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Posts Tagged ‘global economic crisis’

COVID-19 SECOND WAVE ACCELERATING GLOBAL ECONOMIC CRISIS

July 13th, 2020 Comments off

 

Coronavirus has already unleashed a severe worldwide recession that is far worse than the Global Financial Crisis of 2007-09. In the words of economist Nouriel Roubini, the emergence of the Covid-19 pandemic resembled an asteroid striking the global economy.

The response of governments was inconsistent, but basically followed the following pattern; shut down much of the economy, accumulate unprecedented levels of debt to subsidize investors, businesses and laid-off employees, while hoping for the miracle of a quickly-developed vaccine. Amid the sea of debt-induced liquidity, pundits and policymakers boasted of a quick V-shaped recovery.’

 

Now we are witnessing in many countries a second-wave of the pandemic, in many cases only weeks after government officials boasted that coronavirus had been contained and that the economy could begin reopening. This, despite warnings from those more knowledgeable about the dynamics of a great pandemic that premature reopening of economic activity would greatly worsen the impact of a second wave of Covid-19, leading to repeated false openings followed by swift shutdowns of normal economic activity. These false starts and rapid lockdowns will actually worsen the negative impacts of coronavirus on the overall economy.

Now we are witnessing evidence that the pandemics is close to being out-of-control and spreading like wildfire in a growing number of countries, while sovereign debt , only months into the pandemic, is already at unprecedented levels. These factors further exacerbate the Global Economic Crisis now underway in tandem with the health crisis,  with talk of a V-shaped recovery proving to be illusory, while a severe economic depression  on the scale of the 1930s looks increasingly likely.

Global Economic Crisis Evolving Into Full-Blown Depression

June 19th, 2020 Comments off

There are two conflicting versions of reality emerging  regarding  long-term economic trends generated by the global health crisis. On the one hand, enforced lockdowns of key economic activity in response to the Covid-19 pandemic has already led to a worldwide recession that is by all measures far worse than the Global Financial Crisis of 2007-09. On the other hand, central banks, multinational economic forums and leading investment bankers are predicting  a V-shaped recovery; a sharp rise in economic activity following the steep decline due to the coronavirus.

A lesson from 2007-09 is that reality and data trump optimism. It must  be recalled that at the onset of the Global Financial Crisis, well into 2008, the U.S. Federal Reserve predicted that there would be no recession. Only months later, Lehman Brothers collapsed.

In the Global Economic Crisis created by the Covid-19  pandemic, the collapse of key industries such as tourism and airlines, the energy sector and manufacturing, the implosion of retail trade  and decline of exports and imports already rival the level of contraction that occurred during the Great Depression of the 1930s. This implosion in economic activity has occurred in 2020 in a matter of months, not years as with the Great Depression. Furthermore, the massive deficit spending by sovereigns, combined with the collapse in tax revenue, points to a staggering debt crisis globally in the near future.

Health experts warn of a second or even third wave of the coronavirus, thwarting attempts at restarting the global economy. A vaccine, in the most optimistic scenarios, is at least a year away. And even if a vaccine is developed and widely distributed,  the cumulative damage to the global economy will linger for years.

The most realistic scenario is that the 2020s will be a decade of unprecedented economic depression.

Global Economy In Free Fall At Worse Rate Than Beginning of Global Financial Crisis and Great Depression

March 20th, 2020 Comments off

The imposed shutdown of much of the world’s economy, all being done in a frantic effort to contain the rapidly spreading coronavirus, has set the stage for possibly the worst contraction in economic history. JP Morgan has now issued its first projection on the impact of Covid-19 on economic growth. They forecast in Q1 and Q2 of this year combined contraction of negative 14 percent in the United States, and negative 22 % in the Eurozone. This rate of decline exceeds the initial period of the 2008 Global Financial Crisis and 1929 stock market crash that unleashed the Great Depression.

What is unique about the 2020 Global Economic Crisis is that is being initiated by self-imposed demand destruction predicated on a public health emergency. We are entering uncharted territory.

Is President Trump the Herbert Hoover of 2020? Global Economy Collapsing in Freefall – Coronavirus Pandemic Is Now an Economic Catastrophe

March 18th, 2020 Comments off

The imposed shutdown and enforced demand destruction unleashed by sovereigns across the global in a frantic effort to contain the Covid-19 virus has now unleashed an economic contagion of devastating virulence. The underlying weakness in the global economy, mainly unprecedented corporate leveraging, hidden by artificially boosted stock market valuations, are now exposed and vulnerable to an extent that will likely exceed the Global Financial Crisis of 2008 in severity.

All indices of global economic trends – oil prices, equity markets, bond yields – are pointing to a massive global economic contraction, which might very likely become a full blown depression.

The social and political consequences will rival those of the public health emergency. One likely casualty will be President Donald Trump, who until recently seemed headed for reelection on the basis of perceived economic strength.

No longer.

As with Herbert Hoover in 1932, President Trump will have to campaign , not on the basis of the “best economy ever,” but with a depressed economy in freefall collapse, shedding jobs by the millions and with bankruptcies soaring.

The world is about to undergo radical change, unforeseen not even weeks ago.

