Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Global Warming ClImate Change Mega Death Trend - 8th Apr 24
Gold Is Rallying Again, But Silver Could Get REALLY Interesting - 8th Apr 24
Media Elite Belittle Inflation Struggles of Ordinary Americans - 8th Apr 24
Profit from the Roaring AI 2020's Tech Stocks Economic Boom - 8th Apr 24
Stock Market Election Year Five Nights at Freddy's - 7th Apr 24
It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- 7th Apr 24
AI Revolution and NVDA: Why Tough Going May Be Ahead - 7th Apr 24
Hidden cost of US homeownership just saw its biggest spike in 5 years - 7th Apr 24
What Happens To Gold Price If The Fed Doesn’t Cut Rates? - 7th Apr 24
The Fed is becoming increasingly divided on interest rates - 7th Apr 24
The Evils of Paper Money Have no End - 7th Apr 24
Stock Market Presidential Election Cycle Seasonal Trend Analysis - 3rd Apr 24
Stock Market Presidential Election Cycle Seasonal Trend - 2nd Apr 24
Dow Stock Market Annual Percent Change Analysis 2024 - 2nd Apr 24
Bitcoin S&P Pattern - 31st Mar 24
S&P Stock Market Correlating Seasonal Swings - 31st Mar 24
S&P SEASONAL ANALYSIS - 31st Mar 24
Here's a Dirty Little Secret: Federal Reserve Monetary Policy Is Still Loose - 31st Mar 24
Tandem Chairman Paul Pester on Fintech, AI, and the Future of Banking in the UK - 31st Mar 24
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Global Recession, United States Economy in Least Worst Shape

Economics / Recession 2008 - 2010 Feb 15, 2009 - 09:51 AM GMT

By: Money_and_Markets

Economics

Best Financial Markets Analysis ArticleJack Crooks Writes: Americans are beginning to realize the gravity of the current U.S. economic situation. After the new Treasury Secretary spoke earlier this week he left us with a very uncomfortable feeling: This problem is huge, and no one seems to have a real answer.

Still, the government feels it must produce an answer and prove that it is the ONLY entity that can fix this mess — via hundreds of billions (perhaps trillions) of U.S. dollars.


The effectiveness of recent proposals is uncertain; but the potential long-term consequences are great. If government aid creates a premature recovery, we'll be relieved of some pain … only to have other pains cast upon us. The outlook is downright ugly.

But even though the severity of the U.S. recession is growing worse by the day, the U.S. may actually be in the least bad shape when compared to other economies.

In fact …

Here Are the Two Areas that I Think Will Suffer the Most!

China — Overdependence on Western demand …

China has become a huge global player. Unfortunately for them, the Chinese depend largely on the role of Western consumer demand.

And the numbers show how that dependence is now smacking the daylights out of their economy:

Unfortunately for the Chinese, their economy depends largely on the role of Western consumer demand.
Unfortunately for the Chinese, their economy depends largely on the role of Western consumer demand.
  • In January, China's exports sank by 17.1% year over year — the second straight month of declines.
  • At the same time, China's imports absolutely plunged — down more than 43% from January 2008.
  • More than 20 million lost jobs add to the potential for social unrest.
  • The real estate market is easily in the worst shape it's been in since at least 2005.

Being the surplus nation it's become, China will need to somehow replace Western demand in order to soften the painful readjustment to output and production that lies ahead. This readjustment will not only hurt China's growth rate, but it will seep into those markets reliant on Chinese demand.Which leads me to …

Europe — Concealing underlying struggles …

If there's anyone still behind the curve, it's the Eurozone economy. By that I mean the European Central Bank is still lagging in their downward monetary policy adjustments.

Inflation is currently not a problem; but growth is. In fact, fourth-quarter GDP contracted 1.5% — the worst on record for the single-currency group of countries.

While a quicker move toward a zero rate of interest won't solve their problems, I believe that the ECB should take interest rates further in that direction. Holding off with these key moves seems an attempt at concealing the underlying struggles Europe must eventually face.

Among them lies a very vulnerable banking system. Considerable exposure to emerging market debt is one of the biggest concerns, especially when you consider the heavy liabilities already weighing on these banks. This credit and lending situation will certainly hamper any hopes of recovery in the near future.

Turning to European governments likely won't reveal any support either. Germany is already having trouble passing through a stimulus package. And the short leash the government has for expanding an already high tax-to-GDP ratio will pose an ongoing obstacle.

The U.S. isn't the only government passing out money left and right in hopes of avoiding severe declines.
The U.S. isn't the only government passing out money left and right in hopes of avoiding severe declines.

No Shortage of Stimuli …

The U.S. isn't the only government scurrying to provide help. For example, China, Japan and South Korea are dishing out dough left and right in hopes of avoiding severe declines. So far, though, all have failed to bring about intended effects.

The risk-environment seems to have changed for the foreseeable future. Consumer appetites have changed. Demand stimulation is almost certainly destined to fail. A major readjustment period is upon us.

In my experience, when it comes to currencies it's all about finding out who is sitting on high ground when the storm and downpour comes through.

And in this case, it seems the real task is to find out who will be the best swimmer. My bet is on the U.S.

Best wishes,

Jack

P.S. Are you hungry for the latest on what's going on in the currency markets? Then be sure to check out my blog .

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com .

Money and Markets Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in