Has Global Deflation Ended? (w/ Jawad Mian) | Interview | Real Vision™

TL;DR

Jawad Mian argues that the global economy has passed its point of maximum deflation pressure. No major advanced economy is in deflation for the first time in a decade, while wages and companies’ pricing power are increasing. With global growth expected to remain around 3%, he sees room for continued economic expansion. Read on for his outlook on the US, Europe, China, productivity, and debt.

Transcript

Despite being eight years into this recovery-- it's been a very unusual recovery-- I still see no signs of a US recession. There is-- interest rates are far from reaching restrictive levels. We don't have over investment in any particular sector. Arguably, there was in the US shale patch, but that has had its own fall-out, and now, it's also recove... Read More

Key Insights

• 💗 Despite concerns, the US economy shows no signs of a recession and continues to grow.
• 🖐️ Productivity could play a significant role in extending the economic recovery.
• 🇪🇺 Europe's cyclical recovery lags behind the US, presenting opportunities for growth.
• ✳️ China's recent measures reduce the risk of a hard landing.
• 🌐 Global growth is expected to remain around 3%.
• ✊ Wages are increasing, and companies have pricing power, suggesting an impulse for economic growth.
• 💨 The global economy is shifting away from deflationary pressures.

Questions & Answers

Q: Has the global economy reached the end of deflation?

Jawad Mian believes the global economy has passed the maximum point of deflation pressure. He notes that no major advanced economy is in deflation for the first time in a decade, while wages are increasing and companies have the capacity to raise prices.

Q: Why does Jawad Mian see no signs of a US recession?

Interest rates are far from restrictive levels, and he sees no overinvestment or excess in the economy or any particular sector. Although the US shale sector previously experienced overinvestment, it went through a fallout and was recovering.

Q: How could productivity extend the US economic recovery?

A pickup in capital investment and capital spending could bring productivity back. Combined with positive growth in the working-age population, that recovery in productivity could make the economic expansion last much longer than many people anticipate.

Q: What could 4%–5% nominal US growth mean for debt?

If pro-growth plans proceed, Mian says nominal US growth could approach 4%–5%. With the effective interest rate on the debt around 2%, the debt-to-GDP ratio could be at a peak, creating the possibility of a more effective deleveraging.

Q: Why does Jawad Mian expect European cohesion rather than a breakup?

Europe remains well behind the US in its cyclical recovery from both employment and growth perspectives. Mian sees opportunities for companies to hire and benefit from pent-up demand, making European cohesion more likely in his outlook.

Q: How has China reduced the risk of a hard landing?

China has cracked down on the financial sector, shadow banking, and wealth management products. Mian says these measures reduce longer-term economic and financial risks, even though the economy is structurally slowing.

Q: What is Jawad Mian’s outlook for global growth?

He expects global growth to remain around 3%. In his view, that level of growth supports a favorable environment for risk-taking and leaves room for the broader economic expansion to continue.

Q: What could continued economic growth mean for markets?

Mian argues that if the economic cycle continues, the bull market could also continue. He also expects the global stock-to-bond ratio to rise much higher under that scenario.

Summary & Key Takeaways

• The US economy shows no signs of a recession, with no excesses in any sector and potential recovery in productivity.

• A pickup in capital investment and spending could lead to a longer economic recovery.

• Europe is still behind the US in its cyclical recovery, and China's recent measures reduce the risk of a hard landing.