Ah, the old negative feedback loop has finally made it back into the narrative. The IMF is out with a note today warming of ‘widespread secular stagflation’ as well as the negative feedback loop. You think the analyst who concocted this report reads Zerohedge much?
This is all part of my thesis. As the year wanes on and growth proves to be lackluster, confidence with whither, then flag, then capitulate.
Prices will sharply drop and bonds will rise.
The world economy will grow 3.2 percent this year, down from a projected 3.4 percent in January, the IMF said Tuesday in a quarterly update to its World Economic Outlook.
“Growth has been too slow for too long,” IMF chief economist Maurice Obstfeld said in remarks prepared for a press briefing. “There is no longer much room for error.”“But by clearly recognizing the risks they jointly face and acting together to prepare for them, national policy makers can bolster confidence, support growth, and guard more effectively against the risk of a derailed recovery,” he said.
The IMF cited among the biggest risks as a “return of financial turmoil itself, impairing confidence and demand in a self-confirming negative feedback loop.”
“Another threat is that persistent slow growth has scarring effects that themselves reduce potential output and with it, consumption and investment,” the IMF said. “Consecutive downgrades of future economic prospects carry the risk of a world economy that reaches stalling speed and falls into widespread secular stagnation.”
In other words, the IMF is blaming confidence, of a lack thereof, for the systemic problems that are plaguing the global economy. Has it ever occurred to them that the lack of structural fiscal reform is at the root of these issues and the incessant papering over them with central bank over planning is only exasperating the core problems?
Maye these nuts should just prescribe heavy doses of psychotropics to everyone to make us feel happier again. That’ll fix everything and make all the debt, and the waste, and the corruption go away.
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Can someone explain what exactly a negative feedback loop is? I’ve heard it used in a million different contexts, some of which I imagine are incorrect. Thanks.
If you google negative feedback loop, you get this:
“Negative feedback occurs when some function of the output of a system, process, or mechanism is fed back in a manner that tends to reduce the fluctuations in the output, whether caused by changes in the input or by other disturbances.”
Negative feedback loops actually stabilize a system. But it seems that no one but engineers ever use this term correctly.
So almost no one uses the “negative feedback loop” correctly, Fly included. The popular usage of the term, which is technically incorrect, is to denote a situation where something is negative or bad, and then that negativity is recognized and fed back into the system, making the system more negative. It’s like a big snowball rolling down the hill of negativity, gathering more negativity as it goes. E.g. consumer confidence is low or negative. Then statistics come out showing this. Then consumer confidence becomes even more negative, because people are aware of the problem and then get all depressed about it.
There used to be a programming acronym for this: GIGO
Garbage In, Garbage Out
Negative feed back loop — A certain negative output e.g. deflation creates more of the same negative output.
In this context, global deflation causes under investment and less consumption resulting in more deflation.
Another example would be when a market crashes. Shareholders off loading shares results in a decrease of share price which results in more shareholders selling shares as they run for the exits.
Yes, that is the popular, and technically incorrect, usage of the term. But if you are not an engineer, that is the only usage you will probably ever see.
Only little problem is bonds have risen for 35 years and yields are negative in Europe and japan. Would you consider this bull market might be a tiny bit old or is that just the new normal that will lasts forever? Or maybe negative yield is fine and they will go more negative? What’s the upside? I’m confused.
“Warns of ‘Widespread Secular Stagflation”
This made zero sense until I say that it was a typo.
Stagnation, not Stagflation.
LOL.
until I SAW that it was a typo.
Economy:Circular reference error.