Fiscal stimulus?

While this graph is interesting, it is not at all easy to explain.

This week’s graph is remarkable. Taken from a Bloomberg article, it shows over time just how often Bloomberg has used the term ‘fiscal stimulus’, i.e. government measures designed to stimulate the economy, in its news items. By and large, the first period is pretty much what you would expect. From 2008-2009, when the global economy saw its worst recession since the 1930s, the term popped up quite often. Everyone expected governments to step in to save the economy, by boosting growth with extra spending packages and temporarily accepting the resulting extremely large deficits. Indeed, as the economy recovered, use of the term began to diminish again.

No surprises so far. However, the second period in the graph is telling: since the start of this year, the term has again gained in popularity and mid-year, it was appearing even more often than it did during the crisis. This made me wonder: did I miss something during my vacation? Could a new global recession be brewing? At any rate, that seemed to be the gist of the Bloomberg article. There is also a second graph in that article showing the weakness of the US economy and citing disappointing Q2 growth of 1.1% as a factor. It doesn’t take a genius to realize that sluggish growth calls for fiscal stimulus measures.

But even so, while 1.1% is on the low side, it’s still higher than the growth registered in the last half of 2012. So why didn’t ‘fiscal stimulitis’ flare up then? At first I still thought, perhaps it’s because of the US presidential election campaign: not just anyone can get elected, you do it by boosting the economy. Unfortunately, that doesn’t hold water. Not only was there no election underway in 2012, there were no peaks in stimulus measures either. And the spike was significant: it broke the old 2009 record!

Just to be sure, I double-checked with Google to see if it followed with the trend. The result was quite clear: Google confirmed the 2009 spike, but not that of 2016…

Fortunately, I have a Bloomberg terminal, so I can go back to the source. And lo and behold, the system shows that exact spike (sorry for the quality of the chart), which brings me back to the question: what really caused the increased usage of fiscal stimulus? Or are Bloomberg journalists just fond of suddenly writing about it?

‘Fiscal Stimulus’ story count
Source: Bloomberg NT

After some variations on the theme, I finally discovered where all the stimulus rumors came from: by applying a regional split and adding the word ‘Japanese’, it quickly became clear who was primarily responsible: Abe. The Japanese markets had a bumpy ride after details of a new stimulus package were announced in early August. For Bloomberg, financial market turmoil is important news, which explains why there were suddenly so many articles on the subject. It had nothing to do with a recession or with elections. Well, perhaps with a Japanese recession then, but that wouldn’t be the first time…

Nice graph, but it’s not as meaningful as it appears at first glance.

‘Japanese Fiscal Stimulus’ story count
Source: Bloomberg NT

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