The International Monetary Fund seems to have finally caught on to the fact that the global recovery never really was a recovery.

The first 2016 edition of its World Economic Outlook, titled “Too Slow For Too Long,” give the impression that they’re starting to figure out what is going wrong but are prevented from recognizing the full extent by their ideological devotions. In other words, they are listening to the problem but cannot yet “hear” it.

There is nothing in their updated projections that come as a surprise. It is the usual downgrade across-the-board in incremental fashion – the slow drip of the slowdown that is now unimpeded into its fifth year.

The IMF has finally given up on estimating 3 percent growth for the United States, as the “best” annual GDP prediction in the IMF series is now just 2.5 percent forecast for 2017 – and only down from there to what looks like a new estimated baseline of just less than 2 percent.

That is a huge discrepancy compared to the 3 percent average for 1998 to 2007 (which, notably, includes one recession in that average).

The new forecasts don’t show an acceleration in growth with the IMF giving into its prognosis of “secular stagnation.” It doesn’t explicitly list the causes of stagnation, but merely note its potential effects.

Again, central bank “stimulus” remains conspicuously absent in the results quite opposite all prior expectations and promises. Thus, we can begin to “hear” that there is at least some monetary function amiss.

U.S. GDP growth is no better now than 2011 or 2012, remaining more than 0.5% less than its prior average. That may not seem like a big miss but it is, especially stretched out year after year (lost compounding) but more so in relation to again the size of the GR itself.
There is something very wrong with a large contraction and followed by a continuingly stunted growth period, not a real recovery.

Where’s Inflation?

The biggest discrepancy to the recovery trajectory has been inflation. It was thought that inflation over time would follow the recovery and gently accelerate into the “soft landing” utopian future just under every central bank’s 2 percent target.

Instead, inflation started falling in 2012 and hasn’t yet stopped. The current forecasts for 2016 show a small pickup around the world, but it is still early in the year with plenty of time for more downgrades (as with current estimates for 2016 GDP, especially in the U.S. if current Q1 forecasts hold at around 0 percent).

It bears all the hallmarks and scars of the slow constriction of a monetary noose; the shrinking global money supply. The IMF “hears” secular stagnation even though they detail all sides of the eurodollar system’s ongoing decay because mainstream theory does not allow observation. Instead, orthodox economics only permits “what should be” even where “what is” could not be more apparent.

That is why, even after five years of these downgrades and continual slowing, the IMF still predicts a turnaround (though less robust) just around the corner even though the trend is clearly entrenched. This is not an insignificant difference; at the end of secular stagnation is downgraded growth, but steady growth nonetheless. The final stage of a slowdown based on monetary decay and restriction is likely to be nothing like that.

Jeff Snider is head of global investment research for Alhambra Investment Partners, a registered investment advisory based in Palmetto Bay, Florida.