There’s been a lot of talk about a “New Normal” for the global economy in the wake of the 2007-09 financial crisis and Great Recession.
For the developed world, this “New Normal” has been characterized by slow economic growth, businesses reluctant to invest and low–at times dangerously low–inflation. In addition, deleveraging and increased regulation in the wake of the global financial crisis held back credit creation for all but the largest and most creditworthy mega-capitalization corporations.
Meanwhile, central banks assumed the burden of attempting to keep the global economy from slipping into recession and preventing a dangerous slide from historically low inflation into an outright deflationary spiral.
First, central banks turned to near-zero interest rates to stimulate global growth. When ultra-low rates had a limited impact, central banks followed up with quantitative easing–buying government, mortgage and corporate bonds to drive down yields–and, finally, negative interest rates in Europe and Japan.
As readers of Capitalist Times Premium know, we’ve grown increasingly concerned about these trends over the past 12 to 18 months. Given recent events and changes to key signals, we adjusting our outlook while keeping an eye on a few particular indicators.