The OECD’s $11 Trillion Forecast Miss——Stunning Proof That ‘Stimulus’ Hasn’t Worked
by Jeffrey P. Snider
DavidStockmansContraCorner.com
June 2, 2016
The OECD pleaded this morning for more “coordinated action”, i.e., “stimulus”, without even bothering to explain why anyone would feel confident if governments around the world might actually oblige. This economy, the singular global economy, has been stimulated to death, awash in especially monetary influence of constant ZIRP and QE’s and now threatened by nominal punishment through NIRP. When all of that was first introduced, there were no doubts ever expressed that they wouldn’t work, at most these orthodox institutions would admit that there were only risks to their modeled success rates.
In May 2009, the OECD published a report that anticipated nothing but positive and lasting impacts from especially coordinated fiscal policy. Believing very strongly in “spillover effects”, that is local “stimulus” benefiting those beyond national boundaries through increased “demand” and thus trade, at that point in 2009 the OECD was more worried about rising interest rates cutting back some of the effectiveness:
Secondly, it is assumed that there is no increase in interest rates in 2009-10 as a consequence of the fiscal stimulus, whereas if interest rates did increase this would also tend to dampen multiplier effects both at home and abroad, involving partially offsetting negative spillover effects. Further fiscal actions would raise positive trade spillover effects, but also increase the likelihood of an adverse reaction from interest rates.
They treated the Great Recession as any typical cycle, only much deeper and more synchronized globally than any economist thought possible. No matter what has happened in disappointment since then, they do not deviate from that assumption. Seven years later, the OECD now worries that the global economy is stuck in a “low growth trap” and once again appeals to the myth of fiscal potency. All for the children:
Policymaking is at an important juncture. Without comprehensive, coherent and collective action, disappointing and sluggish growth will persist, making it increasingly difficult to make good on promises to current and future generations.
The Rest…HERE
