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Global Economic Downturn to Continue? (Read 98954 times)

perceptions_now

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Re: Global Economic Downturn to Continue?
Reply #525 - Sep 3^rd, 2011 at 12:20pm

U.S Employment Stagnated in August

Employment in the U.S. unexpectedly stagnated in August, increasing pressure on Federal Reserve Chairman Ben S. Bernanke and President Barack Obama to spur an economy that’s barely growing two years into the recovery.

Payrolls were unchanged, the weakest reading since September 2010, the Labor Department said today in Washington. The median forecast in a Bloomberg News survey called for a gain of 68,000. The jobless rate held at 9.1 percent.

“This is further evidence that the economy is very close to stalling if not having stalled,” said Nariman Behravesh, chief economist at IHS in Lexington, Massachusetts, who forecast a gain of 15,000.

“We’re calling for a mild recession at this point,” said Julia Coronado, chief economist for North America at BNP Paribas in New York. “We’ll see QE3 definitely,” she said, referring to a third round of large-scale asset purchases by the Fed. “It helps put a floor under the economy and stabilize things.”

Stocks Slump
The Standard & Poor’s 500 Index fell 2.5 percent to 1,173.97 at the 4 p.m. close in New York. The yield on the benchmark 10-year note dropped to 1.99 percent from 2.13 percent late yesterday.

Obama Proposal
Among the steps Obama has been considering are more infrastructure spending, tax incentives to spur hiring, a reduction in the employer portion of the payroll tax and changes to unemployment insurance to subsidize worker retraining, according to people familiar with discussions.

Obama’s options will be limited by opposition to increased spending from Republicans in Congress.

“I’m not sure what the administration can do at this point,” said Gus Faucher, director of macroeconomics at Moody’s Analytics Inc. in West Chester, Pennsylvania. “I think any full-bore stimulus is dead in the water.”

Political squabbling over the budget and mounting fear of a default in Europe caused the S&P 500 to plummet 17 percent from July 22 to Aug. 8, prompting companies and consumers to cut back.

Sustained payroll increases of around 150,000 a month are needed to bring unemployment down about half a percentage point over a year, according to Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “200,000 is the speed the economy needs to really cut into the jobless rate,” he said.

Government payrolls decreased by 17,000 in August. Employment at state governments rose by 5,000, even after the end of a partial shutdown of the Minnesota government returned about 23,000 workers to their jobs. Local government employment slumped 20,000.

Private hiring, which excludes government agencies, climbed 17,000 last month, the smallest increase since a decline in February 2010. The median forecast in the Bloomberg survey called for a 95,000 increase.

“Economic growth has, for the most part, been at rates insufficient to achieve sustained reductions in unemployment,” Bernanke said Aug. 26 at the Jackson Hole, Wyoming, central bank symposium. “It is clear that the recovery from the crisis has been much less robust than we had hoped.”

Link -
http://www.bloomberg.com/news/2011-09-02/employment-in-u-s-unexpectedly-stagnate...
============================================
A few observations -
1) Due to Population growth, the US Economy needs 150,000 additional jobs each month, just to tread water, just to stand still.
Anything less than 150,000 each month, means the US Economy starts to sink!

2) The basic cause of the US & Global Economic woes arise from Declining Demand, due to Demographics (Baby Boomer Ageing & Job losses) and the Public anticipating a poor Economic future, due to Debt problems in the US & Europe.
3) Neither side of the Economic divide (Keynesians Vs Austrians) can magically solve the current Global Economic dilemma's.
Keynesians can not, because this is not a short term issue that can be resolved by governments throwing money at it. But, in any event, most governments couldn't, even if they wanted to, because poor planning over many decades already has them in serious Debt problems, when they should have had substantial surpluses available, to be used to stimulate their Economy.
Austrians can not, because their usual AUS-terity programs will only serve to produce further Declines in Demand for Products & Services, as the Publics Disposable income is further reduced, sending Consumption ever lower and there goes the big Economic driver, as Public Consumption is around 70% of the Economy.
4) Bernanke & the FED can usually draw Economic activity higher, by lowering interest rates, but the FED already has their rate effectively set at ZERO and there is currently no way the FED can put any floor under the economy or stabilize anything.
5) Obama can not stimulate the US Economy, as US Debt is already far too high, so any possible stimulus measures can only be mild and that is, IF any measures can get past the Republicans & the Tea Party.

