Economic growth

A rickety rebound

The global economy is gaining momentum. But only in America is the acceleration likely to last

See article

Readers' comments



Gary C in reply to Esekla

Recalculating GDP didn't impact the reported rate of growth since earlier periods were also recalculated.
While it seems intuitive that increasing the money supply reduces the value of money it's more complicated than that. Increasing the money supply to keep up with increased goods and services is the most obvious reason.
A reduced velocity of money is another reason to increase the money supply. If money changes hands twice in a year instead of 2.5 times the money supply could increase 25% with the same amount of dollars being spent during the year. This requires reducing the money supply by 25% if velocity increases from 2/year to 2.5/year. Quantitative easing allows the Fed to shrink the money supply by selling the bonds they've purchased (with money they created) created and then destroying this money).
Evidence from Japan shows that well managed increases in the money supply doesn't destroy the currency and doesn't cause inflation. Managing the Yen hasn't solved their problems but they're much better off than the "creative destruction" they would have experienced if they were on a gold standard. Look at Greece and Ireland that are on a Euro standard.


It is shocking how newspapers like the Economist, although targeted towards an educated readership, still cling to the concept of endless economic growth, instead of leading the discussion about the steady-state non-growth economics which are ultimately in the future of all nation states as demanded by the second law of thermodynamics for closed systems.

The Economist still caters to the group which holds onto the illusion that since “there always has been growth” and “the human mind in unlimited in its creativity” societies will somehow prevent what the laws of physics demand.

Admittedly it can take a long time for unpleasant ideas to become part of societies thinking, but the political elite, relying on expanding economies for reelection, will remain in a state of denial (or postponement) as long as possible.

With the absence of leadership from the political system due to their reelection cycle thinking, only the written or the visual media can bring the needed discussion into the mainstream. I would hope that the Economist will be one of those leading the way.


"Evidence is mounting that America’s GDP grew faster in the second quarter than the initial estimate of 1.7%, and has accelerated since."
GDP grew faster because they changed how it is calculated. True growth requires free market style creative destruction. Until people wake up and demand a change from the ruinous combination of debt and fiat currency, innovation and growth will continue to be smothered by ever increasing pools of useless paper.

jason9139 in reply to pgKaiser

And why, pray tell, is our world economy a closed system? It is not for population stabilization, which is not guaranteed to last (should we colonize space, for example), nor by the automation in the west that proves the number of hands doesn't determine your industrial or commercial output. It is not for lack of resources, of which we make use of more and more on our own planet (advances in materials sciences), much less the near-endless supply beyond our tiny blue home. If not for lack of people or resources, then why a closed system? Why do you try to impose hard scientific limits on a dynamic social system? There is a limit... to the energy the sun will put out, or the pounds of uranium or coal in the ground, but is that a realistic way of imposing limits on future economic growth?

I find your lack of 'creativity' disturbing, sir.

Brian David Thomas

American households have reduced their debt levels by 12% since 2008.

Given that Americans were struggling to keep up with their debts back then, that's a far cry from a "plunge."

Especially since the debt levels are largely falling because people are renting instead of buying. Indeed, more Americans are reaching to their credit cards to pay for groceries or financing that newly purchased car.

This is partially because the jobs created in this recovery offer less pay and full-time status than the jobs from the previous credit-fueled boom.

Its true that Americans are looking better than 2008. But considering 2008 was the lowest economic point of the past 33 years, that's not much to cheer.

So what's the plan in China when the insanely inflated real estate bubble finally pops? All those empty office buildings and malls are falling into disrepair without tenants... what's the plan in 2020 for all those properties when they STILL don't have tenants? Not to mention the accelerating cost of housing near the big cities?


One thing to add.

US (through participation of American companies) leads the world in innovations and in developing new products and services. They are two big examples in recent times -- IT and internet (world of microsoft, apple, google,......, etc) and shale gas.

US will bounce back and lead others.

Watchout for the space of green pillar for US businesses to lead the world.

Your Neighbourhood Economist

China is more likely to continue to be the main source of growth for the global economy. The Chinese government will be its utmost to ensure that the transition to a consumer society. For more, see

On the other hand, there are numerous perils luring within the US economy and the recent bankruptcy of Detroit is just a hint of what could go wrong. Refer to

ZA Observor

"Rickety rebound" is entirely as a result of money printed by 'quantitative easing', which artificially devalues the currency of world dominating economies of China, Euro, Japan, UK and USA at the expense of others.

Emerging markets continue to take massive hits, as do pension funds and savings of citizens "rebounding" nations - we have bought time, but much of it has been squandered at enormous human cost.

Should the Fed pull incrementally the plug on QE through tapering alone, the US rebound will likely grind to a halt and bubbles pop like banking weasels in the night.

European central bank unification and structural reform is stalled, with some members of the union cherry picking trade at the expense of others - nothing has changed.

Instead of living in denial and pretending QE "tapering" can sustain growth, it is overdue that economists admit that only a quantitative leap can exit the game safely by offsetting central bank balance sheets bloated with bonds bought with printed money, against national debt. That debt is largely between the very same bullies who impoverish the world with QE, so why should one good turn of the monetary cheek not serve the other?

