로그인




연락처 :
bolle1917@gmail.com



HSBC fears world recession with no lifeboats left

The world authorities have run out of ammunition as rates remain stuck at zero. They have no margin for error as economy falters

5K
1K
11
580
7K
Email
Photo: ALAMY

The world economy is disturbingly close to stall speed. The United Nationshas cut its global growth forecast for this year to 2.8pc, the latest of the multinational bodies to retreat.

We are not yet in the danger zone but this pace is only slightly above the 2.5pc rate that used to be regarded as a recession for the international system as a whole.

It leaves a thin safety buffer against any economic shock - most potently if China abandons its crawling dollar peg and resorts to 'beggar-thy-neighbour' policies, transmitting a further deflationary shock across the global economy.

The longer this soggy patch drags on, the greater the risk that the six-year old global recovery will sputter out. While expansions do not die of old age, they do become more vulnerable to all kinds of pathologies.

A sweep of historic data by Warwick University found compelling evidence that economies are more likely to stall as they age, what is known as "positive duration dependence". The business cycle becomes stretched. Inventories build up and companies defer spending, tipping over at a certain point into a self-feeding downturn.

Stephen King from HSBC warns that the global authorities have alarmingly few tools to combat the next crunch, given that interest rates are already zero across most of the developed world, debts levels are at or near record highs, and there is little scope for fiscal stimulus.

"The world economy is sailing across the ocean without any lifeboats to use in case of emergency," he said.

In a grim report - "The World Economy's Titanic Problem" - he says the US Federal Reserve has had to cut rates by over 500 basis points to right the ship in each of the recessions since the early 1970s. "That kind of traditional stimulus is now completely ruled out. Meanwhile, budget deficits are still uncomfortably large," he said.

The authorities are normally able to replenish their ammunition as recovery gathers steam. This time they are faced with a chronic low-growth malaise - partly due to a global 'savings glut', and increasingly to a slow ageing crisis across most of the Northern hemisphere. The Fed keeps having to defer its first rate rise as expectations fall short.

Each of the past four US recoveries has been weaker than the last one. The average growth rate has fallen from 4.5pc in the early 1980s to nearer 2pc this time. The US fiscal deficit has dropped to 2.8pc but is expected to climb again as pension and health care costs bite, even if the economy does well.

The US cannot easily launch a fresh New Deal. Public debt was just 38pc on GDP when Franklin Roosevelt took power in 1933, and there were few contingent liabilities hanging over future US finances.

"Fiscal stimulus – a novel idea at the time – may have been controversial, but the chances of it working to boost economic activity were quite high given the healthy starting position. Today, it is much more difficult to make the same argument," he said.

The great hope - and most likely outcome - is that the recent monetary expansion in the US and the eurozone starts to gain traction later this year. Broad 'M3' money data - a one-year advance indicator - has been growing briskly on both sides of the Atlantic. But nobody knows for sure whether the normal monetary mechanisms are working.

JP Morgan estimates that the US economy contracted at an rate of 1.1pc in the first quarter, far worse than originally supposed.

The instant tracking indicator of the Atlanta Fed – GDPnow – shows little sign that America is shaking off its mystery virus. Growth was just 0.7pc (annualised) in mid-May. It is becoming harder to argue the relapse is a winter blip or caused by temporary gridlock at California ports.

Over 100,000 lay-offs across the oil and gas belt seem to have taken their toll. The Fed thought the windfall gain of cheaper energy for everybody else would weigh more in the balance, but this time Americans have chosen to salt away the money.

Net saving jumped by $125bn to $728bn in the first quarter. There was no pick-up in April. Retail sales were flat.

It is now more likely than not that US economy has dropped through the Fed's stall-speed threshold of two consecutive quarters below 2pc growth. Exactly how far below is unclear. The Fed uses its own growth measure - gross domestic income (GDI) - and this data has not yet been published.

The stall speed concept is soft science but not to be ignored. "Output tends to transition to a slow-growth phase at the end of expansions," said a Fed research paper.

Much now depends on China, where the economy is starting to look "Japanese". Dario Perkins from Lombard Street Research says the Chinese economy is in a much deeper downturn than admitted so far by the authorities. It probably contracted outright in the first quarter.

Electricity use has turned negative. Rail freight has been falling at near double-digit rates. What began as a deliberate move by Beijing to choke off a credit bubble has taken on a life of its own, evolving into a primordial balance-sheet purge.