So, what we have is the DOW down 253 today and the next 10-20 year trend in Economic activity set to Decline, due to Demographic trends (Ageing & actual Global decline), Peak Energy & Climate Change issues, IT WOULD SEEM THAT EQUITIES ARE GOING TO TAKE A HAMMERING for quite some time.

Good luck & watch the Debt!

PS - China can not help OZ & nor will the Liberals!

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Re: Global Economic Downturn to Continue?
Reply #526 - Sep 3^rd, 2011 at 9:53pm

The Mighty US$

Last Report dated 06/08/2011

US$ Index (basket of Currencies): @ 74.71 (Last Report - 74.52) (2010/06/04 - 87.85)
http://www.goldseek.com/quotes/charts/usdollar/usdollarindex24hour.php

Euro - US$: @ 1.4205 (Last Report - 1.4282) (2010/06/04 - 120.44)
AUD$ - US$: @ 1.0645 (Last Report - 1.0442) (2010/06/04 - 83.17)
AUD$ - GBP: @ 0.6563 (Last Report - 0.6371) (2010/06/04 - 57.04)
AUD$ - EURO: @ 0.7492 (Last Report - 0.7312) (2010/06/04 - 69.06)
http://www.bloomberg.com/markets/currencies/fxc.html

Gold - @ US$1,884.20 (Last Report - US$1,651.80) (2010/06/04 - $1,207.80)
Oil WTi - @ US$86.45 (Last Report - US$86.88) (2011/03/19 US$101.01) (2010/06/04 - $70.22)
BALTIC DRY INDEX (BDIY) - @ 1,740 (Up 58 @ Friday close) (Last Report – 1,268) (2010/06/04 - 3,844)
http://noir.bloomberg.com/apps/quote?ticker=BDIY:IND

DOW @ 11,240 - (Down 253 @ Friday close) (Last Report - 11,445) (2010/06/04 - 11,444)
ALL ORDS @ 4,322 (Down 61 @ Wednesday close) (Last Report - 4,170) (2010/06/04 - 4,840)
SHANGHAI COMPOSITE @ 2,528 (Down 28 @ Friday close) (Last Report - 2,626) (2010/06/04 - 2,553)
http://www.bloomberg.com/?b=0

Last 5 years DOW -
http://finance.yahoo.com/echarts?s=%5EDJI#chart3:symbol=

THERE was movement at the FED, for the word had passed around, That the US$ was an old Regret and its value had long since passed away
==================

Well, the VOLATILITY certainly has continued to escalate!

US$ Index
After approaching 89 in June and going under 76 in November, the US$ index finished 2010 at 78.96.
It then rose to 81, before falling again to a low of 75.57.
After hitting a recent low of around 73.50, the US$ has spiked again on recent turmoil, finishing Friday at $74.71
http://futures.tradingcharts.com/chart/US/M

AUD$ - US$
One of the big winners last year was the OZ$, which slid to $0.83 against the US$ in June and has since recovered dramatically to close 2010 at $1.0233.
The OZ$ had range traded, but recent events had seen it drop to around 0.98, before rebounding to its current levels.
The OZ$ closed Friday at 1.0645, after trading recently as high as $1.076 range.
The OZ$ has also picked on the cross rates, against both the GBP & the Euro.

Gold
Gold dipped a little early in the year to around $1,050 in February, but finished the year strongly at $1,421.40.
It has since slipped and threatened to break back under $1,300, before rising again.
Gold has continued its recent charge, up from US$1,541.60 on July 9th, to US$1,651.80 on August 6th and US$1,884.20 today.

Oil WTi
Having slipped below $70 mid year, Crude Oil recovered to finish 2010 at $91.38.
It since slipped to around $85, before escalating sharply on Middle East tension to rise to around $107 a barrel.
After coming down from US$96.20 on July 9th, to US$86.88 on August 6th, Oil has been up & down, but finished Friday at US$86.45, close to its price at the August report.

The Oil Price will now decline along with the Global Economy, for some time, before recommencing it's rise, due to Supply related problems!

BALTIC DRY INDEX (BDIY)
The Baltic Dry Index finished Friday at 1,740, up somewhat on the previous report. However, I suspect that level will fall again in coming months.

