Great Divergence or Financialized recovery ?
The IMF’s latest delivery of the World Economic outlook contains an interesting analysis of the current “non” recovery in terms of a divergence between fiscal and monetary policy, the first between restrictive and procyclical in nature and the second being accommodating and reinforcing a financial expansion. As argued here by the IMF economists who worked on this issue, the “great” divergence then is between a stagnating productive economy punished by austerity and a booming financial economy supported by quantitative easing and real low interest rates ? I’ve read here and there analysis of the divergence by a number of commentators, the latest and most interesting being this column by Gavin Davies in the FT,
and I’m wondering if this is what a “Financialized recovery” looks like.
I’ll be udpdating this post later with data on Canada, in the mean time here are 4 charts taken from the WEO report, basically each graph is illustrates comparative data contrasting the current recession/recovery with average outcomes of the 1975, 1981, 1991 recession recovery. The first charts real GDP growth, the second public expenditure, the third interest rates and the last central bank assets. Â For Canada I think that CHMC assets should be used as a complement to data on the BOC’s assets.
The data is organized as follows:
Years from global recession on x-axis; indices = 100 in the year before the global recession. Recovery from the Great Recession in red, Â Average of previous recessions (1975, 1982, 1991) in blue.