The Global Economy Is Facing A Long-Term Risk Of Stagnation.

We have entered a quite different era from the past, and the future economy and market are significantly different from those in the past decades.

One of the core driving forces of economic growth is population size and structure. Under the benchmark situation, the long-term stagnation in the future will continue.

Although global monetary easing may come to an end,

It is very likely that interest rates will rise again in December, and liquidity will tighten at the margin. But since December 2015, this round of interest rate rises will not be too big and will not rapidly raise global interest rates in the short term. The low growth rate, low inflation and low interest rate of the global economy will probably continue after 08 years of financial crisis unless the situation improves or deteriorates.

Five prospects for the world economy.

1) long term stagnation, 2) reverse globalization, 3) class bond stock bubbles, 4) economic prosperity, 5) economic recession.

The benchmark scenario is sustained economic stagnation, low growth and low inflation, unless major reforms and innovations enhance total factor productivity to hedge population.

In this case, the Fed's slow interest rate increases, the global liquidity inflection point of concern.

Due to concerns about exchange rate depreciation and capital outflow pressure, the Fed's rate hike will block other currencies' loose monetary space, but other economies have little chance of raising interest rates.

Only by strengthening capital controls can the independence of monetary policy be maintained in order to serve the domestic economy.

World economic recovery: challenges.

1)

Slowing down.

The biggest problem in the global economy is the slowdown in growth, which reduces the expected return on investment. 2016 will be the fifth year in which global GDP growth is continuously below the long-term mean of 3.7%. In 2017, it is likely to be sixth years, the world economy has never been so weak in such a long time; 2) the threat of anti globalization.

Under the intertwined effect of global growth and weakening inequality, the political climate of countries obstructing reform and adopting an introverted policy is taking shape. If globalization reverses, it will restrict the flow of trade and labor force and will have a negative impact on global economic growth. 3) the economic depression in Europe and Japan.

The euro zone and Japan are still in the trap of liquidity; 4) the developing countries are weak.

China's economic pformation, growth and shift, the resources of Brazil and Russia are dragged down by the fall in commodity prices. India's economic growth is relatively high, but India's economic aggregate is limited at present, and it is difficult to promote the overall growth of the global economy.

The prescription of the world economy: monetary slow + fiscal reform + strong reform.

The conference calls for not relying solely on monetary policy. It should co-ordinate monetary and fiscal policies and restructure the global economy through structural reform and innovation.

1) not over reliance on monetary policy.

The marginal promotion effect of loose monetary policy on economic growth has almost disappeared; 2) financial needs are more powerful.

At present, interest rates are at a historic low level. If there is fiscal space, it is a good time to upgrade public investment and infrastructure.

3) promote structural reforms.

The reform of Thatcher and Reagan respectively made Britain and the United States succeed in getting out of stagflation and realizing economic pformation and stock debt.

Structural reforms in countries are far from enough. Compared with monetary and fiscal policies, structural reforms often involve adjustment of multiple economic factors, and resistance and difficulty are much greater.

The crux of the world economy is aging, slow technology and slow reform.

1) population growth is decreasing and aging.

The growth of population in almost all countries will slow down and the structure will deteriorate. 2) technological progress will slow down.

Technological progress has obviously slowed down over the past few decades; 3) neutral interest rates are going down.

The lower neutral interest rate leads to economic downtrend and the traditional monetary policy has little stimulus to the economy; 4) the short-term impact of the 08 year financial crisis.

Sequelae persist until now, private and public sector debt is overloaded, and financial institutions' balance sheets are damaged. As a result, demand continues to be weak. 5) in the medium to long term, reform is slow and structural factors dominate.

The recovery process of the world economy and the cycle of monetary policy are different. The US economy is heading for recovery and takes the lead in raising interest rates. While Europe, Japan and emerging economies are still at a low level, they do not have the conditions of raising interest rates. The emerging economies are divided and India's GDP growth rate exceeds China.