Global recession coming?

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neverfail
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Global recession coming?

Post by neverfail » Sun Aug 25, 2019 3:26 pm

https://www.theguardian.com/uk-news/201 ... ning-signs
Trump inherited a buoyant economy and then gave it a sugar rush of income tax cuts and corporate giveaways. Stellar growth last year prompted the US central bank, the Federal Reserve, to increase interest rates to calm things down.

A combination of those higher borrowing costs, the end of the sugar rush and the tariff war with China, which has increased import costs, has hit US industrial production. Figures last week showed the US manufacturing sector in decline for the first time in a decade.
That's not the whole story either :
Long recession in Germany
Angela Merkel’s finance minister, Olaf Scholz, has raised expectations of a €50bn (£45bn) boost to the German economy to head off an imminent recession. The economy contracted by a small margin in the second quarter – 0.1% – but is expect to suffer a second and larger drop in the third quarter.

Most analysts expect Scholz’s extra cash will be too little too late to prevent two consecutive quarters of negative growth, which is the technical definition of a recession. A turnaround next year largely depends on a recovery in China, where Germany now sells much of its machine tools, industrial equipment and cars.
Significantly, Germany's targeted premier market for these products is now China, not the US.

The bad news does not end there either.
Chinese debt crisis
China, more than the US, has been the extra gear for the global economy since the 2008 financial crash, but the country is in the throes of a full-blown debt crisis.

State industries have borrowed heavily and so have consumers. Banks are weighed down by loans that will never be repaid. Each time Beijing has attempted to rein in excessive consumer and corporate lending, the global economy has wobbled, forcing China’s policymakers to loosen credit again.

Meanwhile, industrial production growth is at a 30-year low at 4.8%. Beijing wants the economy to become more self-contained with a shift from manufacturing to services, but it’s a long haul.
China was the player that saved the world from plunging into outright economic depression in the wake of the 2008 GFC. Given its own now dicey fiscal state I would not rely on it to pull that rabbit out of the hat this time around. The PRC is currently in a no-win, caught between two fires scenario where apparently whatever it does in the wrong remedy,

The global economy is like a house of cards awaiting the first puff of wind to blow it over.

(p.s. as the global canary down the coal mine Singapore is already in recession.)

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Doc
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Re: Global recession coming?

Post by Doc » Sun Aug 25, 2019 9:07 pm

neverfail wrote:
Sun Aug 25, 2019 3:26 pm
https://www.theguardian.com/uk-news/201 ... ning-signs
Trump inherited a buoyant economy and then gave it a sugar rush of income tax cuts and corporate giveaways. Stellar growth last year prompted the US central bank, the Federal Reserve, to increase interest rates to calm things down.

A combination of those higher borrowing costs, the end of the sugar rush and the tariff war with China, which has increased import costs, has hit US industrial production. Figures last week showed the US manufacturing sector in decline for the first time in a decade.
That's not the whole story either :
Long recession in Germany
Angela Merkel’s finance minister, Olaf Scholz, has raised expectations of a €50bn (£45bn) boost to the German economy to head off an imminent recession. The economy contracted by a small margin in the second quarter – 0.1% – but is expect to suffer a second and larger drop in the third quarter.

Most analysts expect Scholz’s extra cash will be too little too late to prevent two consecutive quarters of negative growth, which is the technical definition of a recession. A turnaround next year largely depends on a recovery in China, where Germany now sells much of its machine tools, industrial equipment and cars.
Significantly, Germany's targeted premier market for these products is now China, not the US.

The bad news does not end there either.
Chinese debt crisis
China, more than the US, has been the extra gear for the global economy since the 2008 financial crash, but the country is in the throes of a full-blown debt crisis.

State industries have borrowed heavily and so have consumers. Banks are weighed down by loans that will never be repaid. Each time Beijing has attempted to rein in excessive consumer and corporate lending, the global economy has wobbled, forcing China’s policymakers to loosen credit again.

Meanwhile, industrial production growth is at a 30-year low at 4.8%. Beijing wants the economy to become more self-contained with a shift from manufacturing to services, but it’s a long haul.
China was the player that saved the world from plunging into outright economic depression in the wake of the 2008 GFC. Given its own now dicey fiscal state I would not rely on it to pull that rabbit out of the hat this time around. The PRC is currently in a no-win, caught between two fires scenario where apparently whatever it does in the wrong remedy,

The global economy is like a house of cards awaiting the first puff of wind to blow it over.

