VOLCKER'S WORLD:

It's capitalism, but not as we know it: Economic cycles aren't what they used to be. (Phil Mullan, 1/07/05, Spiked)

Many commentators are aware that there is something odd about the world economy today. This economic cycle has many unusual and perplexing features. It is even difficult to identify what stage we are at on the basis of using the normal four phases of a cycle: (i) recession, stagflation, or contraction phase; (ii) the trough moving to reflation phase; (iii) the expansion or recovery phase; (iv) the boom/overheating/peak phase.

As the Financial Times' Philip Coggan remarked in November 2004: 'The picture seems very confusing. The bond markets suggest we are in the reflation phase [because of low interest rates], equity markets recovery [because stock markets remain high and rallied after the US presidential election], and commodities overheating [because of the recent strong prices for many raw materials including, of course, oil]. And we could even be heading for stagflation next year [because the gap between long and short term interest rates is falling - in the jargon 'the yield curve is flattening' - and in some cases, like Britain, is negative, normally a harbinger of impending slowdown].'

Three key distinguishing features characterise the world economy today:

-- The mature industrialised countries of North America, Western Europe and Japan are all having great difficulty in regaining a dynamic of self-sustaining expansion.

Except for the United States which has been in a self-sustaining expansion since 1983, when inflation was brought down to 3% from the 13.5% it hit in 1980.

MORE:
December Hiring Helps Fuel Job Growth (LEIGH STROPE, 1/07/05, AP)

U.S. employers added 157,000 workers overall to their payrolls in December, bringing the year-end total of new jobs to 2.2 million, the best showing in five years. The unemployment rate held steady at 5.4 percent.

The Labor Department reported Friday that the 2.2 million new jobs created in 2004 were the most in any year since 1999, when employers added 3.2 million positions, based on a government survey of businesses.

Posted by Orrin Judd at January 7, 2005 9:16 AM