Tag Archives: World Economy

The world economy may well be stuck in neutral for years – Telegraph

Low interest rates in the US and Greece are not a sign of recovery, but a warning of permanent stagnation, creating the potential for future ?nancial instability

It is now nearly seven years since the start of the ?nancial crisis, yet despite growing evidence in America and Britain of a return to relative normality, something remains profoundly broken at the heart of the world economy. One manifestation of this – much discussed among the of?cials, ?nance ministers and central bankers gathered in Washington this week for the spring meeting of the International Monetary Fund – is the persistence of unnaturally low interest rates.

The world economy may well be stuck in neutral for years – Telegraph

If the foundation for your house is crumbling and the house starts to fall, then putting up supports to prevent the fall is not going to fix the real problem. The real problem will remain until the house is allowed to fall and a new foundation is built.

The world economy will remain stuck in neutral forever, or until something – like war – comes along causing a great crash.

A world economy on the brink of fracture – Telegraph

Up against a gathering credit crunch, the Chinese economy will slow to almost stall-speed; the price of Brent crude will sink below $80 a barrel; Germany will slide back into recession; the United Kingdom will remain intact and the internet will begin to Balkanise, leading to a boom in encryption technology but problems for the big global online brands.

’Tis the season for self-indulgent – and mainly futile – crystal ball gazing. What does the future hold for the economy and markets? Normal health and wealth warnings apply.

My big prediction is for $80 oil, from which much of the rest of my outlook for the coming year flows. It’s hard to overstate the significance of a much lower oil price – Brent at, say, $80 a barrel, or perhaps lower still – yet this is a surprisingly likely prospect, the implications of which have been largely missed by mainstream economic forecasters.

But first, there’s the frequently humiliating task of revisiting last year’s predictions.

A world economy on the brink of fracture – Telegraph

World economy: The gated globe | The Economist

The forward march of globalisation has paused since the financial crisis, giving way to a more conditional, interventionist and nationalist model. Greg Ip examines the consequences.

FIVE YEARS AGO George W. Bush gathered the leaders of the largest rich and developing countries in Washington for the first summit of the G20. In the face of the worst financial crisis since the Great Depression, the leaders promised not to repeat that era’s descent into economic isolationism, proclaiming their commitment to an open global economy and the rejection of protectionism.

They succeeded only in part. Although they did not retreat into the extreme protectionism of the 1930s, the world economy has certainly become less open. After two decades in which people, capital and goods were moving ever more freely across borders, walls have been going up, albeit ones with gates. Governments increasingly pick and choose whom they trade with, what sort of capital they welcome and how much freedom they allow for doing business abroad.

World economy: The gated globe | The Economist

Japan’s Elections Rattle China – Businessweek

Now that the election is over and Abe is firmly in control, the Chinese seem to be steeling themselves for more confrontations over the disputed islands in the East China Sea controlled by Japan (barren rocks called the Diaoyu Islands by the Chinese and the Senkaku Islands by the Japanese). The official China Daily newspaper criticized the Japanese premier not only for his stand regarding the islands but also for his economic agenda designed to weaken the yen, end deflation, and revive growth in the world’s third-largest economy. “Abe persists in staging provocative shows that are alienating Japan from its neighbors,” the newspaper harrumphed. “Abe’s beggar-thy-neighbor policy is leading Japan up a blind alley, where it will be a pariah in the international community.”

Japan’s Elections Rattle China – Businessweek

Implication: Things are going to get worse.

IMF warns world economy risks chronic new phase of financial crisis | Business | guardian.co.uk

The International Monetary Fund has warned that new risks to global financial stability are already emerging before the problems left by the deepest slump since the 1930s have been sorted out.

In its half-yearly healthcheck on the financial system, the Fund said failure to deal with old and new risks risked propelling the five-year old crisis into a fresh chronic phase.

José Viñals, the IMF’s financial counsellor) said the improvement in financial markets seen over the past six months would not be sustained unless policy makers addressed “key underlying vulnerabilities”.

IMF warns world economy risks chronic new phase of financial crisis | Business | guardian.co.uk

Global economy faces ‘chronic’ crisis if reforms are not completed, warns IMF – Telegraph

It also found evidence in the United States that “accommodative monetary policies are bringing about an intended shift toward risky assets”.

