Many people think that global markets started off on the wrong foot in the new year, leaving investors to wonder if there are deeper problems ahead with the recent slowdown in global growth. In the 1970's the U.S. struggled through a deep recession, and shopkeepers were watching out for consumers to act upon the "five-finger discount," a euphemism for shoplifting. This article talks about these "five-finger discounts," and how central bankers should be reminded of these growth-robbing challenges threatening the global economy over the next several business cycles.
1. Stalling globalization-When fueling corporate profits and personal income increases through international trade, capital and labor flows for about 30 years, and globalization appears to stall.
2. Unfavorable demographics- If current trends of large emerging market economies hold up over the next 10 to 15 years, many will be in the same position as most developed countries. This will cause slow growth in the supply of labor, higher dependency ratios and possibly a reduction in productivity growth.
3. Excessive leverage- Many people nowadays have high levels of debt, public, corporate, and household. Recent events in Chinese markets increase concerns that excessive leverage could set off another wave of global financial instability.
4. A harsher regulatory environment- More regulations is time-consuming and expensive for business, and most likely restricts productive investment.
5. Rising taxes- Twice as many countries have increased income taxes than cut them during this global financial crisis. Higher taxes tend to reduce incentives for employing capital and labor, distort domestic economic fundamentals through dead weight losses, and can prompt larger businesses to maximize returns for their investors by wasting resources to seek out lower tax bases for their operations.
Link: http://www.cnbc.com/2016/02/19/global-economy-faces-a-five-finger-discount-commentary.html
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