global growth should pick up modestly in 2017and 2018 (Table 1). Second, we are seeing a shift in economic policy from over-reliance on monetary policy to fiscal initiatives designed to boost growth. Third, we are not out of the woods and significant risks remain.
The ranking of the world's leading economists has remained essentially unchanged since 2006. Post-2008, we are hearing from the same people, mostly white males now in their 60's. Federico Fubini asks, "Might the world’s leading economists be so keen to protect their own ideas that they ignore (or, worse, stifle) innovation from unexpected quarters?"