This article from Project Syndicate is very pessimistic about prospects for the global economy. It focuses mostly on low inflation:

Draghi began by acknowledging that, in Europe, inflation has declined from around 2.5% in mid-2012 to 0.4% today. He then argued that we can no longer assume that the drivers of this trend – such as a drop in food and energy prices, high unemployment, and the crisis in Ukraine – are temporary in nature.

In fact, inflation has been declining for so long that it is now threatening price stability – and inflation expectations continue to fall. The five-year swap rate – an indicator of medium-term inflation expectations – has fallen by 15 basis points since mid-2012, to less than 2%. Moreover, as Draghi noted, real short- and medium-term rates have increased; long-term rates have not, owing to a decline in long-term nominal rates that extends far beyond the eurozone…

A year and a half ago, those who expected a return by 2017 to the path of potential output – whatever that would be – estimated that the Great Recession would ultimately cost the North Atlantic economy about 80% of one year’s GDP, or $13 trillion, in lost production. If such a five-year recovery began now – a highly optimistic scenario – it would mean losses of about $20 trillion. If, as seems more likely, the economy performs over the next five years as it has for the last two, then takes another five years to recover, a massive $35 trillion worth of wealth would be lost.

When do we admit that it is time to call what is happening by its true name?

This discussion doesn’t really get at potential root causes (a valid criticism of most economic and financial reporting, I think) – is it just a lack of confidence feeding on itself? Is it lack of innovation causing productivity to fall? Is it automation causing productivity to rise but lining too few pockets? Is it climate change or some other manifestation of environmental degradation?

The reference to falling food and energy prices wouldn’t seem to support that last hypothesis. But I don’t quite get it – Brent crude is at $102 a barrel compared to its historic inflation-adjusted level of $20-40 for most of the last century. Meat and grain prices in the U.S. are definitely up due to one of the worst droughts ever in some key farming states. And that’s the U.S., not the tropics where the bulk of humanity now lives and the bulk of food needs to be grown in the future. So if I am right and there are serious pressures on water, energy, and food, we better hope that we are innovating at the same time to do something about it.