Pre-occupation with this sterile debate about "might is right" in how the economic pie is being sliced up, is missing entirely how unjust and stupid central bankers and their politician stooges are being.

p_Kaiser in reply to jason9139

In short, because you asked: The earth is a closed system except for the incoming sunlight. Aside from early introduction of writing, agriculture, domestic animals, gravity irrigation which stimulated growth (improving efficiency) all almost all later "inventions" required the use of raw materials. The needed raw materials are concentrated in the earths surface where we can mine them. These materials are then scattered around the globe as products. Recovering them for reuse requires the use of energy. Since all energy sources except those driven by the sun (wind, water, tides, voltaic) are also mineral resources, we have a problem. Resource yields are declining in spite of addition costs and dangers. Resources and not human ingenuity are the main constraint on economic activity.
As you hint in your last sentence, in the future the solar constant has to supply all energy for daily needs and the recovering of materials for recycling.
One can, of course, argue about when resource depletion will seriously affect life styles, but one cannot argue about whether or not it ultimately will.
I know this is a bit sketchy but I hope it helps.

I disagree with you completely. Chinese Re is in such a huge bubble with 65 million units never occupied on the market, either for rent or sale. The average Chinese cannot afford them.

As the article says, America has taken the tough medicine a few years ago and their economy is rebounding.

Nom Deplume in reply to Gary C

Ahh... someone else gets that it isn't just 'printing gobs of money', but rather a short term increase in 'velocity' forced by supply side. Once the interest rate reached near zero and then zero this was the 'best club left in the bag' for the Fed to play.


The US could be looking forward to a Swiss or Australian moment.

If the US does go through a few quarters of decent growth, falling unemployment and rising inflation will put pressure on the Fed to tighten monetary policy and perhaps even raise interest rates. Just imagine the swell of savings (currently cash hoards sitting uninvested) that would flow from Europe to the US in search of return.

Given the low import concentration of the US economy, the dollar could appreciate quite quickly without much deflationary pressure. And Americans would no doubt spend these dollar inflows (along with money saved from not having to import oil) on cheap imports from Europe, Latin America and Asia.

If it works out this way, good. This in itself would make a massive contribution to boosting returns and recapitalizing European banks, and would also boost aggregate demand and economic activity in Europe.


In Europe, I read the supply side shift as especially strong (the absence of demand is the real drag - so the payoff from reforms just isn't visible yet).

Kuka vehicle manufacture:
Hybrid aircraft:

Airbus has record orders, Spanish productivity has advanced strongly, rapid progress has been made in extending free trade & expanding/ integrating markets, levels of human capital, investment in skills & English fluency have never been higher, etc. Just look at the innovation the present crisis has motivated in Spain (related to banking/fintech):

And ease of doing business has improved faster in "periphery" Europe than anywhere else over the past 5 years.

In the United States, the Federal Reserve hinted at “tapering” its quantitative-easing policy later in the year, and a kind of global carry trade based on monetary conditions in advanced countries started to unwind as a result, causing credit tightening and market turbulence in emerging economies. This is probably only a preview of the complexity of the exit from the post-crisis assisted-growth model that has prevailed in the US, Europe, and now Japan. A possible political impasse in the US in September over the budget and debt ceiling complicates the outlook further.

Thanks group


I find the article name very witty. It sums up the author's point of view in 3 simple words. Yes, the economy in the past trimester seems to be going much better, but this period of economic health is highly unlikely to last. Given that the whole structure of China's economy is changing, we can no longer rely on it to lead global growth. Japan is only doing half of the job necessary in order to attain an ongoing health and the Euro is too much in debt to rise any time soon. As cocky as it may be to name the USA as ''engine of global growth'', I strongly agree with the author given the status of the other major economies.


I find it odd that Latin America and Africa were completely disregarded in this article. The growth rate in many African countries has been climbing steadily since the turn of the century, and is helping to keep the emerging market yields strong. The fact that many of these countries were so poor to begin with means that they could continue to grow for a long time at this rate. While this may not be enough to prop up the global economy, it should certainly help, especially since the continent has been a non-factor for so long. In addition, Latin America is no longer the laggard when it comes to Emerging markets, and countries like Mexico and Chile are starting to break into the high-income realm. While these countries are not necessarily big enough to effect the globe, if their positive model is emulated by the rest of the continent, it could prove to be a strong area of global growth. In addition, the TPP could serve as a huge platform for growth, and should not be written off.

Esekla in reply to Gary C

It doesn't cause inflation because we fudge the #s and/or decrease effective pay rates.

In "the west", we love to note the # fudging for places like China, but it's just as bad in the U.S. and not just by completely changing how they're calculating GDP. Unemployment figures too high? Let's just stop counting working age people who've given up completely. Inflation is not a problem, because we don't count food & energy, because nobody uses those! The list goes on and on.

You can spin the #s any way you want, but just look at real working people and their standards of living (not government figures on them) in Europe, Japan, and more recently in the U.S. since the Nixon shock in 1971. See for background.


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