In my last monthly e-mailed note (on 28th June) I said that money growth patterns in the four leading advanced country jurisdictions (USA, Eurozone, Japan and the UK) were more or less perfect. To recall, “4% a year is a more or less ideal rate of broad money growth in developed countries, with a trend rate of output growth of 1% - 2% and an aim to keep inflation around 2%. Amazingly, and no doubt more by happenstance than design, 4% a year is at present common to the USA, the Eurozone, Japan (just about) and the UK.” Well, not much has happened since then to alter the assessment. The picture is as follows,The numbers for China and India, the two big developing countries (both with trend growth rates of output of over 5% a year), are as follows
Debts have continued to build up over the last eight years and they have reached such levels in every part of the world that they have become a po- tent cause for mischief,” according to William White, former chief economist at the Bank for International Settlements in an interview for the Daily Telegraph on January 20. According to White, “the situation is worse than it was in 2007. Our macroeconomic ammunition to fight downturns is essentially all used up.” White’s pessimism chimes with warnings from Goldman Sachs last year. Andrew Wilson, chief executive of one of its fund management businesses, was reported on May 26, again in the Daily Telegraph, as saying that excessive debt represents “a risk to economies” and is a “major issue”. Specifically, in mature industrial nations populations are ageing and the proportion of working-age people to the total population is falling, presenting “us” with the question of how “we” are “going to pay down the huge debt burden”. The combination of the Bank for International Settlements, Goldman Sachs and the Daily Telegraph ought to be intellectually overwhelming. But they have indulged in rhetoric and used words sloppily. To whom does “us” refer? Who exactly are “we”? And, although the image of “the world drowning in debt” is often invoked, what is it supposed to mean?