A New Global Recession?

[Bjornebye]

I hate the daily mail. But this is worth a read. I fear Brexit might be the catalyst to the end of days. 

 

https://www.dailymail.co.uk/debate/article-7365809/PETER-OBORNE-Red-lights-flashing-economic-hurricane-coming-scared.html

 

PETER OBORNE: Red lights are flashing. An economic hurricane is coming...and we should all be scared

 

On the surface, things are looking rosy. The Office for National Statistics last week announced that employment was at 76.1 per cent — the joint highest level since records began.

Consumers are still spending. The International Monetary Fund says that the British economy will grow 1.4 per cent next year.

But I’m not reassured. In fact, I don’t mind admitting that I’m rather scared. This week the red lights began to flash, a warning that a global recession is on the way. 

 

And not just a normal recession of the kind which comes along every decade or so. I fear that an economic hurricane might be about to descend.

 

Here in Britain and around the world we should prepare ourselves for job losses, failed businesses and busted hopes, and Brexit will have little to do with it.

Before I wrote about politics, I was a financial correspondent, and I know that economic trouble comes hand in hand with political turmoil. 

Go back to the Great Depression of the 1930s. It led to the rise of fascism in continental Europe and World War II. I don’t believe that history repeats itself, but it’s safe to say all kinds of problems lie ahead. 

Let’s take a more detailed look at the warning signs. Last week we learned that the UK economy — the world’s fifth largest national economy — shrank by 0.2 per cent in the three months to June this year.

 

Some experts dismissed it as a blip caused by companies reducing stocks which had been expanded ahead of Britain’s original expected departure from the EU on March 29.

Perhaps. But look at Germany — globally the fourth largest economy and the engine room of Europe. Industrial production suffered its worst annual drop in a decade, and Gross Domestic Product (GDP) also fell by 0.1 per cent in the second quarter of 2019.

At least Germany is strong enough to weather a storm. Not so Italy, which is a financial catastrophe waiting to happen.

The country owes an eye-watering $2.3 trillion in public debt. GDP growth is all but non-existent and business confidence even lower amid political instability.

Its fragile governing coalition looks finished, with Matteo Salvini — deputy prime minister and head of the far-Right League party, — pushing for snap elections in the autumn.

Most of all, though, I am unsettled by China, the nation that has driven global economic growth for the last three decades.

 

Industrial production growth hit a 17-year low in July. At the same time, China’s export-led growth has been slowing fast. In July, it slumped to less than 5 per cent — Beijing needs much higher growth to sustain its investments at home and abroad.

Of course, cyclical downturns of this kind, however unpleasant, are routine occurrences. What makes me truly nervous about this one is mounting global debt, which now stands at a far higher level than it did ahead of the 2008 recession.

 

This is deeply worrying because back in 2008, governments around the world were able to solve — or, at least, ameliorate — the problem by investing huge sums, bailing out banks and re‑floating the economy via quantitative easing (in which central banks injected new money into the system).

Yes, it worked then, but if another financial crash of that size happens, we lack the means to do it again. National balance sheets have not recovered.

And it’s not just national debt. Average UK household debt is now more than £15,000 — that’s £2,000 more than the alarming level reached in 2008. 

Consider this terrifying statistic: unsecured debt stood at a £286 billion in 2008. That was unsustainable then, but today it stands at £428 billion.

The same trends are seen internationally. Last week, U.S. mortgage debt reached a record level — $9.406 trillion, according to the Federal Reserve Bank of New York — which, for the first time, surpasses the high of $9.294 trillion from 2008.

 

On Wednesday something sinister occurred. For the first time in 12 years, yields on long-term bonds fell below those on short-term bonds. 

For the last half century, this so-called inversion of the yield curve has been an infallible sign that recession is on its way.

The terrifying truth is that world growth has been financed on a borrowing splurge for the past decade.

According to the Institute of International Finance, world debt rose $3 trillion in the first quarter of 2019, to $246 trillion — that is three times global GDP. Unimaginable. And, I’m afraid, unsustainable.

 

As all of us know from sometimes unpleasant personal experience, you pay a price if you live beyond your economic means. A day of reckoning is on its way.

 

The situation is made even more dangerous by looming trade wars.

Donald Trump’s threats against President Xi Jinping of China may win him domestic popularity. But it’s plain to see that the world is reverting into a system of rival protectionist blocks, reversing the direction of travel of the last 50 years.

