Global recovery: this time it's different

THE moaning about the state of the global economy has now become almost deafening. The chorus is closing ranks around a battle cry for increased demand, which is nowhere to be seen. We do not, however, live in an economy responding in the same way to economic policies as it did until, say, 10 years ago. Policies applied would have elicited a robust global recovery .

Global debt is paralysing the global economy. In the year 2000, its share of gross domestic product (GDP) was 160 per cent. Today it is more than 215 per cent and is still rising.

Unanimity among economists to guide major economic powers through the debt crisis is conspicuously absent. The US Federal Reserve and the European Central Bank (ECB) - though less likely the Japanese central bank - will eventually rein in surplus liquidity. When they start to do so, interest rates will go up and recalling the debt burden will turn net interest payments into an insurmountable barrier for recovery.