DOW
Share markets after reaching mid year lows, as the DOW went from just under 9800 in July, to finish 2010 at 11,577.
The DOW Declined from 12,657 on July 9th, to 11,445 on August 6th, before hitting a recent low of 10,719 on August 10th, amid some wild recent fluctuations, before finishing down 253 on Friday, at 11,240.
Given the basic Economic factors in play, I suspect the trend is down & we are not yet anywhere close to a bottom.

ALL ORDS
The Australian market rose from just under 4,300 in July to finish 2010 at 4,847.
The All Ords Declined from 4,716 on July 9th, to 4,170 on August 6th, before hitting a recent low of 4057 on August 8th amid some wild swings, before finishing down 61 on Friday, at 4,321.
Following the US & Europe performances on Friday, it is likely that OZ will follow on Monday with another fall!
OZ, as with most other countries will follow the US and I therefore suspect that the All Ords is also no where close to a bottom.

SHANGHAI COMPOSITE
The Shanghai Composite continues to be the Roller Coaster Ride!
The Shanghai Composite finished down 28 on Friday, to close at 2,528.

NOTE: Given the REAL, BASIC ECONOMIC FACTORS involved -
1) Declining Demand, due to Demographics (Baby Boomer Ageing & Job losses) and the Public anticipating a poor Economic future, due to Debt problems in the US & Europe.
2) Peak Energy & related issues.
3) Neither side of the Economic divide (Keynesians Vs Austrians) can magically solve the current Global Economic dilemma's.
4) Bernanke & the FED are Impotent.
5) Obama can not stimulate the US Economy, as US Debt is already far too high, so any possible stimulus measures can only be mild and that is, IF any measures can get past the Republicans & the Tea Party.

I WOULD SUGGEST, THE TRUTH IS, THAT EQUITIES ARE GOING TO TAKE A HAMMERING for quite some time.

Good luck & watch the Debt!

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perceptions_now

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Re: Global Economic Downturn to Continue?
Reply #527 - Sep 5^th, 2011 at 12:40pm

Non-Farm Payrolls Below 2001 Level

The current number of non-farm payrolls is below those of 1999-2001. The population has grown from about 280 million in 1999 to approximately 312 million today. So, adjusted for population growth, employment is in much worse condition than the above graph indicates.

The above graph shows that employment levels (as measured by non-farm payrolls) have fallen back to early 1987 levels.

The other factoid taken from the above graph is that population normalized employment has reached the low point of a recession that started at the turn of the century. There was a failed attempt at a recovery 2003-07. Then the recession resumed.

The title of this article could well have been "Non-farm Payrolls at Levels not Seen since Early 1987."

What this graph is specifying in hard data is an employment depression.

While the U.S. stock market can be supported in this massive depression by global earnings, if global economic activity slows down where will support for current earnings come from? And more earnings growth?

Europe is definitely slowing under the austerity demands stemming from the sovereign debt crisis. Asia is slowing under the attempts of central banks to stem inflation.

Where is the growth going to come from?

Link -
http://seekingalpha.com/article/291481-non-farm-payrolls-below-2001-level?source...
=========================================
A few observations -
1) As shown in the first chart, IF US Employment had continued its long term trend, then Non-Farm Payroll numbers would now be around 150 Million.
Instead, those Employment figure is around 131 Million, some 19 Million under where it would have been, IF it had stayed on trend.

2) As shown in chart 2, the Employment numbers to the Total Population ratio clearly Peaked around 2001 and that ratio is now clearly on a downward trend, having already declined from around 47% to about 42%.

3) There are two separate & competing Demographic issues involved in these US figures and they should also be expected in Global trends.
a) First, with total Population levels still continuing to rise, in the US at around 1% PA, this means that at a 60 participation rate that an additional 150,000 jobs NEED to be added to the US Employment figures each month, just to tread water, just to be standing still. Anything less and the US Economy is in Decline. This is shown in chart 1.
b) On the other hand, as from January 1st 2011, some 80 Million Americans started the "official" transition of US Boomers into retirement.
This means that based on the same 60% participation rate that some 220,000 Boomers are now DUE to retire (on average) each month, for the next 18 years.
In fact, the decline in the Employment to total Population ratio started around 2001 and that ratio will continue to decline, for the next 20 years, following the Demographic trends of the Boomer generation.

So, by current population increases, some 150,000 new jobs would normally be expected each month.
However, because of much higher retirement levels, due to the Boomers, there is possibly another 220,000 jobs being vacated each month by Boomers.

