The growth of the global economy is false

We can say a good news. OECD has adjusted its expectations concerning the global growth. While in November, it has been expecting that the planet is going to grow by 3.3 % in the year 2017, today it is expecting that it is going to grow by 3.5 % and in the year 2018 even by 3.6 %. If the prognosis gets fulfilled it is going to be the most significant growth since the year 2011. It would be great if OECD was right - but I am cautious.

The world has changed a lot. Patterns which have been working for years are not working anymore. It is extremely difficult to make prognosis today. The yield curve has been working as an effective tool of prediction for years. You could tell a lot about the entire economy from the difference of 2-year and 10-year yield. The bigger was the difference the more were the investors speculating on the recovery of the economy and on the growth of the interest rates of central banks. But today?

For example at the American bonds, this difference has been getting smaller for a couple of months which should hypothetically mean a speculation on a crisis. But that is definitely not expected according to OECD. We all can relativize this and take it down by saying that let’s say the interest rates are significantly influenced by the decisions of central banks and those are behaving unusually so the difference of interest doesn’t have such good predictive ability as it had twenty years ago. But we do have new tools.

For example, bitcoin is right under the all-time high today and moving around 2860 dollars. It was still around 1200 dollars three months ago. Why? Because the investors are preferring alternative investments. Simply said, they think something is stinky in the standard economy. The same goes for gold. That has reached to its seven-month high. When has the gold always been growing in the history? When a crisis was coming up or when the investors were fearing something. So how is OECD going to deal with this?

No matter what side we look at this, investors are suddenly doubting that it is possible to be raising the interest rates quickly. Economic recovery should be automatically connected to the growth of the interest rates… Many are assured of this also because of the development on Spanish banking market. The biggest bank in the country announced that it is going to buy the struggling Banco Popular for symbolic one euro and increase its capital by 7 bn. euros. That is showing nothing more than a weakness of the sector which is still dusty from the last crisis.

All things considered, I still think that the growth of the global economy is false from a big part and it is pulled by artificial demand from the central banks.  Many central banks are already owning a giant share in the industry. For example, the central bank of Japan has ownership of more than 20 % share at many key companies. It is simply rather a growth on the paper then a real one.