How the next recession will happen

In Uncategorized on 19/02/2016 at 7:14 am

How the US and therefire the world will fall into a recession from NYT Dealbook

If There Is a Recession in 2016, This Is How It Will Happen Tumult in emerging markets and the commodities sectors could create both real and psychological hits to an economy that is already growing sluggishly.

True markets are feeling good. But

The OECD has today lowered its growth forecast for the current year from 3.3% to 3%, saying that the downgrade is

broadly based, spread across both advanced and major emerging economies, with the largest impacts expected in the United States, the euro area and economies reliant on commodity exports, like Brazil and Canada.

Financial instability risks are substantial, as demonstrated by recent falls in equity and bond prices worldwide, and increasing vulnerability of some emerging economies to volatile capital flows and the effects of high domestic debt.

Manufacturing is weak in many countries, and big job cuts are being announced on a regular basis (Bombardier is the latest). Fourth-quarter earnings per share for S&P 500 companies are likely to be down 4%, the worst quarter since 2009. More corporate bonds are being downgraded and Moody’s forecasts that the global default rate for junk bonds will hit 4.2% by the end of the year from 2% in 2015; CreditSights is looking for a default rate in America of 5.5% by December.  And geopolitics still look a mess with the war in Syria raising tensions between Russia and Turkey, and China installing weapons on a disputed island in the South China Sea. The mood can always turn again.

Whateveer PM’s either very lucky or smart. He called the election at the right time.

Here’s something I was planning to post in mid October but which I mislaid.

PM held GE juz in time. Economy will take turn for worse

A “deeply concerning” slowdown in trade, particularly with China, will lead to lower global economic growth this year, says the Organisation for Economic Co-operation and Development.

Global GDP is now expected to grow by 2.9%, down from 3% forecast in September, but will hit 3.3% in 2016.

The OECD said trade had dropped to levels perilously close to those “associated with global recession”.

Worldwide trade growth is forecast at 2% this year, down from 3.4% in 2014.

Catherine Mann, the OECD chief economist, said: “This is deeply concerning. Robust trade and global growth go hand in hand.”

Asia Devaluation

Asia Devaluation

The three engines which have pulled developing economies along in the past decade—exports, public and private investment—are sputtering. World trade is growing slower even than global output. Tax receipts have been hit by falling commodity prices and depressed activity, squeezing government spending.

Colombia’s finance minister, Mauricio Cardenas, spoke of “intelligent austerity”—tax rises, spending cuts and slightly bigger deficits—but not all countries have fiscal room to embrace it. Businesses are putting off investment until uncertainties lift. At the same time, foreign investors are pulling capital out of emerging markets for the first time in years. Not all countries are equal. But “the bar for an emerging market to distinguish itself has moved higher,” David Fernandes of Barclays, a bank, told financiers at a parallel powwow of the International Institute of Finance, a bankers’ association.

FT I think

  1. Cancer Loong smart??? Sorry CI, any idiot could see that world economy slowing down by Q2 2015. That’s why a dumbass like me & a million other guys were predicting by June 2015 that GE would be in 2015 and not 2016.

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