Yesterday the IMF downgraded its projections for economic growth. In its announcement it warned that such action is the result of self-inflicted wounds created by a “precarious” trade war. At a time when central banks are trying to be inventive again via monetary unorthodox measures in order to orchestrate a smooth landing, the body-politic of trade and international relations is seeking a balance between the concepts of virtù (with the meaning of power) and virtue (with the meaning of its true Greek origin arete). The pursuit of the former leads to vices, while the advancement of the latter leads to moral and admirable excellence which in turn produces greatness.
The deteriorating outlook especially for the US, China, the EU and Japan (a.k.a. G4) can be seen below.
The pace of global growth has been downgraded by 10% since the IMF’s last projection (April of this year) and relative to 2018 this year’s growth rate is about 20% lower. According to the IMF report the prospects for the G4 look bleak for the next 4-5 years. Our humble opinion is that the IMF’s projection for a better 2020 is to a large degree unrealistic because it is based on significantly better growth and prospects for the economies of Argentina (which may go bankrupt next year), Turkey (whose lira, banks, and business confidence are pretty shaky), Iran (with an economy near collapse), Brazil (whose prospects keep deteriorating), Russia (which may be facing the music of declining living standards), and Mexico (which indeed may be enjoying some better outlook).
While the report points out that the global weakness centers around trade and manufacturing, our observation is that the spillover effects have not been seen yet. However, as last week’s commentary pointed out, the US exports of services have been slowing down significantly and thus, we believe that even this IMF report is optimistic. What potentially could revive the global economy in the next two years is a massive program of fiscal spending e.g. on infrastructure.
However, with the Brexit uncertainty and the many structural issues facing the EU at a time of a Chinese slowdown, our opinion is that it is becoming ruthlessly clear that the unblinking commitment to the power play (virtù) separates the global economic prospects from a virtuous upswing cycle and remind us of Machiavelli’s friend and contemporary Guicciardini whose Maxims contain the essence of his mentor’s heroes of antiquity that is Severus and Hannibal both of whom demonstrated wickedness, cruelty, impiety, and faithlessness.
It seems that we are entering (in terms of political and economic developments) a period that mirrors Guicciardini’s argument that “deception is very useful, whereas your frankness tends to profit others”. After all, Guicciardini was more Machiavellian than Machiavelli himself!
Deteriorating Economic Sentiment: Down the Path of Guicciardini’s Maxims
Author : John E. Charalambakis
Date : October 16, 2019
Yesterday the IMF downgraded its projections for economic growth. In its announcement it warned that such action is the result of self-inflicted wounds created by a “precarious” trade war. At a time when central banks are trying to be inventive again via monetary unorthodox measures in order to orchestrate a smooth landing, the body-politic of trade and international relations is seeking a balance between the concepts of virtù (with the meaning of power) and virtue (with the meaning of its true Greek origin arete). The pursuit of the former leads to vices, while the advancement of the latter leads to moral and admirable excellence which in turn produces greatness.
The deteriorating outlook especially for the US, China, the EU and Japan (a.k.a. G4) can be seen below.
The pace of global growth has been downgraded by 10% since the IMF’s last projection (April of this year) and relative to 2018 this year’s growth rate is about 20% lower. According to the IMF report the prospects for the G4 look bleak for the next 4-5 years. Our humble opinion is that the IMF’s projection for a better 2020 is to a large degree unrealistic because it is based on significantly better growth and prospects for the economies of Argentina (which may go bankrupt next year), Turkey (whose lira, banks, and business confidence are pretty shaky), Iran (with an economy near collapse), Brazil (whose prospects keep deteriorating), Russia (which may be facing the music of declining living standards), and Mexico (which indeed may be enjoying some better outlook).
While the report points out that the global weakness centers around trade and manufacturing, our observation is that the spillover effects have not been seen yet. However, as last week’s commentary pointed out, the US exports of services have been slowing down significantly and thus, we believe that even this IMF report is optimistic. What potentially could revive the global economy in the next two years is a massive program of fiscal spending e.g. on infrastructure.
However, with the Brexit uncertainty and the many structural issues facing the EU at a time of a Chinese slowdown, our opinion is that it is becoming ruthlessly clear that the unblinking commitment to the power play (virtù) separates the global economic prospects from a virtuous upswing cycle and remind us of Machiavelli’s friend and contemporary Guicciardini whose Maxims contain the essence of his mentor’s heroes of antiquity that is Severus and Hannibal both of whom demonstrated wickedness, cruelty, impiety, and faithlessness.
It seems that we are entering (in terms of political and economic developments) a period that mirrors Guicciardini’s argument that “deception is very useful, whereas your frankness tends to profit others”. After all, Guicciardini was more Machiavellian than Machiavelli himself!