(p.s. as the global canary down the coal mine Singapore is already in recession.)
Less Trade would certainly hurt Singapore. China certainly did nothing to stem the 2008 crisis. I know for absolute fact that Chinese owned companies were ordered to stop selling overseas on credit during the crisis. On the other hand the US leant 100's of billions of dollars out during the crisis.

The value of the dollar is deflating internationally. That is what is hurting US manufacturing. It is also the point where the Fed should cut interest rates. But as per usual the Fed never saw an economic problem it was able to fix.
“"I fancied myself as some kind of god....It is a sort of disease when you consider yourself some kind of god, the creator of everything, but I feel comfortable about it now since I began to live it out.” -- George Soros

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cassowary
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Re: Global recession coming?

Post by cassowary » Mon Aug 26, 2019 8:39 am

neverfail wrote:
Sun Aug 25, 2019 3:26 pm


(p.s. as the global canary down the coal mine Singapore is already in recession.)
Says who? News of a Singapore recession is greatly exaggerated.

Singapore may avoid recession after production beats forecasts
The Singapore Economic Development Board said on Monday that production at factories and shipyards fell 0.4% in July, slowing from June's on-year contraction of 8.1%. The consensus estimate of economists polled by Refinitiv had been for a larger retreat of 4.9%.

On a seasonally adjusted month-on-month basis, manufacturing output increased 3.6%, registering the first increase in three months.

"Besides pointing to a better industrial performance ahead, (July's performance) also suggests a lower risk of a technical recession in Singapore if it can be sustained in the coming months," said Irvin Seah, a senior economist at DBS Group.
There is a fighting chance that we will avoid a technical recession which is defined as two consecutive quarters of negative GDP growth.
The Imp :D

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Milo
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Re: Global recession coming?

Post by Milo » Mon Aug 26, 2019 12:00 pm

Doc wrote:
Sun Aug 25, 2019 9:07 pm

The value of the dollar is deflating internationally. That is what is hurting US manufacturing. It is also the point where the Fed should cut interest rates. But as per usual the Fed never saw an economic problem it was able to fix.
Typically a decline in currency value helps manufacturing.

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Doc
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Re: Global recession coming?

Post by Doc » Mon Aug 26, 2019 12:48 pm

Milo wrote:
Mon Aug 26, 2019 12:00 pm
Doc wrote:
Sun Aug 25, 2019 9:07 pm

The value of the dollar is deflating internationally. That is what is hurting US manufacturing. It is also the point where the Fed should cut interest rates. But as per usual the Fed never saw an economic problem it was able to fix.
Typically a decline in currency value helps manufacturing.
Deflating = a rise in value. The Chinese are devaluing the yuan to offset the tariffs on their good in the US. Plus investors are, as usual in times of uncertainty, buying dollars. Also the EU is cutting interest rates All of which are driving up the value of the dollar. Though Gold is going up faster. Gold isn't an investment but it is kind of an insurance policy. For example it fiat currency collapsed one once of gold could be worth say $18,000 up in dollars or higher in other currencies.
“"I fancied myself as some kind of god....It is a sort of disease when you consider yourself some kind of god, the creator of everything, but I feel comfortable about it now since I began to live it out.” -- George Soros

neverfail
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Re: Global recession coming?

Post by neverfail » Mon Aug 26, 2019 3:27 pm

cassowary wrote:
Mon Aug 26, 2019 8:39 am
neverfail wrote:
Sun Aug 25, 2019 3:26 pm


(p.s. as the global canary down the coal mine Singapore is already in recession.)
Says who? News of a Singapore recession is greatly exaggerated.

Singapore may avoid recession after production beats forecasts
The Singapore Economic Development Board said on Monday that production at factories and shipyards fell 0.4% in July, slowing from June's on-year contraction of 8.1%. The consensus estimate of economists polled by Refinitiv had been for a larger retreat of 4.9%.

On a seasonally adjusted month-on-month basis, manufacturing output increased 3.6%, registering the first increase in three months.

"Besides pointing to a better industrial performance ahead, (July's performance) also suggests a lower risk of a technical recession in Singapore if it can be sustained in the coming months," said Irvin Seah, a senior economist at DBS Group.
There is a fighting chance that we will avoid a technical recession which is defined as two consecutive quarters of negative GDP growth.
:o I stand corrected. Singapore is currently only "flirting" with recession. It is not in that hole yet.

