Philosophical governments — one day !

The OECD — a Paris-based think-tank for economists from 26 leading countries — says that the world must take urgent action to dig itself out of its present lassitude. Interestingly, it calls it a ‘growth trap’.  Is this an unconscious recognition that there may be a deeper reason for the lack of economic growth?

Could it be, for example, that most of the successful advanced countries are already replete with consumer goods, and that there are no new goods to follow?  Could it be that China’s old growth rate of 10% has declined to 7% because of this?  And, when the middle classes of the rest of the world have been satiated, then China’s growth rate could sink even lower?  That’s my suggestion anyway, scorned though it is by orthodox economists.

The OECD calls for higher investment, loose monetary policy and structural reforms in order to boost economic recovery. But haven’t governments been pushing banks hard for the last seven years to invest more in businesses?  Governments couldn’t have had much looser monetary policy than they have now — what with 0% base rates almost everywhere outside China and even negative rates in 20 countries?  As for structural reforms, are governments supposed to dampen down automation to prevent too many jobs being lost or downgraded?

One day, the OECD, along with many other bodies of economists, will accept that the world economic system, being a mechanical system, is subject to the same laws of physic as everything else and that, one day, it will find its own activity level when governments learn not to interfere.

One thought on “Philosophical governments — one day !

  1. Two thoughts, Keith. I’m using US experience here.
    First debt has been ‘sold’ like narcotics to billions of consumers for some decades as the ‘normal’ method of buying goods (mainly) and services. Student loans in the US are over a trillion dollars. see:
    Cars, houses, electronics, clothes, vacations, etc are rarely bought with cash or savings.
    Second, the QE and ZIRP & NIRP are not putting significant money into the hands of the 99%. Without that ‘fuel’, demand isn’t stimulated as wages have lagged inflation for a generation at least. (Some say since mid 20th C)
    Money velocity has declined steadily. Even the Fed charts show this. The consumer cannot print money like governments or CBs. 😉

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