The World In Depression: Living With Crisis (Many articles concerning many countries have been placed below) There Is Worldwide Agreement On The Present And Future Decline Of The World Economy. The Alarm Bells Are Ringing Everywhere! “Markits survey of over 6000 firms showed optimism falling sharply in October, dropping to the lowest seen since the survey began five years ago. Hiring and investment plans were also at or near post-crisis lows, while price expectations deteriorated further. More worrying, perhaps, is the US is not decoupled whatsoever, with future expectations of US business activity at the lowest since the financial crisis... expansion plans in the US (are) the weakest seen over the past five years. US growth therefore looks likely to have peaked over the summer months, with a slowing trend signaled for coming months… the U.S. economy has not been immune from weakening global business conditions, with euro area woes and heightened geopolitical risk weighing on firms’ business outlook and job hiring intentions for 2015. U.S. companies reported the lowest degree of confidence since the survey began in late 2009, reflecting domestic concerns and a subdued external demand environment… Global hiring intentions slid to within a whisker of the all-time low seen in June of last year, deteriorating in the U.S. Japan, the U.K., Eurozone, Russia and Brazil. Global investment intentions also slumped to a new post-crisis low, dropping in the US, UK, Japan and Eurozone. “ (1, 1a) “The Organization for Economic Cooperation and Development has predicted the global economy and worldwide trade will expand only moderately in the near future. In its latest outlook, it voiced concerns about the eurozone... The report noted the speed of recovery from the global financial crisis remained unimpressive... the OECD survey (said) the (Euro) single-currency area was grinding to a standstill and posed a major risk to world growth in the years ahead as unemployment remained stubbornly high and inflation persistently far from target... Renewed fiscal austerity could downshift the pace of recovery rather than help it, Chief Economist Catherine Mann said... In the report it said: The Economic Outlook draws attention to a global economy stuck in low gear, with growth in trade and investment under-performing historic averages and diverging demand patterns across countries and regions, both in advanced and emerging economies. “We are far from being on the road to a healthy recovery. There is a growing risk of stagnation in the euro zone that could have impacts worldwide, while Japan has fallen into a technical recession,” (2, 2a) “The Jerome Levy Forecasting Centre, attach a 65% probability of a worldwide recession forcing a contraction in the US by the end of next year... Why the gloom? Levy argues the US and many advanced economies still have balance-sheet excesses exposing them to renewed financial crisis. There is limited room for policy makers to reverse any slump, and low inflation risks tipping into deflation in many parts of the world.” (3) “Falling inflation a worry for Europe but also the world European Central Bank President Mario Draghi has moved closer to launching sovereign debt purchases and data... will show just how dangerously low inflation has fallen in the $13 trillion euro zone economy. A sickly Europe has held back global economic growth for years, and now it is contributing significantly to powerful forces already dragging down inflation across the globe. A spectacular drop in crude oil prices over the past month will be the center of discussion when ministers from the world’s top oil exporters meets... The latest Reuters poll suggests euro zone inflation relapsed to 0.3 percent in November, far from the ECB target of just below 2 percent... Despite years of zero interest rates across mature economies and trillions of dollars worth of emergency stimulus from central banks, alarm bells are ringing worldwide. Japan’s experiment in raising sales taxes to try to revive inflation spawned news of yet another recession. The People’s Bank of China, which is dealing with a falling property market and an inflation rate that has tumbled to just 1.6 percent, unexpectedly cut its main interest rates for the first time in more than two years... The ECB, with rates as low they can go, has been doing everything in its power short of printing money... Yet private credit figures... may once again fail to show any real impact from the cheap long-term loans the ECB has offered banks to lend on to businesses... Bank credit to the private sector has been contracting for more than two years and the few economists who gave a forecast expect another roughly 1 percent fall compared with a year ago.” (4) “World investors eased back on their exposure to