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from Anatole Kaletsky:

Karl Marx was right — at least about one thing

 A board displays the Dow Jones industrials average after the close at the New York Stock Exchange

Confidence in the global economy is steadily improving, as shown in the financial markets’ bullish behavior and confident comments from companies and policymakers over the past few weeks. Though these columns have argued in favor of a robust recovery, when investors get uniformly bullish, the pessimistic case deserves attention.

Many distinguished economists believe that the current improvement in global conditions is just a blip. They insist that the world faces years, if not decades, of “secular stagnation.” How seriously should we take them?

The good news is that there is little evidence of secular stagnation in global statistics. The “new normal” for the world economy since 2008 has not been very different from the pre-crisis period. The average growth of the global economy from 1988 to 2007, the 20 years before the crisis, was 3.6 percent, according to the International Monetary Fund World Economic Outlook database. The IMF latest forecast for 2014 is exactly the same -- 3.6 percent. Though Christine Lagarde, the IMF managing director, hinted at a modest downgrade this week.

International Monetary Fund Managing Director Lagarde addresses the Bretton Woods Committee annual meeting in WashingtonAt first glance, this continuity seems hard to square with the slowdown in economic activity in all major economies since 2008. The IMF expects only 2.2 percent growth this year in the developed countries, compared with an average of 2.8 percent during the two decades before the crisis. In the emerging economies, meanwhile, growth is projected at 4.8 percent this year, slightly below the average of 4.9 percent of the pre-crisis decades.

from MacroScope:

Evening of reckoning

EU heads of government and state dine in Brussels this evening to discuss their response to a big slap in the face from the bloc’s electorates.

Italy’s Matteo Renzi, who bucked the trend by winning handsomely as an incumbent prime minister, has the wind in his sails and has pledged to change Europe’s focus towards growth and job creation after years of fiscal austerity in response to the euro zone’s debt crisis.

from Breakingviews:

What Lagarde should’ve told Smith College’s grads

By Christopher Swann and Rob Cox
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

International Monetary Fund boss Christine Lagarde wimped out of speaking at Smith College’s commencement after a student petition accused the fund of supporting “patriarchal systems.” The fund has made many mistakes over the years. But that critique is mostly old hat. The IMF, particularly under Lagarde, has fostered social spending and championed female rights. Here’s what she ought to have told the 672 women graduating from the university in Northampton, Massachusetts on May 18.

from MacroScope:

Money for Ukraine?

Russia’s next move remains the great unanswered question for Ukraine but there are glimmers that things might be starting to move elsewhere.

IMF chief Christine Lagarde said last night she would send a technical support team to Ukraine soon if Kiev makes a request. It can’t do so until an interim government is formed, probably tomorrow. That would be step one, but only step one, down the road to an international aid package.

from MacroScope:

ECB deflation risk denial has echoes of 2009

Euro zone policymakers like to talk. They often contradict each other at separate speaking engagements on the same day. But they have struck a chorus in recent weeks, asserting that deflation is not a threat.

Members of the ECB Governing Council have been particularly vocal, insisting they will not have to alter policy to counter falling prices.

from MacroScope:

Davos Day Two — Rouhani, Lew and Lagarde

Day one in Davos showed the masters of the universe fretting about Sino-Japanese military tensions, the treacherous investment territory in some emerging markets and the risk of a lurch to the right in Europe at May’s parliamentary elections which could make reform of the bloc even harder.

Today, the focus will be on Iranian President Hassan Rouhani (and his main detractor, Israel’s Netanyahu). Presumably he’s there to woo the world of commerce now sanctions are to be relaxed in return for Tehran suspending enrichment of uranium beyond a certain level. Anything he says about Syria’s peace talks, which have so far been more hostile than conciliatory, will instantly be headline news.

from MacroScope:

Data to shape ECB week

Euro zone service sector PMIs and German inflation (with the euro zone number to follow on Tuesday) will lay the ground for the European Central Bank’s first policy meeting of the year.

The surveys are likely to show the currency bloc ended the year on a reasonably robust note with Germany leading the way as always, Italy and Spain showing signs of life and France looking worryingly weak.

from MacroScope:

Just a typical euro zone day

Spain will sell up to four billion euros of six- and 12-month treasury bills, prior to a full bond auction on Thursday. Italy attracted only anaemic demand at auction last week and Madrid has already had to pay more to borrow since the Federal Reserve shook up the markets with its blueprint for an exit from QE.

However, yields are nothing like back to the danger levels of last year and both countries have frontloaded their funding this year. Economy Minister Luis de Guindos, who declared over the weekend that the Spanish economy will grow in the second half of the year, speaks later in the day.

from Nicholas Wapshott:

Austerity is a moral issue

Security worker opens the door of a government job center as people wait to enter in Marbella, Spain, December 2, 2011. REUTERS/Jon Nazca

In the nearly five years since the worst financial crash since the Great Depression, the remedy for the world’s economic doldrums has swung from full-on Keynesianism to unforgiving austerity and back.

from Ian Bremmer:

Davos power rankings: Who’s up, who’s down and who’s out?

After another year of panels, colloquia, summits, meetings, whispers and skiing, the Davos emissaries headed home with a few new connections and catchphrases (“Resilient Dynamism” forever!). After four years of gloomy predictions and summits dominated by post-financial crisis concerns, this year the mood was significantly more positive. While I would argue that the pendulum of sentiment has swung too far, there are reasons to be cautiously optimistic. Based on my observations at the 2013 World Economic Forum, here’s a power ranking of who’s up, who’s down and who’s off the radar—according to Davos attendees, at least.

UP

United States: The politics of Washington were all but forgotten. With the so-called fiscal cliff standoff resolved and no current budget battle hurdles (at least for the next few weeks), there were no urgent crises to distract Davos from the strong American economic fundamentals. Instead, the chatter was about insourcing, the energy revolution and the positive growth outlook this year – all sources of a (perhaps inflated) exuberance.

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