Here is what we know:
US- facing a serious slowdown or an outright recession due to slumping consumer spending (not yet confirmed) on account of plummeting housing values, and reduced credit availability dating back to August's "credit crunch" (disputed). The market is signalling that it's too late for the Fed to help as it continues to fall in the midst of comments about "substantive" help coming from Bernanke & Co.
EU- facing a slowdown as the EURO strength is hitting exporters hard. The ECB holds the wild card here as it may be early enough to bring help to the markets and the economy, but this is the same ECB that has suggested a willingness to raise rates later this year in the face of growing economic threats.
GB- facing the same property bubble bursting that the US faced, but stuck with a central bank obstinate about fighting inflation that may or may not be a true threat. King's decision with rates is anyone's guess.
And now, warnings from China (via Yahoo! Finance)
"Property market price fluctuation possibly could increase credit risks facing the banking industry," said Jiang Dingzhi, vice chairman of the China Banking Regulatory Commission, said in a report on the agency's Web site.
If China faces economic strains from increased credit tightening in the banking industry, that is, if it faces economic strain of its own and not as a by-product of US problems, then this slowdown can truly be labeled global. It's going to be crucial to watch how this thing unwinds in China because a slowdown will have drastic implications for commodities (oil, gold, etc.).
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2 comments:
Yes I agree completely with the implications of a global slowdown. China is a very interesting place in that they have 150 million migrant workers that go from city to city looking for jobs. These people are usually peasants or very low skilled workers, but the vast majority of them are land owners. They give up farming in search of something better for their families. If we do start to see a slow down these workers will be the first to go, but unlike in other countries they will have an alternative other than unemployment. So what does this mean for China's growth? It will slow from its double digit frenzy but it will still be very significant growth and the economy will continue to expand. The long term fundamentals for growth are positive although right now I think China is expensive and we will see a regression to slower growth (5-7%).
The problems will et much worse.
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