ft.com
T he global economy is starting to bottom out from the worst recession and financial crisis since the Great Depression. In the fourth quarter of 2008 and first quarter of 2009 the rate at which most advanced economies were contracting was similar to the gross domestic product free-fall in the early stage of the Depression. Then, late last year, policymakers who had been behind the curve finally started to use most of the weapons in their arsenal. When will the global recession be over? What will be the shape of the economic recovery? Are there risks of a relapse?
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Showing posts with label Economy. Show all posts
Showing posts with label Economy. Show all posts
Green shoots or Yellow Weeds ?
The US unemployment report released on Thursday last week has raised doubts on the hopes of a quick economic recovery in the developed world, US Job market continues to be extremely weak with Job losses at over 460,000 in June. The Unemployment rate has hit 9.5%, US government expects it to reach 10% in few months. Although Unemployment is considered to be a lagging Indicator it is hard to see how a recovery even if it comes will be sustainable with reduced consumer spending as unemployment will have a significant effect on consumer confidence & spending. The stress tests conducted earlier to check the health of lending Institutions and Banks had factored in unemployment rate of 10.3% as worst case scenario which now seems surpass able. Mean while the Unemployment rate in Europe zone has hit a 10 year high of 9.5% as well, ECB expects economic recovery only in mid 2010.
Not everyone agree to the “Green shoots” argument in the first place, Billionaire Investor Warren Buffet earlier in an interview said he is yet to see any green shoots and expects economic activity to be weak for some time to come. Noted Economist and Nobel Laureate Paul Krugman says that Obama Administration needs to work on getting the stimulus plan bigger to avoid a repeat of 1930’s type of scenario, He also adds that risk of deflation still looms. US Vice President Joe Biden admitted that they misread the state of the Economy when putting together the stimulus package.
The second half recovery as expected by optimists now seems to be an uncertain thing, some Economists even say a recovery when it comes will be very weak that with high unemployment rate it would still feel like a recession.
In a statement released earlier Indian finance ministry stated that there are signs of turnaround in Indian economy although exports continued to decline, it was also noted that the extent of recovery will depend on the revival of US economy. It is hard to get back to 8-9% growth with a weak export market. The Budget failed to impress the stock markets with indices falling over 5%. The stock markets and commodities were rallying on the hopes of an Economic recovery during the second half of the year, now with uncertainty over the turnaround, and a fundamental lagging behind it is likely that markets will be under pressure till there is a clear picture in the macroeconomic front.
Prakash , sharemarketidea@yahoo.com
Not everyone agree to the “Green shoots” argument in the first place, Billionaire Investor Warren Buffet earlier in an interview said he is yet to see any green shoots and expects economic activity to be weak for some time to come. Noted Economist and Nobel Laureate Paul Krugman says that Obama Administration needs to work on getting the stimulus plan bigger to avoid a repeat of 1930’s type of scenario, He also adds that risk of deflation still looms. US Vice President Joe Biden admitted that they misread the state of the Economy when putting together the stimulus package.
The second half recovery as expected by optimists now seems to be an uncertain thing, some Economists even say a recovery when it comes will be very weak that with high unemployment rate it would still feel like a recession.
In a statement released earlier Indian finance ministry stated that there are signs of turnaround in Indian economy although exports continued to decline, it was also noted that the extent of recovery will depend on the revival of US economy. It is hard to get back to 8-9% growth with a weak export market. The Budget failed to impress the stock markets with indices falling over 5%. The stock markets and commodities were rallying on the hopes of an Economic recovery during the second half of the year, now with uncertainty over the turnaround, and a fundamental lagging behind it is likely that markets will be under pressure till there is a clear picture in the macroeconomic front.
Prakash , sharemarketidea@yahoo.com
Nassim Taleb : Authorities 'Will Fail Us Again'
The Obama administration's attempts to fight the financial crisis with more cash is like treating a bad tooth with Novocain instead of a root canal, Nassim Taleb, author of "The Black Swan," told CNBC Wednesday.
The main problem is the level of debt, and Taleb compared the authorities' efforts with those of a not very skilled pilot who is trying to land a Concorde on a narrow strip, between an ocean of deflation and a mountain of hyperinflation."These people failed us, they're going to fail us again," Taleb told cnbc.
More at : http://www.cnbc.com/id/31203621
The main problem is the level of debt, and Taleb compared the authorities' efforts with those of a not very skilled pilot who is trying to land a Concorde on a narrow strip, between an ocean of deflation and a mountain of hyperinflation."These people failed us, they're going to fail us again," Taleb told cnbc.
More at : http://www.cnbc.com/id/31203621
Jim Rogers : Don't Short the Markets
"I’m afraid they're printing so much money that stocks could go to 20,000 or 30,000," Rogers said. "Of course it would be in worthless money, but it could happen and you could lose a lot of money being short."
Rogers feels that a currency crisis looms in near future , He called the US dollar a "terribly flawed currency," adding that it could be the starting point for the next currency crisis.
He is bullish on commodities and says investors should turn toward commodities. This sector will lead the recovery if the global economy improves, and if it doesn't, they'll still be the best place because of inflation.
Investors sceptical on stock market rebound
The majority of the world’s leading investors do not believe the recent strong performance of stocks and other risky assets is sustainable, according to a report released on Monday.
The FTSE All World equities index has surged more than 60 per cent since hitting a low for the year in March.
But Barclays Capital has revealed that just 17.5 per cent of the 605 investors interviewed for its quarterly FX investor sentiment survey – including central banks, asset managers, hedge funds and international corporate customers – think risky assets have further to rise.his is one aspect of a generally gloomy outlook for the global economy, which undermines optimism that “green shoots” of recovery are starting to emerge.
Just 4.5 per cent of respondents believe the trajectory of the global economy over the next year will be “V-shaped” – indicating weakness followed by a sharp recovery.
The majority, 69 per cent, believe the path of the global economy will be either “U-shaped” or “W-shaped”, meaning that growth will remain weak for some time before a gradual recovery begins, or that a recovery will prove temporary and renewed weakness will set in.
By Peter Garnham in London
http://www.ft.com/cms/s/0/52c9f2a8-4e1a-11de-a0a1-00144feabdc0.html