“Higher borrowing in an environment of slower earnings growth is boosting corporate leverage, reversing the post-crisis trend of maintaining conservative balance sheets,” the IMF said.

“A prolonged period of low interest rates may create incentives to increase leverage beyond manageable levels, extend the decay in underwriting standards, and reinforce the search for yield.”

José Viñals, the IMF’s director of monetary and capital markets, said he was concerned about the rapid deterioration in underwriting standards.

“At this early stage of the cycle we are already seeing a deterioration,” he said.

Global economy faces ‘chronic’ crisis if reforms are not completed, warns IMF – Telegraph

Of course the financial crisis is not going away. We are stuck until the full crash is allowed to happen. We are all following Japan. There is no escape from the corruption, bad decisions and bad ideas, short of a big crash. The stress of this ongoing financial crisis could start destabilizing some countries.

Davos 2013: Global economy still at risk of collapse, says Klaus Schwab – Telegraph

Swiss economist Mr Schwab, speaking on the eve of the elite annual gathering in the Swiss mountain resort of Davos, called for business and government leaders to focus on “cautious realism” and a recovery of public trust to avoid another major financial crisis.

“The problems and the risks have not gone away,” he said in an interview with the Associated Press. “The world economy may still confront a collapse if very negative constellations occur.”

Davos 2013: Global economy still at risk of collapse, says Klaus Schwab – Telegraph

UN report predicts likely global economic downturn in 2013 | World Tribune

The global economy risks sliding back into recession.  That’s the sober assessment from the UN’s World Economic Situation and Prospects 2013, which cites weak economic growth in 2012, and an anemic expected expansion over the next two years.  And while economic woes in the United States, Europe and Japan have slowed global growth, once-seemingly supercharged economies such as China, India and Brazil are shifting into lower gear too.

“Weakness in the major developed economies are at the root of the global economic slowdown,” the report asserts, economies in “Europe are trapped in a vicious cycle of high unemployment, financial sector fragility, heightened sovereign risks, fiscal austerity and low growth.”  The report warns, “The U.S. economy slowed significantly during 2012.”

UN report predicts likely global economic downturn in 2013 | World Tribune

Why 2013 eerily looks like the world of 1913, on the cusp of the Great War

The leading power of the age is in relative decline, beset by political crisis at home and by steadily eroding economic prowess. Rising powers are jostling for position in the four corners of the world, some seeking a new place for themselves within the current global order, others questioning its very legitimacy. Democracy and despotism are locked in uneasy competition. A world economy is interconnected as never before by flows of money, trade, and people, and by the unprecedented spread of new, distance-destroying technologies. A global society, perhaps even a global moral consciousness, is emerging as a result. Small-town America rails at the excessive power of Wall Street. Asia is rising once again. And, yes, there’s trouble in the Middle East.

Sound familiar?

In many ways, the world of 1913, the last year before the Great War, seems not so much the world of 100 years ago as the world of today, curiously refracted through time. …

Eve of Disaster – By Charles Emmerson | Foreign Policy

Robert Samuelson: Can globalization survive 2013? – The Washington Post

One fateful question for 2013 is this: What happens to globalization? For decades, growing volumes of cross-border trade and money flows have fueled strong economic growth. But something remarkable is happening; trade and international money flows are slowing and, in some cases, declining. David Smick, the perceptive editor of the International Economy magazine, calls the retreat “deglobalization.” What’s unclear is whether this heralds prolonged economic stagnation and rising nationalism or, optimistically, makes the world economy more stable and politically acceptable.

Robert Samuelson: Can globalization survive 2013? – The Washington Post

Planning for China’s ‘Fall’

Yet a growing number of China watchers have been raising the alarm that all is not well in the world’s second-largest economy. Indeed, any discussion of China these days would be far more foresighted to focus on the growing challenges and potential dangers that the new leadership is facing. The implications of China experiencing an unexpected economic crash or major political crisis, let alone a military conflict, should be as much a part of strategic planning as plans based on more optimistic scenarios. Not so long ago, the U.S. government and CIA were caught flat-footed by the collapse of the Soviet Union. To avoid surprise, the following is a short list of things that governments and policy analysts around the world should pay attention to:

Planning for China’s ‘Fall’