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There are some disconcerting trends unfolding in the global economy, as lurking behind every bit of positive economy news is a significant threat.
The good news centres on the US economy maintaining momentum with the unemployment rate falling sharply, and policy makers giving consideration to a tightening in policy in the New Year. Buoyant share markets and rising asset prices suggest favourable times for consumers and the economy. At the same time India, the world's fourth largest economy, is also forecast to experience a moderate acceleration in growth into 2015, as the recently elected Modi government steadily implements a broad-based agenda aimed at economic reform.
This is about as far as the good news extends in terms of the major economies. The Eurozone economies, which the World Bank estimates to be larger than the United States in terms of its share of global GDP, is floundering with growth bobbing in and out of recession. The Eurozone is also at risk of sliding into a period of deflation, which, if realised, would be poison for government finances and the prospects for reducing the unemployment rate from current levels of around 11.5 per cent.
There is a huge bucket of irony in RBA Governor Glenn Stevens speech to CEDA last night.
For someone who has passively sat by with the exchange rate ridiculously overvalued for several years and who has been reluctant to use monetary policy to manage the business cycle and the interest rate sensitive parts within, Mr Stevens calls for economic agents to "most of all, [show] a willingness to take the occasional risk" are a touch disingenuous.
Stevens questions "whether our overall business environment is conducive enough to risk-taking and innovation".
Look in the mirror Glenn!
It has been pretty obvious for the last couple of years that the Australian dollar has been over-valued, by a large amount, and this market misalignment is one reason why real GDP has been below trend over that time and as a result, the unemployment has risen to a decade high of 6.2 per cent.