risk assets such as stocks as they grappled with divergent monetary policies and multi-speed growth paths among major world economies, a global poll shows. A monthly survey of 47 senior investors in the United States, Europe, Britain and Japan found the average recommended exposure to stocks in global balanced portfolios eased for a second consecutive month to 49.1 percent in November from 49.5 percent. The greatest risk remains disappointment on global growth level ... Markets remain vulnerable to any negative newsflow on macroeconomic indicators, be it in the Euro zone, in the US or even in China, Dexia Asset Management said... Japan, the Eurozone and China are moving toward boosting money supply to counter sluggish or falling economic growth, leaving investors with an uncertain environment to grapple with. Many still feel global growth is shaky - as evidenced in recent falls in global oil prices prompted by worries energy demand will be weak.” (5) “Commodities retreated to a five-year low as crude oil tumbled after OPEC refrained from cutting output to ease a global glut. Gold and copper also declined. The Bloomberg Commodity Index of 22 raw materials dropped 3.9... the lowest since April 2009... Brent crude plunged 6.7 percent after the Organization of Petroleum Exporting Countries took no action on production at a meeting in Vienna. Commodities are poised for a fourth straight year of losses as West Texas Intermediate oil futures are set for the biggest slump since the 2008 financial crisis. China is heading for the slowest yearly expansion pace since 1990... “It has been a broad-based selloff,” Virendra Chauhan, an analyst at Energy Aspects Ltd. in London, said... “It’s likely to have weighed on other risk assets.”... “Precious metals declined as lower oil prices prompted concerns about deflation,” Australia & New Zealand Banking Group Ltd. Said... Industrial metals have been hurt by the drop in the oil price as it may help reduce production costs, according to the bank.” (6) “The FTSE’s (a share index of the 100 companies listed on the London Stock Exchange)… gains were offset by a fall in mining stocks. The UK mining index fell 0.6 percent, dragged down by a 1.7 percent fall in BHP Billiton and a 1.8 percent fall in Anglo American… The fall in the mining index (happened) after a surprise rate cut in China, the worlds biggest metals consumer. Copper prices have come under pressure on concern the measures are unlikely to spur an immediate recovery for companies facing slowing demand and a freeze on credit. Wed have to see a recovery in the mining stocks to provide the next leg of the rally, but their disappointing performance is a reflection of global demand at the moment, said Ioan Smith, managing director at KCG Europe.” (7) “We should be glad the price of oil has fallen the way it has losing another 6%... it allows us to see how the economy is really doing, without the multilayered veil of propaganda, spin, fixed data and bailouts and handouts for the banking system. It shows us the huge extent to which consumer spending is falling, how much poorer people have become as stock markets set records. It also shows us how desperate producing nations have become, who have seen a third of their often principal source of revenue fall away in a few months’ time… We are only now truly even just beginning to see how hard that crisis has already hit the Chinese export miracle, and its demand for resources, a major reason behind the oil crash. The US this year imported less oil from OPEC members than it has in 30 years, while Americans drive far less miles per capita and shale has its debt-financed temporary jump… Even long-time energy industry people cannot remember an overinvestment cycle lasting as long as the one in unconventional US resources. It is not just the hydrocarbon engineers who have created this bubble; there are the financial engineers who came up with new ways to pay for it... Banks including Barclays and Wells Fargo are facing potentially heavy losses on an $850 million loan made to two oil and gas companies, in a sign of how the dramatic slide in the price of oil is beginning to reverberate through the wider economy. [..] if Barclays and Wells attempted to syndicate the $850m loan now, it could go for as little as 60 cents on the dollar. That’s just one loan. At 60 cents on the dollar, a $340 million loss. Who knows how many similar, and bigger, loans are out there? Put together, these stories slowly seeping out of the juncture of energy and finance gives the good and willing listener an inkling of an idea of the losses being incurred throughout the global economy, and by the large financiers. There’s a bloodbath brewing in the shadows. Countries can see their revenues cut by a third and move on, perhaps with new