In an Economy functioning at capacity, this could see another 150,000 new jobs each month, to keep up with Population increases and another 220,000 jobs to fill each month, to keep up with Boomer retirements.
That's some 370,000 jobs each month, to keep the Economy rolling, unless productivity can magically increase?

In short, available worker numbers would normally have been stretched to the limit, with the Unemployment ratio sinking to very low levels.

That scenario has actually happened in some countries, such as Australia, where the Unemployment rate fell below 5%. However, that ratio is now likely to start to increase, following the Global Economic downturn!

Whilst Australia was relatively well placed in Debt levels, the US and much of Europe were not and as both areas started their Economic downturn in the early part of this new century, they are both now approaching catastrophic tipping points, which I envisage will become apparent to almost all, by the end of 2012!

To exacerbate matters, Global Energy Supplies are now Peaking, with Oil being the intial problem NOW, but all other Fossil Fuels are due to follow within the next 20-40 years and finally, with issues relating to Climate change, it means that another Population explosion to assist Global Economics is not possible this time, as there will be insufficient Food, Water & Energy for another Baby Boom!

So, good luck, watch the Debt and watch the world change!

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Re: Global Economic Downturn to Continue?
Reply #528 - Sep 5^th, 2011 at 8:15pm

For the record -
1) The Australian All Ords has fallen about 10%, since its late July Peak.
2) The US DOW has fallen about 12%, since its late July Peak.
3) The UK FTSE has fallen about 13%, since its late July Peak.
and the European Powerhouses ?
4) The French CAC has fallen about 21%, since its late July Peak.
4) The German DAX has fallen about 27%, since its late July Peak.

I hope the rest of Europe are not relying on the French & the Germans, because IF they are, the Truth is they may be sorely disappointed!

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Re: Global Economic Downturn to Continue?
Reply #529 - Sep 6^th, 2011 at 12:03am

Well, it may be another instance of, "once More unto the Breach, Dear Friends"?

As the US has its Labor Day holiday today, the NYSE will not be opening, but the DOW Futures markets are open and down some 186 points or 1.66%.

However, that is actually better than what is happening on European exchanges, where things are growing decidedly ugly, with the major bourses currently showing -
Germany 30 5257.50 -280.83 -5.07%
UK 100 5130.00 -162.03 -3.06%
France 40 2998.50 -150.03 -4.77%

Events seem to be moving quickly and by this time tomorrow night, when the NYSE re-opens after Labor Day, it could be an interesting time?

Btw, in the time taken to type this post, DOW Futures have moved, from down 186, to down 236.

Europe bourses are now -
Germany 30 -307 -5.52%
UK 100 -182 -3.43%
France 40 -163 -5.17%

And, OZ Futures also down another 80 points.

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Re: Global Economic Downturn to Continue?
Reply #530 - Sep 6^th, 2011 at 11:04am

Shareholders wake up to hellish market

THE Australian sharemarket is set to take a massive hit this morning after European and Asian markets tumbled overnight.

European stocks fell heavily yesterday on fresh market fears about Europe’s debt crisis and evidence of a continent-wide drift towards a double-dip recession.

Stocks tumbled about four per cent yesterday, with bank stocks bearing the brunt of the sell-off.

London's FTSE 100 index of leading companies dropped 3.58 per cent to 5102.58 points. In Paris, the CAC 40 fell 4.73 per cent to 2999.54 points and in Frankfurt the DAX plunged 5.28 per cent to a two-year low at 5246.18 points.

Market borrowing costs for Italy and Spain have begun to creep up again, despite the European Central Bank's decision to buy up their debts.

Bonds issued by Greece and Italy fell, and the cost of insuring against default by Italy and France, as indicated by the market for credit default swap (CDS) instruments, rose sharply.

The head of the European Central Bank Jean-Claude Trichet warned of an immediate and imperative need for enactment of a second debt rescue for Greece, and for tightened discipline in the management of eurozone economies.

He also spoke of an eventual "confederal" disciplined management of eurozone national finances.

And the head of the International Monetary Fund, Christine Lagarde, repeated her warning that banks in Europe need extra capital to withstand any contagion from the eurozone debt crisis.

ECB data showed that eurozone banks have deposited record amounts of overnight funds with it, a signal of reluctance by banks to lend to each other.

European bank shares slumped on the developments.

