Reconciling 3 Narratives About Global Growth

There are three major competing growth narratives about the global economy, and each has very different implications for markets, policies and politics. Even though these story lines may seem mutually exclusive in the short term, they could end up being consistent over time. Moreover, combining the three could provide a road map for what likely lies ahead.

Under the first narrative, a growing number of economists who had been resisting increasingly compelling data have been warming to the notion of an even longer period of low growth, or what has been labeled the "new normal," "new mediocre" and "secular stagnation." Driven by advanced economies that consistently fail to reach escape velocity, global growth remains low, which also puts downward pressure on future potential. Meanwhile, active central banks using an expanding menu of unconventional policies continue to successfully repress financial volatility. The result is a low-level equilibrium that is stable and persistent, though disappointing.