It was inevitable that China's investment bubble would lead to vast inventory of unsold property. The country produced more cement between 2011 and 2013 than the US in the 20th Century -

Mr Perkins said China is now in a “classic debt deflation spiral” as excess capacity holds down prices. Factory gate inflation is now minus 4.6pc. This in turn is tightening the noose further by pushing up real borrowing costs.

The Chinese authorities have so far resisted the temptation to flood the system with fresh stimulus, fearing that this would store up even greater trouble.

They have taken steps to offset a clampdown on local government spending and avert a “fiscal cliff” that might otherwise have occurred. They have loosened policy for banks just enough to offset the contractionary effects of capital flight. But they have not yet come to the rescue.

This matters enormously. Andrew Roberts from RBS says China accounted for 85pc of all global growth in 2012, 54pc in 2013, and 30pc in 2014. This is likely to fall to 24pc this year. “If there is only one statistic that you need to know in the world right now, this is it,” he said.

The effects are being felt across Asia. Japan keeps disappointing. Its exports to China have fallen 15pc over the last year. Korea is flirting with recession.

Russia, Brazil, Argentina, and Venezuela are all contracting sharply, casualties of the China-driven commodity bust. The UN says the growth rate for the emerging market nexus (ex-China) has dropped to 2.3pc from an average of 6.5pc in the glory years of 2004-2007.

Europe is doing better but it is hardly a boom. The eurozone is contributing little to global demand. The region has displaced China and to become the world's "saver of last resort" - or its biggest black hole in the view of critics - exploiting the weaker euro to rack up a current account surplus of $358bn.

It is far from clear whether Europe can act as an engine of world recovery. The composite purchasing managers index (PMI) for services and manufacturing slipped in May, and new orders fell. Oxford Economics thinks the “sugar rush” from quantitative easing may be wearing off.

HSBC's Mr King says the global authorities face awful choices if the world economy hits the reefs in its current condition. The last resort may have to be "helicopter money", a radically different form of QE that injects money directly into the veins of economy by funding government spending.

It is a Rubicon that no central bank wishes to cross, though the Bank of Japan is already in up to the knees.

The imperative is to avoid any premature tightening or policy error that could crystallize the danger. As Mr King puts it acidly. "Many – including the owner of the Titanic – thought it was unsinkable: its designer, however, was quick to point out that 'She is made of iron, sir, I assure you she can'."

?

List of Articles
번호 제목 글쓴이 날짜 조회 수
481 [터키/미국] Turkish Government Surveilled US Troops as Part of 2016 Coup Probe - Report 볼셰비키 2019.05.02 116
480 [미국/대선] Bernie Sanders To Stay A Democrat For Life And Support Clinton If She Is The Nominee 볼셰비키 2016.04.23 115
479 [이스라엘/유태인 혐오증]Making Progressives the Enemy 볼셰비키 2019.05.11 115
478 [러시아/미국] Russia and Its BRICS Partners Gradually Abandoning Dollar in Mutual Trade 볼셰비키 2019.05.08 114
477 [이라크/미국] Trump Pardons Ex-Soldier Convicted of Killing Unarmed Iraqi Man (요약 번역 첨부) 볼셰비키 2019.05.10 114
476 [그리스] Why we need to support Greek left now file 볼셰비키-레닌주의자 2015.01.04 113
475 [IBT] Open Letter to the Opposition within the ‘Fourth International’ 볼셰비키 2017.06.11 113
474 [세계정세] Imperialist war, the working-class upsurge in the Mideast and North Africa, and the strategy of Permanent Revolution 볼셰비키 2019.05.11 113
473 [러시아] The Russia as ‘imperialist’ thesis is wrong and a barrier to solidarity with the Ukrainian and Russian people 볼셰비키 2015.02.10 112
472 [파시즘] Why the Rise of Fascism is Again the Issue 볼셰비키 2015.03.03 110
471 [중동/러시아] "러 전폭기 격추, 터키-IS 원유 밀거래 채널 타격과도 연관" 볼셰비키 2015.11.26 110
470 [그리스] Independent Greeks: Who are Syriza's right-wing coalition partners and what do they want? 볼셰비키 2015.01.28 109
469 [중국] Week-long mass protest rocks Shanghai 볼셰비키 2015.07.07 109
468 [시리아/미국] Syria Airstrikes Instantly Added Nearly $5 Billion to Missile-Makers' Stock Value 볼셰비키 2018.04.16 108
467 [독일] RISE OF GERMAN IMPERIALISM AND THE PHONY “RUSSIAN THREAT” 볼셰비키-레닌주의자 2014.12.14 106
Board Pagination Prev 1 ... 5 6 7 8 9 10 11 12 13 14 ... 42 Next
/ 42