In Britain, Royal Bank of Scotland (RBS) slumped 12.32 per cent to 21.78 pence, while Lloyds Banking Group (LBG) dropped 7.46 per cent to 30.65 pence and Barclays fell 6.69 per cent to 154.15 pence.

Societe Generale was hit the hardest on Paris's CAC 40 index with a fall of 8.64 per cent to 20.25 euros, with BNP Paribas dropping 6.34 per cent to 31.30 euros.

Shares in Deutsche Bank fell 8.86 per cent to 23.72 euros, not helped by its chief Josef Ackermann saying the situation resembled that of the panic that followed the collapse of US investment bank Lehman Brothers in 2008 and threw the world economy into recession.

Italy's UniCredit fell 7.30 per cent to 0.832 euros and Intesa Sanpaolo dropped 6.96 per cent to 1.029 euros.
In Switzerland, Credit Suisse fell 8.13 per cent to 19.99 francs and UBS lost 6.52 per cent to close at 10.32 per share.

"When the power of love overcomes the love of power, the world will know peace." Hendrix
andrei said: Great isn't it? Seeing boatloads of what is nothing more than human garbage turn up.....

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Re: Global Economic Downturn to Continue?
Reply #531 - Sep 7^th, 2011 at 1:21pm

Yes, the OZ market has bounced today!

Following a bounce started in the US last night, where the DOW was down some 270 points,(which was following what happened in Europe the night before), it then turned around to finish the session down by only 101 points and DOW Futures have continued that trend, being up 66 now.

It could be there is an expectation that Obama is going to revive the "Exponential Growth Fairy", which is currently on life support in intensive care, in a speech he is due to make before the US Congress on Thursday?

Regrettably, the reality is that Obama, the FED and all those other "Economic authorities" have been making statements, which is all they can now do.

In Truth, they are now impotent, they can not revive the "Exponential Growth Fairy", in the face of the Macro factors now influencing Global Economics.

The Truth, bearing in mind the Demographics, Peaking Global Energy Supplies, Peaking Global Debt & Climate Change issues, there is zero chance of the "authorities" reviving Growth and if the Truth were known, I doubt that is their real intention, at least at some of the highest Global levels?

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Re: Global Economic Downturn to Continue?
Reply #532 - Sep 10^th, 2011 at 8:33am

DOW - 10,992.13
Down 303.68 (2.69%)

http://chart.finance.yahoo.com/zs=%5eDJI&t=1d&q=l&l=on&z=l&a=v&p=s&lang=en-AU&region=AU

U.S. stocks slammed by Europe’s troubles

U.S. stock indexes dove Friday on heightened worry about Greece’s debt crisis, pushing the dollar to a six-month high against the euro and 10-year yields to a record low.

The distress came along with news that the European Central Bank’s top economist had quit and that Germany was reportedly preparing to safeguard its banks against a possible Greek default.

“The perception is the ECB is not on the same page, that it doesn’t have a clear vision of how to stimulate the economy,” said Brad Sorensen, director of market and sector analysis at Charles Schwab Corp.

Tallying its sixth straight triple-digit move, and its worst day in more than three weeks, The Dow Jones Industrial Average DJIA -2.69% lost 303.68 points, or 2.7%, to 10,992.13, down 2.2% from the week-ago close.

All of the blue chips’ 30 components lost ground, including McDonald Corp.’s MCD -0.05% off 4%, after the world’s biggest burger chain reported a less-than-anticipated increase in global sales for August.

Also weighing on the Dow, Bank of America Corp. BAC -0.14% shares shed 3.1% on a Wall Street Journal report that executives have discussed cutting about 40,000 jobs in an initial restructuring wave.

Link -
http://www.marketwatch.com/story/us-stocks-battered-by-ecb-members-exit-2011-09-...
========================================
The Truth is, Central banks and governments are now pretty much impotent, events are now in self sustaining feedback loops, much like Climate Change.

At some time, in the not too distant future, a tipping point will arrive, possibly Greece OR something else and the equity markets will crash.

That crash will most likely start in Europe or the US, but will flow on to the rest of the world, including China & the developing countries in Asia & elsewhere.

The crash is likely to see something in the order of 30-50% wiped off share values in the short term, but around 50-75%, in the longer term!