The World Trade Organisation — which has done so much to create wealth by freeing up global trade — is almost impotent.

Worryingly, that’s the institution which post-Brexit Britain will depend on when we quit the security of the EU single market and customs union. But Brexit, no deal or otherwise, isn’t the reason for what may unfold in the coming year.

Expect a wave of national bankruptcies. One already looks inevitable in Argentina, and certain in Italy, which can’t survive in the Eurozone for much longer. Nor can Greece. And the knock-on effects will be huge.

We have become used to relatively benign economic growth stretching over decades. Now the world is entering a new and dangerous environment.

[Oh Buoy]

Brexit also gives you cancer.

[ZonkoVille77]

It's defo on the way. The current stock market rises are unsustainable. I'll give it to about March before it kicks in. 

[Mudface]

I don't buy it- the last global recession was actually just in the UK and was caused by Labour's reckless spending- gold plated pensions for lollipop ladies, multi-millionaire doctors etc. Surely the brave coalition sorted all that out by closing libraries and killing off the disableds?

[Mudface]

.

[Em City]

Peter Oborne is one of the few conservatives out there with any intellectual integrity.

 

Unfortunately, it appears we are rather fucked.

[TheHowieLama]

Nothing better for the super rich than a recession

[Pureblood]

Oborne conspiracy.

[AngryOfTuebrook]

Here's a long and detailed piece from 6 years ago from International Socialism, basically arguing that we're bollocksed.

 

http://isj.org.uk/from-global-slump-to-long-depression/

 

[AngryOfTuebrook]

And a follow-up from last year. 

 

http://isj.org.uk/the-political-economy-of-a-long-depression/

 

[Section_31]

It's mad, who'd have thought a financial system which sees three men in the States have as much wealth as the poorest 50 million would create consumer economies where the consumer has no money, where there is less and less coal for the steam engine, resulting in hollowed-out societies.

[Red Shift]

I posted a couple of weeks ago that QE4 is underway. The Fed is bailing Wallstreet to the tune of 60 Billion a day.

The Financial Times is now saying that the Global Financial System is at risk because of the biggest bond bubble in history.

 

 - IMF Managing Director Kristalina Georgieva projects a collapse in world GDP, one of many results of the current bankrupt financial system, at the 2019 IMF Annual Meeting in Washington, D.C. on October 8, 2019.

 

But the IMF itself gave a strong suggestion in its Global Financial Stability Report 2019: A large portion of the big bond funds that invest in the $15 trillion bond markets are short of liquidity and cannot pay off their investors. The report added a second alarm: In the oncoming recession, as much as 40-45% of the companies that owe some $19 trillion in corporate debt, won’t be able to even make interest payments. And this problem will quickly spread—by what the financial world calls “contagion.” Mutual funds hold almost $1 trillion of the securities by which the banks have “securitized” this failing corporate debt. Debt-zombie corporations are creating zombie hedge funds and zombie investment firms. The Federal Reserve is injecting more and more liquidity loans every day—$134 billion on Oct. 24 alone, for example—to keep this “everything bubble” of debt from imploding.

 

"Bankers are making panicked proposals that would have disastrous consequences if they were to be implemented. Jamie Dimon, CEO of Wall Street’s biggest bank, JPMorgan Chase, asserted on Oct. 18 that bank capital regulations were causing the banking system’s sudden liquidity crisis and should all be removed. On Oct. 20, the former head of the Bank of England, Mervyn King, predicted “financial Armageddon” unless the Federal Reserve was given new powers and resources to bail out any bank—or any other financial company—at any time. And most shocking, the current Bank of England head Mark Carney proposed to replace the U.S. dollar in international trade with a global electronic currency controlled by the Bank of England and the other major central banks. These wild proposals smell of the failure of bank policies since the last financial crash, which have brought us to the verge of another." (LaRouche Political Action Committee, Washington)

Strap yourselves in, it's going to get bumpy.

[AngryOfTuebrook]

 

[Creator Supreme]

Corbyn's fault!

[Guest Pistonbroke]

I've got a cupboard full of canned food, sorted. 

[Bjornebye]

46 minutes ago, Pistonbroke said:

I've got a cupboard full of canned food, sorted. 

One of my favourite ver lines on this forum was when someone started a thread asking the 6 items you would want in an apocalypse. Cant remember who (I think it may have been Spy-Bee) replied with "5 cans of super strength and a jet-pack"

 

Still laughing thinking about that now.