Double Dip Recession?

[edyzmedieval]

http://money.usnews.com/money/person...on-the-horizon


http://www.telegraph.co.uk/finance/c...al-choice.html


http://www.telegraph.co.uk/finance/f...-declines.html

With back-to-back rounds of dismal GDP figures and a seemingly endless parade of other disappointing economic reports, the prospect of a double-dip recession is gaining traction among economists and financial experts.


The economy has barely grown in 2011, according to recent government figures, registering a meager 1.3 percent gain in gross domestic product in the second quarter, revised downward from initial estimates of almost 2 percent. That figure comes on the heels of revised first quarter readings that clocked in at a stunningly low 0.4 percent, prompting many experts to doubt whether the promising recovery that began in 2009 is now on its last legs.

Former US Treasury Secretary Larry Summers said there is now a one-third chance of a full-blown recession next year in the US. Nobel leaureate Paul Krugman said obscurantists had run amok. "What we're witnessing here is a catastrophe on multiple levels. We are doing a terrible thing. We are repeating all the mistakes of the 1930s, doing our best shot at recreating the Great Depression," he said.


Fear that a synchronized squeeze in half the global economy may go horribly wrong has seeped into market psychology, explaining why the $2.4 trillion (£1.5 trillion) debt deal agreed in Washington has failed to spark a relief rally. Wall Street is a step ahead, bracing for cuts in an economy that has already slipped to stall speed.

So we're on the way back to 2008, but on the bad way back. The Eurozone is a disaster now, Italy most likely to default, Greece half defaulting, turns out France now is the next target. German economy is now cooling down. The US just barely passed a debt bill that nearly brought it to collapse.


With all of these bad news, it looks that we are heading towards a double dip recession. All reports from the US have been weaker than expected, and it looks as if the US will grow by 1% this year.


Gold will probably end up 2000$ by the end of the year - http://www.telegraph.co.uk/finance/p...-year-end.html


Thoughts on this? Full blown recession coming up or is it just a soft patch?

[Adrian II]

Thoughts on this? Full blown recession coming up or is it just a soft patch?

Looks like the real McCoy. The West has lived far beyond its standard, now we have to pay off our debt. In order to do this we're cutting budgets in the midst of a tenuous recovery when we should be priming the pump.

Greece is just ahead of us. It is being forced to eat its own economy -> negative growth -> more debt.

AII

[Furunculus]

if europe takes too long deciding to become an economic and transfer union, then italy and spain will require a bailout, and even if they get it it will still lead to a double-dip around the world from the damaging indecision.

the peoples of germany and the netherlands, etc, need to decide over this summer whether they are willing to enter a permanent transfer union as the 'givers' in this new relationship, so that when parliaments return from summer recess they can legitimately enact the legislation necessary to save the euro.

chances of that happening is zero, so more dithering will ensue which will result in bailouts for italy and spain along with the double-dip, and then, maybe, the full integration necessarry to stop this stupidity happening again, and again, and again!

[Adrian II]

if europe takes too long deciding to become an economic and transfer union

It already is, even if Wolfgang Schäuble refuses to call it that. It is also a special trade zone where one country depends on others for most of its experts. The same applies to the West as a whole, including the US.

The real reason why markets are jittery is the basics are lacking everywhere.

If you insist on going by the cra's, you should ask why they have now threatened just about every western country with a downgrade. If Moody's downgrade the US to AA status one of these days because US economic growth has ground to a complete halt, which it has, all eyes will be on the US again. If Moody's sticks to its word that the UK would lose its triple A status if growth stays beneath Osborne's prediction of 1.7 %, which it does since British 2nd quarter growth is zilch, London may be next. It's a circus.

I wish some leader would break the conspiracy of impotence and plead for a Greek debt restructuring, which should have happened over a year ago. In necessary they can opt out of the eurozone for while and take the Argentinian route. Argentine gave its creditors the finger and is doing very well these days with a 8% growth rate.

AII

[Papewaio]

So the only thing that might save the world is if China develops a larger middle class...

[Adrian II]

So the only thing that might save the world is if China develops a larger middle class...

I guess it's already pretty large. It seems as if the days of cheap Chinese labour will soon be over.

