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Negative Rates A Negative Force

The fighter with the glass jaw can persist indefinitely until he is hit. So it seems with the market; while economic vulnerabilities continue to mount, stocks are likely to hang in there until hit by a direct blow to the ever-fragile economic foundation.

There are many ways to describe this vulnerability, but we’ll focus on recent happenings. This weekend the G-20, a collection of the world’s 20 most important economies, had a summit in China. With the exception of very recent summits of large nations, this was the most motley collection of countries whose leaders assembled under one roof. In terms of income per capita, as shown by the Bloomberg chart, the range was about nine-fold with India at the rear at $6,000 and the U.S. in the lead with over $55,000. When you pair anorexics with the morbidly obese to discuss food labels, don’t expect consensus—their disparities are too great.

What makes this strange mix even more intractable: those countries that lag in per-capita incomes were not the smallest. China, fourth from the bottom in per-capita income, is the largest in overall income.Moreover, many low per-capita countries such as Brazil, Russia, South Africa, and China, have abundant natural resources—resources necessary for the rich per-capita countries to maintain their living standards.

The gathering agreed to pursue a growth agenda. This means all ways to boost growth, from current emphasis on monetary policy to government spending on badly needed infrastructure to structural reform tools that eliminate messy and stultifying bureaucracies. Unfortunately, the disparities among these countries make a win-win situation nearly...