In response to an FT article by Martin Wolf on 15th September 2015, entitled 'A new Chinese export - recession risk'
"Mr Buiter does not expect world output to decline. The notion here is a “growth recession”, a period of growth well below the potential rate of about 3 per cent. One might imagine 2 per cent or less. Mr Buiter estimates the likelihood of such an outcome at 40 per cent"
40%? Did he use a stochastic spreadsheet or optimal chicken entrails? We are not entering a 'growth recession', a 'secular stagnation' or any other such nonsense. We are entering the last phase of a massive debt binge, which, one way or the other will resolve itself as the west moves into an inevitable downturn. The game is up, either through a massive CB induced inflation, a deflationary debt collapse, a conscious reset of the global monetary system, or a combination of two or more of these.
Central Banks have spent the past 30 years blowing bubbles in a vain attempt to prevent capitalism having a 'down' to match it's 'up', a 'lose' to match it's 'win'...and under no circumstances whatsoever...must we experience a liquidation of debt. There is not a single 'honest' interest rate or price to be found anywhere. There are however, legions of economists who claim to know exactly how much everything should cost.
Since October 1987 when Mr Greenspan debuted the 'Greenspan Put' a couple of months into his new job as the Chairman of the Federal Reserve, CBs have progressively used 'easy money' tools in an effort to prevent markets doing their job, clearing debt, identifying mal-investments and redistributing capital and resources to more profitable endeavours.
Whatever the spin, and however many inconvenient truths are swept under the carpet, they have done this in the interest of governments and banks. Governments that maintain power with 'guns and butter', but don't tell the truth about how much these things cost, nor ask their electorates to pay for them with higher taxes...preferring instead to kick the can down the road to a future where our grandchildren will have do all the paying and none of the collecting. Banks, who issue the credit to keep the Ponzi scheme going, who now get their carry trade chips for free, and best of all, get bailed out by the taxpayer when the liquidation process starts.
Now Mr Buiter, one of the Prima Donnas of this tooth fairy economics, an academic who believes in abolishing cash to complete the centrally planned nightmare, reckons there is a 40% chance of a 'growth recession'. I think there's a 100% chance that a man who has spent his career trying to control and suppress markets, doesn't have the foggiest idea what a real economy looks like.
He is not alone. The 12 academics who will be sitting round the table in the Eccles Building on Thursday haven't got the foggiest idea what they are doing either.