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perceptions_now Gold Member Offline Australian Politics Posts: 11694 Perth WA Gender:	Re: Global Economic Downturn to Continue? Reply #533 - Sep 10^th, 2011 at 11:21am Margin Call http://www.margincallmovie.com/ Hmmm, Yes, could be prophetic in timing? Btw, seems like a good cast!
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perceptions_now

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Re: Global Economic Downturn to Continue?
Reply #534 - Sep 10^th, 2011 at 12:03pm

US$ Rises - Everything else Falls

US$ Index - US$77.204

http://www.bloomberg.com/apps/charth=200&w=280&range=1y&type=gp_line&cfg=BQuoteComp_10.xml&ticks=DXY%3AIND&img=png

On August 29th, the US$ index closed at 73.721
Today, it continued its sharp recent rise to finish at 77.20

EURO/US$

US$1.3651

http://chart.finance.yahoo.com/zs=EURUSD%3dX&t=1d&q=l&l=on&z=l&a=v&p=s&lang=en-AU&region=AU

On August 29th, the EURO bought US$1.4514.
Today alone, it fell around 3 cents & now it only buys US$1.3651

AUS$/US$

US$1.047

http://chart.finance.yahoo.com/zs=AUDUSD%3dX&t=1d&q=l&l=on&z=l&a=v&p=s&lang=en-AU&region=AU

On September 1st, the AUS$ bought US$1.0725
Today alone, it fell around 2 cents & now it only buys US$1.047

So, following modern history, the US$ rises in what is called "a flight to quality", during a Global Economic crisis.

Strangely, few seem to be taking note that on this ocassion, it is the USA itself who may be the most exposed and who are at least in as great a peril!

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Re: Global Economic Downturn to Continue?
Reply #535 - Sep 13^th, 2011 at 8:54am

http://chart.finance.yahoo.com/zs=%5eDJI&t=1d&q=l&l=on&z=l&a=v&p=s&lang=en-AU&region=AU

So, after DOW Futures were down 240 shortly before trading started on the DOW, markets started to rise and within an hour of trading commencing the DOW was even.

However, after the usual ups & downs, the DOW was down about 170 with an hour & a half left of trading when rumours hit the market of the Chinese coming to the rescue of Italy.
http://www.bloomberg.com/news/2011-09-11/u-s-stock-index-futures-decline-amid-co...

And, at the close, the DOW is up by 69.

So, as usual, another bout of slight of hand?

But, at the end of the day, slight of hand is not enough!

Reality eventually catches up and the Greek situation just foesn't magically disappear -
http://www.bloomberg.com/news/2011-09-12/greece-s-risk-of-default-increases-to-9...

That said and whilst Greece is bad enough, there is "No Hiding Place From the Bigger Crisis" -
http://finance.yahoo.com/news/No-Hiding-Place-From-Crisis-cnbc-3512402427.html?x...

"Carl Weinberg, the chief economist at High Frequency Economics is very worried about Europe. His central forecast is that the debt crisis will lead Europe into a depression that will mean soaring unemployment, deflation and zero interest rates for the foreseeable future.

After months of inaction, Weinberg believes the time to stop a Greek default has now passed. He believes that once it becomes clear that Greece has defaulted, the market will quickly come to the realization that other euro zone members like Portugal, Ireland, Spain and Italy will be allowed to fail as well.

With the so-called PIIGS (Portugal, Ireland, Italy, Greece and Spain) sitting on 3 trillion euros in debt, Weinberg is assuming losses could ultimately hit 50 cents in the euro, leading to a 1.5 trillion euro hit to the financial system.

This will in Weinberg's opinion force banks to stop lending. Governments will then be forced to bail them out, elevating debt-to-GDP ratios for national governments to "horrific levels"

With US and UK banks likely to have big on and off balance sheet exposure, Weinberg warns all they can do is prepare for the worse.

"There is no place to hide from this, at least not in the Euroland. German banks are no safer than Greek ones in this disaster scenario. The myth that bunds are a safe haven from Euroland debt woes will be proven wrong the minute the first German bank announces that it needs public help to recapitalize it," he said."

I'm sure, the sounds of the last can, being kicked down the last road, will still be ringing in the markets ears, as those same markets go into meltdown!

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Ex Dame Pansi Gold Member Offline Australian Politics Posts: 24168	Re: Global Economic Downturn to Continue? Reply #536 - Sep 13^th, 2011 at 9:17am It's the debt plague a-tissue a-tissue we all fall down!
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Re: Global Economic Downturn to Continue?
Reply #537 - Sep 14^th, 2011 at 3:45pm

Are The U.S. And Europe Headed Down Japan's Road?