But before that we all have to face the crunch. Italy and Spain seem uniquely wobbly these day because the bond market is dull, everybody is waiting for the implementation of the euro rescue plan. So if someone walks into the trading room saying "I've got a couple of Spanish bonds here that I'd like to lose fast", the whole floor is up in arms: "There goes Spain!"

From the Frankfurter Allgemeine to Le Monde to The Telegraph the sentiment seems to be the same: this problem is much deeper and wider.

[...] it is difficult not to be unnerved by what is going on in the markets. We all know at heart that the debt burden of the developed world is unsustainable. By convention, the political classes and the markets take August off, and leave others to have a crisis. But this financial crisis is beginning to look ominous, as if a corrective spasm is approaching.

AII

[Kagemusha]

I think this is the beginning of the end of our economical model and i dont think that is a positive thing.

[Furunculus]

It already is, even if Wolfgang Schäuble refuses to call it that. It is also a special trade zone where one country depends on others for most of its experts. The same applies to the West as a whole, including the US.
AII

it will be when national parliaments vote in favour of it in september...........

09.05 Olli Rehn, the EU Monetary Affairs Commissioner, has said the eurozone's yet-to-be approved €440bn European Financial Stability Facility (EFSF) bail-out fund needs to be credible and respected by markets to be effective:

Quote To be effective the EFSF needs to be credible and respected by the markets. And therefore we need to be continuously assessing it, once up and running, in its objective form with these goals in mind.

Rehn wasn't specific about numbers, though Willem Buiter, Citigroup's chief economist calculates that the EFSF needs €2 trillion to deal with the latest crisis.

Rehn will speak to reporters today in Brussels just before lunchtime on the eurozone. More from Brussels correspondent Bruno Waterfield then

[Adrian II]

I think this is the beginning of the end of our economical model and i dont think that is a positive thing.

I think it is necessary and the sooner it happens the better. Unless it leads to large-scale war which is rather less inviting, even if the chance of that happening is quite small.

AII

[Kagemusha]

I think it is necessary and the sooner it happens the better. Unless it leads to large-scale war which is rather less inviting, even if the chance of that happening is quite small.

AII

I agree that the economical model might not be sustainable.Call this my gloomy day, but what i know there is no birth without lot of pain, suffering and bloodshed.

[Lemur]

This pretty much sums it up.

[gaelic cowboy]

I think it is necessary and the sooner it happens the better. Unless it leads to large-scale war which is rather less inviting, even if the chance of that happening is quite small.

AII

This is often the case when the level of trade from whoever your dealing with is not likely to rise, basically the gain from war goes up slightly.

[gaelic cowboy]

I guess it's already pretty large. It seems as if the days of cheap Chinese labour will soon be over.

The days of the China Price are numbered

[HoreTore]

'It's like putting your entire mouth into the economy!!'

[gaelic cowboy]

'It's like putting your entire mouth into the economy!!'

This Daniel lad is clever with a paraphrase.

[Tellos Athenaios]

The days of the China Price are numbered

Whoever wrote the code behind that magazine should be outsourced.

[Xiahou]

The Dow took a 500+ point nosedive today, unemployment remains high, growth slow, housing is still overpriced.... yeah, it's not looking real good.

[Adrian II]

housing is still overpriced....

It's overpriced all over the western world. Remember the Japanese real estate bubble bursting in 1992? They're still recovering from it...

AII

[Papewaio]

US houseprices look far more reasonable then Australia ones.

At the moment we have 5% unemployment... but most of the reason the economy is ticking over here is because of our trade with China. China makes the worlds goods, Australia supplies China with raw materials in LPG, Iron and other minerals. If the World stops buying, China stops producing, then Australia will be in for all sorts of heartache.

Part of the problem though is that our measuring systems aren't keeping up with changes in logistics... the internet has made for some interesting Peer to Peer goods which aren't readily captured in the current rounds of figures. Add to that some efficiencies which are being seen as less consumption... think of it this way, if industry is 5% more efficient that means they are buying 5% less materials... however it doesn't neccesarily mean less consumption at the consumer end.

Also due to belt tightening people are now more used to supermarket inhouse brands. Sure they are drinking and eating the same food, just without the fancy mancy packaging hiking up the prices... it will take a while before people go back to the shiny cardboard and push up perceived retail consumption again.

[edyzmedieval]

Australia was quite forgiven of the global recession because of the strong economic relationship with China. It's interesting to see how it will go now with the Chinese economy slowly cooling down given the efforts of the government to curb the inflation.