leaders, but many companies can’t lose that much income and keep on going, certainly not when they’re heavily leveraged.” (8) “Crude oil slid to a four-year low after OPEC refrained from cutting production to ease a supply glut, stoking declines in energy stocks worldwide. Government bonds rose, while Russia’s ruble weakened to a record low. West Texas Intermediate oil tumbled 6.3 percent to $69.05 a barrel in electronic trading, as Brent crude fell to its lowest level since 2010. Canadian energy companies sank the most since 2011, dragging the Standard & Poor’s/TSX Composite Index down 0.8 percent… in Toronto… Global energy stocks are down 25 percent in 2014, while fixed-income assets have rallied as the drop in crude damps inflation. German price growth climbed the least since 2010, data… showed… Canadian energy shares slumped 5.1 percent, the most in one day since August 2011, led by losses of at least 14 percent in Penn West Petroleum Ltd., which slid to its lowest level since 1996, Blackpearl Resources Inc., and Lightstream Resources Ltd… BG Group Plc fell 6 percent in London, as BP Plc slipped 2.7 percent and Royal Dutch Shell Plc declined 4 percent. Saudi Arabia’s Tadawul All Share Index, which is down more than 18 percent from this year’s peak, fell 0.3 percent as indexes in Oman and Qatar dropped 1.6 percent and 1.4 percent respectively. The ruble weakened to an all-time low of 48.6550 per dollar in Moscow, while Norway’s krone, the second-worst performer against the dollar this year among 16 major currencies, lost 1.4 percent to 6.9272 per dollar. Norway is the biggest oil producer in Western Europe... The euro declined 0.3 percent to $1.2467 after the German inflation data. German consumer-price growth, calculated using a harmonized European Union method, dropped to 0.5 percent in November from 0.7 percent in October. It marked the slowest pace of inflation since February 2010.” (9) “Energy companies plunged the most in three years, leading the Canadian index to the biggest decline in three weeks, as the U.S. benchmark for oil slumped below $70 a barrel for the first time since 2010. Lightstream Resources Ltd. (LTS) and MEG Energy Corp. dropped at least 14 percent to pace declines after OPEC’s decision not to cut production. Suncor Energy Inc., the nation’s largest oil producer by market value, tumbled the most in more than two years. First Majestic Silver Corp. and Detour Gold Corp. retreated more than 4.1 percent as precious metals prices slid... “Energy’s falling through the floorboards here,” said John Kinsey, a Toronto-based fund manager at Caldwell Securities Ltd., which manages about C$1 billion. “The real stellar oil names, including Crescent Point, Canadian Natural Resources and Suncor, we own all of them and they’re all being pummeled. We’re not happy campers here.”… Crescent Point Energy Corp. (CPG) sank 9.7 percent to C$30.70, the largest retreat since December 2008. Suncor lost 5.7 percent to C$36.86, the biggest decline since June 2012, and Canadian Natural dropped 7.1 percent to C$38.45, the most since June 2009… Raw-materials and energy producers, which account for about a third of the benchmark Canadian equity gauge, were among three of the 10 main industries in the index that fell... on trading 32 percent below the 30-day average. All but one of the 69 members of the S&P/TSX Energy Index tumbled as the industry sank 5.1 percent, the most since August 2011.” (10) “ ‘It was a great decision,’ Saudi Oil Minister Ali al-Naimi said as he emerged smiling after around five hours of talks. Asked whether OPEC had decided not to cut production and to roll over existing output policies, he replied: That is right. Venezuelan Foreign Minister Rafael Ramirez left the meeting visibly angry and declined to comment on the outcome. Wealthy Gulf states have made clear they are ready to ride out the weak prices that have hurt the likes of Venezuela and Iran — OPEC members that pressed for output cuts to stabilize the market and ease pressure on their budgets, but cannot afford to make any themselves. A price war will also seriously hurt top non-OPEC exporter Russia, which has clashed with Saudi Arabia over Moscows support for Syrian President Bashar Assad. Russia is already suffering from Western sanctions over its actions in Ukraine and needs oil prices of $100 per barrel to balance its budget.” (11) “From Venezuela to Argentina, oil’s steepest plunge in three years is reverberating through a region that accounts for the largest crude reserves outside of the Middle East. Venezuelan oil bond yields jumped, American depositary receipts of Petroleo Brasileiro SA, YPF SA and Ecopetrol SA plunged and the Colombian peso fell the most in five years after the 12-nation OPEC opted against measures to prop up crude prices Nov. 