In the past two years a lot of analysts have been warning that the US and/or Europe are about to turn “Japanese”. By this I guess they mean that very high levels of debt are going to set the stage for one or two decades of economic stagnation and zero growth.

I am not sure I agree. I think these kinds of comparisons seriously miss the point about what went wrong in Japan in the 1980s. Except at a very superficial levels Japan’s imbalances before 1990 were very different from the imbalances from which Europe and the US suffer today, and the resolutions in each case are likely to be very different.

But we are nonetheless hearing the comparison more and more often.

Believers of the west-is-turning-into-Japan argument point to several similarities. In both cases, large debt burdens mean sluggish growth after a stock market crash. Meanwhile, the political response to the troubles is confused and does little to alleviate the pain. “It is blatantly obvious that those comparisons are valid,” says Jeffrey Gundlach, chief executive of US fund manager DoubleLine. “[We have] over-indebtedness and banks with bad assets that they are not writing down because otherwise they would be insolvent. Instead, you try to grind it out on a multi-year horizon.”

These characteristics, it turns out, are the same characteristics we have seen dozens of times in the past two centuries. In fact they are the fairly normal set of characteristics during any financial crisis, Japanese-style or not. The one exception in Milligan’s list may be “poor demographics”, but that of course depends on what you mean by “poor”. If all you mean is a rapidly aging and declining population, then this characteristic is something pretty new to the history of financial crises, although for that reason it is not clear that it is a vitally important characteristic, and anyway Japan’s demographics are in no way like those of the US, whose population is growing quite quickly and is barely aging (and even Europe is not aging nearly as quickly and is far more open than Japan – at least for now – to immigration).

Link -
http://seekingalpha.com/article/293074-are-the-u-s-and-europe-headed-down-japan-...
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Whilst there are some similarities between the Japanese situation of the last 20 years, to what is now happening, there are also some differences.

Yes, there is a substantial Ageing Demographic in Japan, which started well before the rest of the world and that situation is now also being reflected in the 80 Million US Baby Boomers, with similar situations in most other countries around the world.

In itself, this Ageing Demographic issue is quite a large drag on the Economy of each country, as has already been demonstrated in Japan.

However, in these times of a Global Economy, Japan was at least supported by virtue that the rest of the Global Economy was still "bubbling" along just fine, at least initially.

That said, as this century began, the same Demographic issue start to creep into other Economies, as more & more Baby Boomers started to move toward their official retirement years.

By 2005 the Boomer Demographic effect was becoming apparent, as Housing fell, because Boomer Demand was reducing in the US.

But, with the Boomer Demographic being worldwide, Demand for many Products & Services is also falling, as the massive Demographic moves into a more stringent retirement mode!

Of course, that also means that the Supply of many Resources, Capital & Labour is also going to fall.

So far, we have only raised the Ageing Demographic factor, which would certainly be a predictor of poor Economic outcomes, as it is unique in history, because of the sheer scale of numbers involved in Boomer retirements over the next 20 years.

However, that is not that only massive, nor unique factor involved, in the current Global Economic dilemmas.

In addition, there is -
1) Peak Global Total Population, where the Population of many countries will actually cease to grow, as it has almost always done and never greater than the last 80 years.
Most countries will actually arrive at a Peak Carrying capacity over the next 20 years or so and those Population levels will then commence to decline, in individual countries, but also Globally.
The Economic effect simply of the reduced growth would be large, but the effects of an actual decline will be massive.
Can't we simply start another Baby Boomer?
The answer is No!
And the reasons are Peak Energy and Peak Resources in general, including Food & Water!

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perceptions_now

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Re: Global Economic Downturn to Continue?
Reply #538 - Sep 14^th, 2011 at 3:46pm

Are The U.S. And Europe Headed Down Japan's Road? (Cont)

2) Energy is one of the two major factors that enabled the massive Global Population Growth, from 1 Billion in 1800 to 7 Billion today, the other is Innovation.
In the last 10 years or so, the growth in the Supply Energy resources has started to fall behind the Growth in Population driven Demand.
This has resulted in substantial increases in the Cost of Energy, which is particularly noticeable in Oil, but those increases are also spreading to other Energy sources, especially Fossil Fuels!

The Massive increases in Energy (Oil) costs to national & Global Economies has already added enormously to Cost levels & to the Debt to GDP ratio's of many countries and that contributed substantially to the GFC MK1 crash of 2008!