Greek Euro Exit Expectations Growing

September 3rd, 2012 Comments off

 

Chatter about the inevitability of Greece exiting from the European Monetary Union-the euro-continues to gather momentum. A recent Financial Times poll indicated that a majority of Germans expect Greece to abandon the euro, and prefer such an outcome in lieu of continued bailouts of Athens that are largely funded by German taxpayers.

In the United States, major companies are preparing for the impact of a Greek exit from the euro, as reported in The New York Times.  In fact, major corporations globally are assessing the likelihood that Greece will exit-or be “kicked out” of the euro. It is also said that “the market” has priced in the impact of a Greek exit.

The problem with planning for a Greek euro exit or the market supposedly pricing in such a monetary development is that such a move will be unprecedented, and cannot be properly analyzed or accounted for in advance. For one thing, a Greek euro exit is only the first domino, and may open he way for the other PIIGS nations (Portugal, Ireland, Italy and Spain) to sequentially exit the euro after Athens departs from the monetary union. In short, we are sailing into unchartered territory, as the global economic crisis and Eurozone debt crisis enters a new, and potentially far more dangerous state.

 

                 

 

 

 

WALL STREET KILLS--A CHILLING NOVEL ABOUT WALL STREET GREED GONE MAD

 To view the official trailer YouTube video for “Wall Street Kills,” click image below:

In a world dominated by high finance, how far would Wall Street go in search of profits? In Sheldon Filger’s terrifying novel about money, sex and murder, Wall Street has no limits. “Wall Street Kills” is the ultimate thriller about greed gone mad. Read “Wall Street Kills” and blow your mind.

 

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Global Economic Crisis 2012

January 3rd, 2012 Comments off

All signs point to 2012 witnessing an acceleration of the negative economic and fiscal metrics that plagued advanced and major emerging economies in 2011. In particular, the Eurozone debt crisis, which dramatically worsened in 2011, shows no sign of abating in 2012. A clear indication of this is that Eurozone cheerleaders President Nicolas Sarkozy of France and Chancellor Angela Merkel of Germany, in New Year’s messages, warned that things with respect to the Eurozone crisis will be even more dire in 2012.

A sign of how  bad things look in Europe is the latest PMI data on European manufacturing, which was continuing to contract towards the tail end of 2011. This all points to a recession. In fact, there is now a clear consensus among economists that the Eurozone will enter a double-dip recession in 2012, if it in fact has not already done so. Clearly, nations such as Greece, Ireland and Portugal are currently in a recession so deep, it meets the definition of a full-blown economic depression.

And what about the United States? With 2012 a presidential election year in America, expect the Obama administration to spin economic data seven ways to Sunday in an effort to make things look more rosy. Thus, an unprecedented reduction in the total size of the American work force is twisted into a lowering of the unemployment rate.  But such gimmicks will probably become totally inoperative, once the impact of the looming Eurozone recession and banking crisis migrates to American shores.

In 2009, in my book , “Global Economic Forecast 2010-2015: Recession Into Depression,” I forecasted that the massive transfer of private debt into public debt by sovereigns as a synchronized response to the global financial and economic crisis unleashed in 2008 by the collapse of Lehman Brothers would fail to resolve the crisis, and would lay the seeds for an even more virulent global economic crisis by 2012. With a global sovereign debt crisis now an established reality, and the Eurozone teetering while America has had its previous AAA credit rating downgraded by at least one major ratings agency, neither a continuation of failed policies  nor gimmickry by politicians and central banks will bring an end to the global economic crisis in 2012. Instead of a return to economic growth, the most optimistic forecast one could make is stagnation which, at a time of structural mega-deficits and ballooning national debts, is a guarantee  of further long-term economic misery for a great many of the planet’s inhabitants.

 

                 

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Former Fed Chairman Paul Volcker Urgently Warns Against “Planned” Inflation

September 19th, 2011 Comments off

 

In an Op-Ed  piece in The New York Times, Paul Volcker, chairman of the Federal Reserve during 1979- 1987, issued an eloquent warning against economic policymakers deliberately increasing the inflation rate as a way of dealing with escalating economic and fiscal problems that have defied all other policy measures. Volcker’s Op-Ed, entitled, “A Little Inflation Can Be a Dangerous Thing,” warrants serious reading by all concerned with the global economic crisis. Paul Volcker knows what he is talking about; it was he as Fed Chairman during the Reagan administration who squeezed high inflation out of the U.S. economy through a draconian process of high interest rates.

 

Here are extracts of what Volcker wrote in his Op-Ed piece:

 

There is great and understandable disappointment about high unemployment and the absence of a robust economy, and even concern about the possibility of a renewed downturn. There is also a sense of desperation that both monetary and fiscal policy have almost exhausted their potential, given the size of the fiscal deficits and the already extremely low level of interest rates.

