Jump to content
House Price Crash Forum
Sign in to follow this  
interestrateripoff

The World Economy Is Flying With Only One Engine

Recommended Posts

http://www.theguardian.com/business/2014/nov/02/world-economy-flying-one-engine-us-growth

The global economy is like a jetliner that needs all of its engines operational to take off and steer clear of clouds and storms. Unfortunately, only one of its four engines is functioning properly: the Anglosphere (the United States and its close cousin, the United Kingdom).

The second engine – the eurozone – has now stalled after an anaemic post-2008 restart. Indeed, Europe is one shock away from outright deflation and another bout of recession. Likewise, the third engine, Japan, is running out of fuel after a year of fiscal and monetary stimulus. And emerging markets (the fourth engine) are slowing sharply as decade-long global tailwinds – rapid Chinese growth, zero policy rates and quantitative easing by the US Federal Reserve, and a commodity super-cycle – become headwinds.

So the question is whether and for how long the global economy can remain aloft on a single engine. Weakness in the rest of the world implies a stronger dollar, which will invariably weaken US growth. The deeper the slowdown in other countries and the higher the dollar rises, the less the US will be able to decouple from the funk everywhere else, even if domestic demand seems robust.

Falling oil prices may provide cheaper energy for manufacturers and households, but they hurt energy exporters and their spending. And, while increased supply – particularly from North American shale resources – has put downward pressure on prices, so has weaker demand in the eurozone, Japan, China, and many emerging markets. Moreover, persistently low oil prices induce a fall in investment in new capacity, further undermining global demand.

...

But serious challenges lie ahead. Private and public debts in advanced economies are still high and rising – and are potentially unsustainable, especially in the eurozone and Japan. Rising inequality is redistributing income to those with a high propensity to save (the rich and corporations), and is exacerbated by capital-intensive, labor-saving technological innovation.

This combination of high debt and rising inequality may be the source of the secular stagnation that is making structural reforms more politically difficult to implement. If anything, the rise of nationalistic, populist, and nativist parties in Europe, North America, and Asia is leading to a backlash against free trade and labour migration, which could further weaken global growth.

Rather than boosting credit to the real economy, unconventional monetary policies have mostly lifted the wealth of the very rich – the main beneficiaries of asset reflation. But now reflation may be creating asset-price bubbles, and the hope that macro-prudential policies will prevent them from bursting is so far just that – a leap of faith.

Roubini getting all negative.

Share this post


Link to post
Share on other sites

Shale oil and Osborne's echo housing bubble are the only things deterring the onset of a second great depression??

Who knew?

You forgot hardworking families

Share this post


Link to post
Share on other sites

Since when has the US & UK economies been functioning properly?

Exactly. The US & UK the 'good engine'? god help us. They only have the illusion of being good by currency debasement and racking up debt in an exponential fashion.

Share this post


Link to post
Share on other sites

Since when has the US & UK economies been functioning properly?

Since ballooning trade deficits, falling real wages, and 40 year low workforce participation rates no longer mattered.

But none of that matters, the stock market and house prices are doing OK, which, in media land is the economy.

Funny, I always thought the guardian was against this neo-liberal crap. Then I assumed Roubini was too. I guess not.

Share this post


Link to post
Share on other sites

Since ballooning trade deficits, falling real wages, and 40 year low workforce participation rates no longer mattered.

But none of that matters, the stock market and house prices are doing OK, which, in media land is the economy.

Funny, I always thought the guardian was against this neo-liberal crap. Then I assumed Roubini was too. I guess not.

He is right of course, in that the US and the UK financial centres are functioning. but it has cost us all dearly, and the economy itself, the one that provides things, food and energy to people, is slowly getting bogged down in a mire of debt, which is kept going by lowering interest rates and criteria for risk lending.

In other words, the US and UK Financial Centres are the current location of a likely detonation.

Share this post


Link to post
Share on other sites

Imagine an airliner that has been flying for weeks with a refuelling boom.

There is a huge party going on in the 1st class area. The members of this exclusive group have been partying on food and drink that should have gone to the poor sods in coach.

They have also been encroaching further and further into 'business class' turning it into their 1st class enclave. Extra room is grabbed and more unfortunates in business are being thrown into coach to live on crumbs. There is absolutely now way back up from coach.

The Elites in 1st Class have been demanding that the pilots pay for the fuel on their credit cards as the airline long since stopped paying - they insist that despite being able to afford 1st class travel they do not have any liquid assets to pay for the fuel. All the cards belonging to the 1st Officer are now declining and he has been tossed into coach. There are more and more red flashing lights and sounders present in the cockpit...............

Share this post


Link to post
Share on other sites

In other words, the US and UK Financial Centres are the current location of a likely detonation.

That's what people on here have been saying for more than a decade yet they still seem to be able to keep the plates spinning...

Share this post


Link to post
Share on other sites

That's what people on here have been saying for more than a decade yet they still seem to be able to keep the plates spinning...

Printing will do that.

You run out of cash, print some more, because, clearly, not enough cash is the problem.

At some point the cash becomes meaningless, which is its natural state anyway.

Edited by Bloo Loo

Share this post


Link to post
Share on other sites

Unfortunately, only one of its four engines is functioning properly: the Anglosphere (the United States and its close cousin, the United Kingdom).

A bit rose tinted so far as the UK is concerned. Isn't the US a bit doubtful as well.

Aren't all the engines supposed to be linked together and feed off each other these days and it's not as if it's a glider either.

Edited by billybong

Share this post


Link to post
Share on other sites

He is right of course, in that the US and the UK financial centres are functioning. but it has cost us all dearly, and the economy itself, the one that provides things, food and energy to people, is slowly getting bogged down in a mire of debt, which is kept going by lowering interest rates and criteria for risk lending.

In other words, the US and UK Financial Centres are the current location of a likely detonation.

I put Japan and China far in the lead in terms of having an economic event that precipitates a world finacial crisis.

Share this post


Link to post
Share on other sites

I put Japan and China far in the lead in terms of having an economic event that precipitates a world finacial crisis.

I thought they already had theirs.

They are covering as much as we are.

As ours is the largest, when it does blow......

Share this post


Link to post
Share on other sites

Apparently Saudi just lowered the price of gas to the US and put it up for Europe and Asia? This seems to be a financial story on the news wires but I always thought that the Yanks got a better deal for oil from the Saudis?

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   211 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.