A gloomy prognosis for the global economy from Lombard Street Research.
A seminar on the Pacific rim today came to the conclusion that much of the world is heading for low growth and deflation. “The rest of the world is going to look increasingly like Japan,” said Michael Taylor, a senior economist at the organisation.
His colleague, Charles Dumas, took a similar view. In his talk on “Chimerica as globalised Japan” he discussed the “globalisation of gloom”.
For Dumas the Eurasian savings glut is still doing immense damage to the global economy. As a result of excess savings there is going to be too many goods chasing too little demand (since Asia is producing far less than it is consuming). “The world market in goods is going to be brutally competitive”, he says. Manufacturing businesses will feel the most pain.
Global imbalances certainly look set to be a big point of contention at the G20 in Pittsburgh. Both China and Germany are resisting American pressure to get them to readjust. Neither accept the view that their export-led growth is to blame for the crisis. From the German and Chinese perspective it is Anglo-American profligacy that is the main problem.