27. Brent is down 13 percent this week. Crude’s accelerating rout, as the U.S. shale boom coincides with slowing demand, is putting pressure on producers to cut spending. Latin America’s largest independent producer Pacific Rubiales Energy Corp. said... that it’s battening down for at least a year of lower prices. Some project development and drilling in the region is poised to decelerate, Patricia Mohr, a commodity specialist at Scotiabank Group in Toronto, said. “If prices remain very low into the second half of next year, it could be a bigger slowdown,” Mohr said... Petrobras, as Brazil’s state-run oil company is known, is investing $221 billion between 2014 and 2018 to accelerate production at the largest oil discoveries in the Western Hemisphere in almost four decades. The company assumes a Brent crude price of $100 a barrel for 2015-2017 and $95 from 2018-2030 in its 2030 strategic plan… Petrobras ADRs (American depositary receipts) fell 8.3 percent... ADRs of YPF, Argentina’s state-run producer, slumped 5.3 percent while Colombia’s Ecopetrol SA (EC) fell a record 15 percent in New York. Steel-pipe supplier Tenaris SA lost 3.8 percent in Buenos Aires... “They depend on oil companies’ projects and any cancellations will hit them,” Raymond James analyst Santiago Wesenack said...“I expect further loses.”... The currency in Colombia, which depends on oil for more than half of its exports, slid to the weakest since May 2009. Crude’s plunge comes as the government forecasts the nation’s oil output will fall this year for the first time since 2005. (12) “Copper futures fell to a four-year low as a rout in the energy market drove raw materials lower. A gauge of six industrial metals posted the biggest weekly drop since February 2013. On the Comex in New York, copper futures for March delivery tumbled 3.7 percent... Earlier, the price touched $2.8435, the lowest for a most-active contract since June 10, 2010. This week, the metal tumbled 6 percent, the most since December 2011... The Bloomberg Commodity Index of 22 raw materials headed for the biggest decline since September 2011, touching the lowest since May 2009. Metals from aluminum to zinc dropped. (13) “Copper futures fell to an eight-month low as orders for business equipment unexpectedly dropped in the U.S., the world’s second-biggest consumer of the metal. Orders for non-military capital goods excluding aircraft declined 1.3 percent in October, a government report showed... Economists in a Bloomberg survey expected a 1 percent gain. A slump in energy futures damped the outlook for some commodities. “The lower oil prices cast a shadow on metals as well,” Richard Fu, the director for Asian commodity trading at Newedge Group SA in London, said...” (14) “Iron ore extended a retreat below $US70 a metric ton to the lowest level in more than five years as global supplies of the steel-making raw material are poised to swell just as economic growth in China is slowing. Ore with 62 per cent content delivered to Qingdao in China declined 1.6 per cent to $US68.49 a dry ton... the lowest since June 2009, according to Metal Bulletin Ltd. The commodity used to make steel slumped 49 per cent this year after plunging into a bear market in March as output climbed... The raw material may plummet to less than $US60 a ton next year as global supply increases and demand remains weak, according to Citigroup. We remain concerned by the iron ore majors volume expansion strategy, Paul Gait, a London-based analyst... said in a note. Any recovery in prices will have to come from either a recovery in demand in China or from an acceleration in the closure rate of high cost producers. Global seaborne output will exceed demand by 100 million tons this year from 16 million tons in 2013...” (15) “The Ibovespa fell (The Bovespa Index is an index of about 50 stocks that are traded on the São Paulo Stock, Mercantile & Futures Exchange)... as a drop in iron-ore prices to the lowest level since 2009 sank shares of mining company Vale SA. Cia. Siderurgica Nacional SA led losses on the MSCI Brazil/Materials Index. Pulp maker Fibria SA dropped to a four-week low as the real strengthened, dimming the outlook for sales abroad... Vale slumped 4 percent... CSN, as Cia. Siderurgica is known, lost 7.9 percent... Fibria declined 3.6 percent...” (16) “Aluminum fell the most in more than a week as slumping oil prices signal lower costs to produce the energy-intensive metal... While crude is not the primary source of energy for the aluminum producers, energy accounts for about 30 percent of output costs and falling oil prices may have a deflationary impact, according to Macquarie Group Ltd. “The entire commodity complex is having a reaction to crude and the U.S. dollar strength,” Bart Melek, the head of commodity strategy at TD