2015 May 29 Friday
World Economy Lacks Lifeboats

Ambrose Evans-Pritchard summarizes the doom and gloom about the world economy. The worst part of it is that governments ran up big debts in the last downturn and central banks lowered their interest rates and never raised them again. They've got a much smaller tool set to use the next time the world economy starts contracting.

Stephen King from HSBC warns that the global authorities have alarmingly few tools to combat the next crunch, given that interest rates are already zero across most of the developed world, debts levels are at or near record highs, and there is little scope for fiscal stimulus.

"The world economy is sailing across the ocean without any lifeboats to use in case of emergency," he said.

500 basis points, 500 basis points, my kingdom for 500 basis points!

The next time the world economy goes into a recession the central banks will not be able to cut interest rates the needed 500 basis points (5%). Interest rates are well below that. What's left? Governments could run big budget deficits and have central banks buy their bonds.

Should you care about all this? That just depends. Are you vulnerable? Suppose jhard times come. Could your employer automate your job? Outsource it? Just shut down the line of business you are in? Go bankrupt?

In your career the best defense is a good offense. Step up your game. Take on more responsibilities. Change to a new role that requires you to learn much more. Take classes to learn new skills. Move away from a stagnant part of the economy to a city that has high tech growing companies. Don't just wait for the ax to fall.

Share |      By Randall Parker at 2015 May 29 10:08 PM 


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