Whilst many are now contemplating a possible GFC MK2, I contend that we are still in the grip of GFC MK1, as it was only a massive increase in Public Debt that saw GDP stay above break even and if those increased Debts were subtracted, which they should be, then the actual/effective National & Global GDP levels would still be below zero!

3) Which now leads to the third factor, which is the Debt to GDP ratio!
In many nations, such as Greece, Spain, Italy the levels of Debt are now such that it is Publicly expected that some of the affected nations will Default on their National Debts.
This is now creating the likelihood of self re-enforcing tipping points & loops, much the same as Climate Change, which means that smallish problems such as Greece make other dominoes fall, meaning the problem/s & Debt levels become larger, thus roping in bigger Economies such as Spain, then Italy, the UK & finally the USA.

Unfortunately, what most people do, is they tend to look at issues in isolation and not at the total circumstances. Many people also tend towards a positive view of life, in which all problems will somehow be fixed, perhaps because that's usually the way it has been.

That said, these three factors are now combining to become unique in human history and unless there is some "Unique & until now unheard of innovation/technology, which enables us to Globally overcome Peak Energy & Climate Change (Food & Water) and can magically make Debt instantly disappear from the Global Economy, then that Global Economy has indeed Peaked and we have started to descend down a very slippery Economic aftermath.

So, good luck, watch the Debt and start getting actively involved!

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perceptions_now

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Re: Global Economic Downturn to Continue?
Reply #539 - Sep 14^th, 2011 at 11:25pm

U.S. Stock Futures Rise on China Speculation

U.S. stock futures rose, indicating the Standard & Poor’s 500 Index will gain for a third day, on speculation China may support indebted European countries.

China is willing to buy the bonds of nations hit by the debt crisis, Caijing reported on its website today, citing Zhang Xiaoqiang, a vice chairman of the National Development and Reform Commission.

“This is fast becoming a crisis of confidence and only credible actions, and not just words, from leaders that markets can believe in will help soothe it,” said Manish Singh, head of investment at Crossbridge Capital, which oversees more than $2 billion in London.

Premier Wen Jiabao said earlier that developed nations shouldn’t rely on China to bail out the world economy. China can best contribute to the global economic recovery by ensuring steady growth at home, Wen said, calling on the European Union and U.S. to allow more Chinese investment in return.

http://www.bloomberg.com/news/2011-09-14/u-s-stock-futures-drop-as-china-signals...
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Moody's Downgrades SocGen, Credit Agricole, Reviews BNP

-- Moody's downgrades Societe Generale's long-term credit ratings to Aa3 from Aa2

-- Moody's downgrades Credit Agricole's rating to Aa2 from Aa1

-- Moody's highlights challenges with BNP short-term funding needs in keeping rating under review

-- Rating agency factors in a potential haircut of 60% on Greek sovereign debt

Moody's Investors Service Wednesday downgraded the long-term debt ratings of Societe Generale SA (GLE.FR) and Credit Agricole SA (ACA.FR) and kept BNP Paribas SA (BNP.FR) under review for a possible downgrade, highlighting a tumultuous period for the French banks that have seen their shares hammered amid fears about their exposure to Greece and weaker euro zone countries.

Moody's downgraded Societe Generale's long-term credit ratings to Aa3 from Aa2 and lowered Credit Agricole's rating to Aa2 from Aa1. It kept BNP Paribas's rating at Aa2.

French financial institutions overall have the highest exposure to Greece--via debt and private loans--rendering them a virtual proxy for fears about whether euro-zone leaders can avoid a destabilizing Greek default that could threaten other weak countries in the region.

Shares in Societe Generale have been particularly hard hit, falling nearly 50% since Aug. 1. BNP Paribas' shares have shed 38% and Credit Agricole's shares have fallen 37% over the same period.

Along with the concerns about Greece, Societe Generale and BNP Paribas also have been hit by the pullback by U.S. money market funds in lending to European banks and French banks in particular, though the banks say they have managed to secure alternative sources of dollars.

http://online.wsj.com/article/BT-CO-20110914-704434.html
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The world is full of fact & fiction, the problem is in deciphering the difference between the two & in understanding what is reality!

ie - Beware the promise of Greeks bearing gifts, of Chinese giving money away to countries that are bankrupt and of making false assumptions.

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