Morning Must-Read: Martin Wolf: An Extraordinary State of ‘Managed Depression’

Martin Wolf: An Extraordinary State of ‘Managed Depression’: “In the US, UK and the eurozone…

…output has fallen far below what virtually everybody expected eight years ago. The same is true of Japan, though the trend in question ended two and a half decades ago. Yet, contrary to what we might also have expected, we do not observe accelerating deflation…. When we look at the high-income economies in this way, we must recognise that they are in a truly extraordinary state. The best way to describe it is as a managed depression: aggressive monetary policies have been sufficient to halt accelerating deflation, but they have been insufficient to produce a strong expansion. This is particularly true of the eurozone…. Recent suggestions by the ECB’s president, Mario Draghi, that the eurozone needs a radical shift in policy regime, is the self-evident truth. Yet the powers that be in the eurozone–notably, the German government–plan to do nothing about it…. We can, at last, see some reasons for optimism about the US and UK… though confidence… cannot be strong. More radical alternatives, such as higher inflation targets and debt restructuring, may yet be needed. In the eurozone and Japan, however, the picture looks more uncertain…

“Uncertain” is not the way I would put it, I must say…