Securities in Toronto, said... “There is that potential on the headlines and less Petro dollars available to invest in the commodity space.” (17) “Bauxite, one of the most common ores in the earth’s crust, is growing scarce. It’s been 10 months since Indonesia banned exports of bauxite, used to extract aluminum, in a bid to transform its mining industry, and the global market is still struggling to replace the lost supply. Bauxite prices are up about 15 percent and aluminum is rallying the most since 2009, driving up costs for importers including the world’s top buyer, China. A global surplus last year has become a shortage in 2014 that Citigroup Inc. says will last three years... Global output of bauxite will trail consumption by about 6.3 million tons this year, compared with a surplus of 49.3 million tons in 2013... China’s bauxite stockpiles are being depleted. Total imports fell 50 percent to 31 million tons in the first 10 months of the year from 61 million a year earlier, customs data show. Imports will drop to 37 million tons this year from 72 million tons in 2013, according to Norsk Hydro ASA, an Oslo-based aluminum producer. Stockpiles may last six months, Commonwealth Bank of Australia said...” (18) “The slump in cotton prices to a five-year low this week will prompt farmers worldwide to reduce planting, the International Cotton Advisory Committee said. The impact of lower prices is already evident in planting intentions in the Southern Hemisphere including Brazil... Futures in New York... tumbled to the lowest since September 2009 as the U.S government estimates global production to outstrip demand for a fifth straight season, boosting inventories to an all-time high. Slowing demand from China, the world’s biggest consumer, will shrink exports from the U.S. and India, the world’s largest shippers... “Everybody is trying to sell and prices are going to go down because supply is higher,” Terry Townsend, a former executive director of the committee, told the conference. “That process of declining prices, farmers losing money, and some farmers going out of business, reducing cotton production is inevitable.” Cotton for March delivery reached 58.53 cents a pound on ICE Futures U.S. ... the lowest since 2009. Futures (have) plunged 73 percent...” (19) “Norddeutsche Landesbank, Germany’s second biggest financier of ships, held provisions at its marine division stable in the first nine months of 2014 as an industry slump enters its seventh year. The state-owned bank based in Hanover, Germany, set aside 474 million euros ($591 million) in the period through September from 478 million euros a year earlier,... “We do not expect the shipping markets to ease significantly in the near future, so we hold on to our conservative risk provisioning,” NordLB said... NordLB... is trying to cut bad loans to shipping clients struggling to service debt amid a slump in the container-vessel market. Its total non-performing loan ratio increased to 3.9 percent at the end of September from 3.7 percent at the end of 2013. Freight rates, charged by vessels to transport containers, are expected to be little changed in the near term as the industry battles overcapacity... The number of vessels NordLB has provided loans to dropped by more than a hundred...” (20) “A recession in the next five years could have a devastating effect on the worlds heavily indebted nations... developed nations with high debt could be in trouble if forecasts for economic recovery did not eventuate... public finances are highly vulnerable to a shock to these optimistic forecasts... A hypothetical recession in 2017 would punch another hole in public finance positions in the developed world. For the group of countries entering the downturn with already dangerously high debt levels, their public finances would look even more unsustainable... the clock is ticking on the next global downturn. The report divides countries into four categories based on their level of vulnerability. 1. Greece, Ireland, Italy, Japan and Portugal were most vulnerable. A recession would derail Greeces attempt to reduce debt, increasing it to 163 per cent of gross domestic product (GDP) by 2020. The story is similar in Ireland, Italy, Japan and Portugal. This shows just how hard it can be to lower public debt when it has risen to extremely high levels. With the exception of Japan, these countries would probably lose access to market financing in this environment. 2. Countries with debt of about 100 per cent of GDP, including the United States, the United Kingdom, Canada, Spain and France. In a recession, sharp declines in nominal growth are painful and small primary surpluses quickly switch to deficits.” (21)
Posted on: Sun, 30 Nov 2014 12:29:19 +0000
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