Still, everyone's a bit gloomy now on the international markets.

[Papewaio]

The fundamentals are:

Growing world population.
Going from third world to first world.

Consumption is going up in the first world.

From memory:
A person needs about 100W per day of energy. A modern human in the first world uses about 10kW per day to maintain their lifestyle and connectivity.

So more people, who want to consume more. The biggest barrier isn't economic development it is energy development...

So the long term trends still look good. This is the puss out of a bubble that has slowly burst due to government intervention... it might have been less gunky if we just let it out in the first place.

As much as the proportion of market falls might become as big as the Great Depression, one only has to look outside the market to see the actual impact on lifestyle... slightly more frugal, not rationing starving individuals... plenty of hype for the next tech toy, not soup kitchens for 30%+ of the population.

[rory_20_uk]

The real reason why markets are jittery is the basics are lacking everywhere.

In a nutshell. The UK is a service based, consumer led economy. Apparently there is nothing wrong with this. as it is basically saying "we make nothing and exist by spending money" I am rather surprised with how sanguine the powers that be are about this.

Although markets are supposed to be about the allocation of wealth effectively, it increasingly is a massive game of chicken - try and do what everyone else is going to do slightly before they do, whatever that is. In the dotcom bubble one trader stated that for one company's share price to be valid, their market capitalisation would have had to be basically 100% of the world in a couple of years, as it made nothing and was loosing money hand over fist. An unpopular view that cost him his job.

The market seems set up for short term panics - no view to 1, 5 or 10 years. This would be fine if Markets had not been finding the West's baby boomer generation from a comfortable cradle to a comfortable grave on IOUs.

[Strike For The South]

So you're telling me spending trillions of dollars when you're in the red is a bad thing?

Predatory lending practices are bad thing?

Brinkmanship is a bad thing?

Do you have a study?

[Kagemusha]

So you're telling me spending trillions of dollars when you're in the red is a bad thing?

Predatory lending practices are bad thing?

Brinkmanship is a bad thing?



Do you have a study?

Spending when recession is looming over is a good thing, but not spending on fiscal business, but spending on somethinhg that creates consumption and jobs.

[HoreTore]

So you're telling me spending trillions of dollars when you're in the red is a bad thing?

Predatory lending practices are bad thing?

Brinkmanship is a bad thing?

Do you have a study?

A state should never, EVER have to take up loans.

Unfortunately, they have to, since people riot when taxes go up. Which is an epic fail at long term thinking, since the interest on those loans will hurt more than the added tax burden would.

It's really fun to watch your tax dollars go towarda paying interest to banks. What's the percentage the US spends on interest again? 13%? With a little more forward thinking, the US populace could've paid 13% less in taxes. Damn those socialists!!

[Fisherking]

Shall we talk about the ironies of giving away all that money to the banks that were too big to fail and now we owe interest to those banks on the free money we all gave to them?

[HoreTore]

They should of course have been nationalized.

Too bad for Joe America that nationalizing stuff is "socialist".

[Fisherking]

They should of course have been nationalized.

Too bad for Joe America that nationalizing stuff is "socialist".

Well, it wasn’t just the US now, was it?

I seem to remember most European Nations also giving away free money to the banks.

Of course in your model we might have been able to take the managers and stand them against a wall and shoot them. That may have made everyone at least feel better but they would still be in debt.

[HoreTore]

Well, it wasn’t just the US now, was it?

I seem to remember most European Nations also giving away free money to the banks.

Of course in your model we might have been able to take the managers and stand them against a wall and shoot them. That may have made everyone at least feel better but they would still be in debt.

The main bank(DNB NOR) is already owned by the state in socialist Norway.

And my comment goes for other european states too, of course.

It should've been seen as a simple investment. Instead of giving away money, they should've bought up shares in the banks. Investors do it all the time for troubled businesses, I don't see why a state shouldn't be able to do the same. It's investing, not 'socialism'.

[Fisherking]

The main bank(DNB NOR) is already owned by the state in socialist Norway.

And my comment goes for other european states too, of course.

It should've been seen as a simple investment. Instead of giving away money, they should've bought up shares in the banks. Investors do it all the time for troubled businesses, I don't see why a state shouldn't be able to do the same. It's investing, not 'socialism'.

Your government owns the banks. Our banks own the government.