Many are overly excited about the renewed growth of the world economy. For example, Chief Economist of the IMF, Maurice Obstfeld, wrote in his recent blog entry that Recent data point to the broadest synchronized upswing the world economy has experienced in the last decade. All looks nice, but what if it was a mirage, a growth pulse driven by unsustainable policies and actions?

In this blog-entry, I will argue that the recent spurt in global growth is exactly that. It is driven by a false belief that the long-awaited global recovery is finally here. However, a deeper look into the sources of growth paints a cruelling picture of manipulated world markets and on labile foundations of global growth. This entry is based on the recent business cycle forecast by GnS Economics.

Who has driven global growth?

This question can also be formalized by asking, where has the growth in private credit and capital come from? Figure 1 presents the development of global private non-financial debt. It shows that one country is responsible for all of increase in private debt since 2008: China. Figure 2, presenting the capital formation of major industrialized nations, tell a similar story. Without China, capital formation would have reached the level of 2008 only in the end of 2015.