Were it not for the fact that your link is with the latest Nikkei review (an independent testimony) then I would scoff at it as inane boosterism. But I do not because in my mind such an assessment carries some authority.

However, even an assessment like that is based upon certain suppositions that might in time prove false. The premier supposition being that things will carry on much as they are now.

So you realize Cass (I hope you do!) that if the global economy plunges into recession such bullish prognostications will come to naught?

The global economy is currently like a house of cards waiting to tumble.

neverfail
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Re: Global recession coming?

Post by neverfail » Mon Aug 26, 2019 3:44 pm

Doc wrote:
Mon Aug 26, 2019 12:48 pm
Milo wrote:
Mon Aug 26, 2019 12:00 pm
Doc wrote:
Sun Aug 25, 2019 9:07 pm

The value of the dollar is deflating internationally. That is what is hurting US manufacturing. It is also the point where the Fed should cut interest rates. But as per usual the Fed never saw an economic problem it was able to fix.
Typically a decline in currency value helps manufacturing.
Deflating = a rise in value. The Chinese are devaluing the yuan to offset the tariffs on their good in the US. Plus investors are, as usual in times of uncertainty, buying dollars. Also the EU is cutting interest rates All of which are driving up the value of the dollar. Though Gold is going up faster. Gold isn't an investment but it is kind of an insurance policy. For example it fiat currency collapsed one once of gold could be worth say $18,000 up in dollars or higher in other currencies.
So there you are! A strengthening US dollar is good news only for those sectors of US industry where imported components form a sizable cost input and where their market is wholly or predominantly the US domestic one. For other types of US production; both for import competing industries along with those struggling to remain cost-competitive in external markets a strong dollar is nothing but a bane.

In summary: even without a devalued PRC Yuan a stronger US dollar by itself would be enough to exacerbate the trend that make importing from abroad more profitable than producing the same goods at home.

The PRC Yuan? Even if that were a fully freely floating currency like the dollar, by now the global 4x market would have pushed the value of this currency down anyhow. So please stop griping about the "devaluation" of the Yuan Doc. Trump defined this as a "trade war'" and in warfare both sides will use whatever weapons they have at hand to win. The US has higher tariffs and the PRC has devaluation as weapons of choice. China is merely prosecuting its own best interests.

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Sertorio
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Re: Global recession coming?

Post by Sertorio » Mon Aug 26, 2019 3:47 pm

Milo wrote:
Mon Aug 26, 2019 12:00 pm
Doc wrote:
Sun Aug 25, 2019 9:07 pm

The value of the dollar is deflating internationally. That is what is hurting US manufacturing. It is also the point where the Fed should cut interest rates. But as per usual the Fed never saw an economic problem it was able to fix.
Typically a decline in currency value helps manufacturing.
Provided you have any manufacturing left...

Jim the Moron
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Re: Global recession coming?

Post by Jim the Moron » Mon Aug 26, 2019 4:50 pm

It's about time that the world-famous economist Jim the Moron offers up his erudite commentary on the subject. He's on record as believing there will be a recession (or maybe two) between now and the year 2034. Strap on your jewel protectors, folks.

neverfail
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Re: Global recession coming?

Post by neverfail » Mon Aug 26, 2019 6:14 pm

Sertorio wrote:
Mon Aug 26, 2019 3:47 pm
Milo wrote:
Mon Aug 26, 2019 12:00 pm
Doc wrote:
Sun Aug 25, 2019 9:07 pm

The value of the dollar is deflating internationally. That is what is hurting US manufacturing. It is also the point where the Fed should cut interest rates. But as per usual the Fed never saw an economic problem it was able to fix.
Typically a decline in currency value helps manufacturing.
Provided you have any manufacturing left...
Our experience with the globalization of our economy is like this Sertorio:

The sum total value of the manufactured component in our GDP is now bigger than ever. The difference is that now we have far fewer manufacturing industries (in terms of variety) but those that we retain are far more productive. Also, manufacturing now employs a considerably smaller proportion of the workforce than before the set of free market reforms that globalized our national economy.

In other words, our manufacturing base has been through a culling process that has rid us of the costly dead wood.

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