We’ve been writing about and following the economy for a while now, and in that time we’ve seen many economic assessments from global acronymed organisations, like the IMF, OECD, BIS, WTF, etc.And we’ve begun to sense that there’s a pattern, which we’ve only recently figured out.
It’s all about getting the pattern down of making a conventional statement, and then immediately hedging that with the different conventional wisdom. Then you make a policy prescription. Then you hedge again.
If you get it down, then you can make yourself sound very smart.
So, for example, you might start with a general economic outlook, that’s really just a restating of where we’ve been.
The world’s economies have rebounded after a severe financial crisis which stretched the limits of the world’s institutions.
Then you have to hedge:
However the economy has been less than robust in much of the developed world, having been characterised by anemic growth and a poor return to full employment.
Then there’s the policy prescription, which follows the same formula.
The world’s governments must safeguard against a double dip — which still seems unlikely, based on our models — by providing markets with ample liquidity and ample stimulus.
Then the hedge:
However, governments must be mindful of excessive spending and debts, and central bankers must guard against inflation.
Then you move onto specific regions. You might start with Europe.
Again, same formula. The statement:
Europe has recovered sharply from the depths of 2009, as financial stresses have eased immensely.
Then the hedge:
However, this summer has seen a worrisome rise of sovereign debt concerns, particularly on the periphery of Europe.
Then the policy prescription:
The strong economies of Europe, notably Germany and France are advised to further backstop weaker periphery economies via bailout mechanisms and the allowance of a weaker euro.
Then the hedge:
However, governments and the ECB must be mindful of moral hazard, and the deficit limits established in the Maastricht Treaty must be closely observed.
Then, you move onto China:
China weathered the economic storm impressively maintaining robust growth thanks to swelling internal demand and aggressive stimulus.
And you know what’s next?
That’s right, your hedge:
However, Beijing must be mindful of asset bubbles, paying particularly close attention to growing signs of excess seen in the real estate market.
Give a prescription:
In order to ensure the stability of the Chinese economy, it is important that regulators maintain strict discipline about bank lending standards and capital adequacy ratios at banks. It’s also advised that a more flexible yuan policy would speed up the establishment of robust domestic demand.
But then, the hedge:
However, the push to liberalize the Chinese economy must be done slowly, as the country’s key institutions may not be ready for full exposure to the global stage.
And on and on and on you go.
You can play it at home. Just remember the pattern. Statement -> hedge -> policy prescription -> hedge. Pepper that pattern with some conventional wisdom, and then send your resume to the IMF. You’ll be all set.