“So now we are beginning to hear murmurings about the possible invigorating effects of ‘just a little inflation.’ Perhaps 4 or 5 percent a year would be just the thing to deal with the overhang of debt and encourage the ‘animal spirits’ of business, or so the argument goes… Some mathematical models spawned in academic seminars might support this scenario. But all of our economic history says it won’t work that way. I thought we learned that lesson in the 1970s. That’s when the word stagflation was invented to describe a truly ugly combination of rising inflation and stunted growth… At a time when foreign countries own trillions of our dollars, when we are dependent on borrowing still more abroad, and when the whole world counts on the dollar’s maintaining its purchasing power, taking on the risks of deliberately promoting inflation would be simply irresponsible.”

In particular, due to the global sovereign debt crisis, economists and policymakers are discussing behind closed doors the desirability of a 5-6 percent annual inflation rate as a way of reducing the burden of national debts in advanced economies. As if the experience of Weimar Germany and Zimbabwe wasn’t enough to show the irrationality of such an approach, Paul Volcker again reminds us of the futility of engineering deliberate inflation as a policy “cure” for our economic woes. One can only hope that the former Fed Chairman’s clear warning is heeded.

                 

 

 

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Sovereign Debt Crisis Warning Issued By European Commission President

August 4th, 2011 Comments off

Jose Manuel Barroso, president of the European Commission, has hit the panic button. As the Eurozone debt crisis worsened, he remained among the most optimistic of EU officials, repeating his faith in the ability of the myriad of rescue packages to prevent further contagion from affecting larger European economies. But no longer.

Barroso has issued a clear warning to the policymakers in Europe that has a strong note of dire panic. He no longer pretends that the debt-financed rescue stratagems cobbled together by the inept politicians of the European Community are safeguarding larger economies such as Spain and Italy being exposed to the rapidly metastasizing debt crisis.  He admits with brutal frankness that the markets “remain to be convinced that we are taking appropriate steps to resolve the crisis.”

The panicky communication from the European Commission president has sparked a wave of frantic selling among stock markets across the globe, while leading gold to ascend to  ever higher prices. Is the handwriting on the wall? It is becoming ever more obvious, even to the formerly sanguine politicians, that the global economic crisis never ended, and that its current phase, the sovereign debt crisis, is getting more dangerous, while the inept policymakers run out of options.

 

 

Global Economic Crisis Much Worse Now Than Two Years Ago, Warns Nassim Taleb

June 11th, 2010 Comments off

In an interview with CNBC, the bestselling author of  “The Black Swan,” Nassim Taleb, described the current economic environment as being significantly deteriorated from 2008, when Lehman Brothers went bankrupt. In his gloomy assessment of the global economic crisis, Taleb said, “We had less debt cumulatively (two years ago), and more people employed. Today, we have more risk in the system, and a smaller tax base.”

According to Nassim Taleb, the core economic and financial problem afflicting major economies is a saturation of debt, both public and private. The current Eurozone and UK debt crisis is a manifestation of the age of austerity that lies before us. The United States and UK share the debt crisis afflicting Eurozone economies, however policymakers are still addicted to deficits even in the current critical economic environment. Taleb warned that a debt crisis could not be countered by taking on even more debt, a policy response he compared with giving more alcoholic beverage to an alcoholic.

Nassim Taleb also pointed out that toxic assets on bank balance sheets were as severe a problem now as two years ago. While acknowledging that governments have used taxpayer money to take some toxic assets off bank balance sheets, he pointed out that further degradation of remaining bank assets due to deteriorating economic metrics meant that banks were as fragile today as they were in 2008.

Double Dip Recession is on the Global Economic Menu

June 9th, 2010 Comments off

Ever since the monetary spigots and fiscal deficit pump primers were set on overload in the wake of the global recession that erupted following the Wall Street calamities of 2008, many economists have warned about the danger of a double dip recession. In other words,  the underlying weakness of the advanced economies most impacted by the recession  is so severe, an anaemic recovery may be shortly followed by a quick return to economic contraction. This is in fact what is increasingly likely to occur.

After incurring a flood tide of debt to cover the losses of the private banking sector, many advanced economies doubled down their bets by unleashing another torrent of debt for economic stimulus activity. The Keynesian policymakers assumed that the massive dose of public debt would quickly restore economic growth, thus ending the global economic crisis.

What has in fact  happened is that unprecedented levels of massive growth in the public debt has, at best, bought a feeble, anaemic and jobless “recovery,” with many economists calling for additional deficits for more stimulus spending. However, the bond markets have begun to react to the increasingly unsustainable levels of public debt. Thus, in short order we saw the Greek debt crisis evolve into the European debt crisis. Sovereigns that once boasted of their deficit spending are now in a panic, desperately trying to find ways of shrinking their structural deficits. The UK is joining with major Eurozone countries such as Germany in warning their citizens that austere times lie ahead, as governments reverse direction and begin to cut spending. These sombre voices are being echoed by the International Monetary Fund (IMF) and G20, as those officials, largely American, who are still calling for more deficit spending are now being drowned out by increasingly desperate European sovereigns, who have caught the scent of public default and national insolvency, and the apocalyptic economic repercussions that would ensue.

Now, what happens to a weak and artificial recovery from the worst economic recession since World War II when the fiscal deficits which alone underpin this so-called recovery are sharply curtailed? The answer is clear except to the politicians; double dip recession lies ahead, which will likely transform the global economic crisis into a full-blown synchronized depression.