I was watching Bloomberg business channel this afternoon and the anchors were talking about the recently proposed Greece Bailout by the Euroean Union, the Chinese stock market as well as the recent fall of the price of Gold. I don’t know if I find it entertaining, informative or depressing. It all depends on the angle you look at it.
While there are many indicators telling us we might enjoy stellar growth over the rest of the year, others suggest that the next crash could be on the way. And I agree with them. The growth outlook for the rest of the year looks positive. But economists aren’t always the best bunch at spotting a coming economic crash.
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Now let me state here that not everyone or nation will be affected but it should also be noted that an economic crunch or market crash in one part of the world can affect the rest of the world negatively. As of the time of this writing, America is doing quite well. Their economy is growing again and people are spending which is a good thing. The same thing can be said of countries like Germany, U.K. etc.
One of the indicators that can tell us where the world economy is going are sell-off in bonds. I got this from a site so I will quote a part of it. “A sell-off in bonds – a place where you want to put your money when you’re not confident about growth – suggests that investors are becoming more optimistic.
But if history is a useful guide, then the US may already be due another recession. The average post-war growth streak has lasted less than five years.
And the Bank for International Settlements, the so-called central bank of central banks, has warned that policymakers may not have room to fight the next financial crisis.”
So are economists being too complacent? Are they ignoring some major warnings about the global economy’s health?
Here are some alternatives measures you can look at to determine where the world’s financial system is headed.
What is thew state of the health of transortation?
While stocks and shares may not tell us much about the real economy, the transport industry remarably does just that.
In the site I read, David Woo, a strategist at Bank of America Merrill Lynch, said: “The transportation market does not share this optimism.”
Shipping freight rates are down 40% so far this year, and “are showing no signs of recovery”, according to Mr Woo. And BoAML’s latest trucking survey shows “sentiment at the year-low” while rail traffic “remains very weak”.
Mr Woo said: “The bellwether China export containerised freight index is down 40pc so far this year and is now below the trough associated with the height of the eurozone crisis in 2012.”
“In sum, what the transportation market is telling us is that global trade growth is weak,” Mr Woo said, something he noted was reflected in recent manufacturing surveys, too.
Is China running out of power?
China is a country to be watched. Not just for its recnt growth but also for the downside. It is only natural for a downside to happen. Smart people profit from such downside of te economy. Increasingly, China is the engine that drives the global economy. At only 16% of global GDP, it still accounts for around a third of total growth.
And a favourite hipster index for the country’s performance was invented by its own premier, Li Keqiang.
Revealed to a US ambassador in 2007, the “Li Keqiang Index” is an alternative to China’s official GDP figures and simply sums growth in rail freight, electricity use, and bank loans.
Mr Keqiang described the official GDP statistics as “man-made” and unreliable, existing “for reference only”.
The Chinese government recently stopped people from selling shares and stocks in a bid to curtail their recent stock crisis. It has also injected billions into their stock market to stablise it. It is also lending money to people to buy stocks. Now this is a big problem. The chinese government is trying to stop their stocks from falling.
It is only natural that what goes up must come down. The same applies to te stock market. Never in history has there been a stock thar went up and stayed there. At some point gravity hit them and their stock price came down. What the chinese government is trying to do is called manipulation which can backfire on them. If the stock market crashes, it will be devastating for the people who borrowed to invest as well as the government who gave them to invest. It is a tragedy that will be of a great magnitude because it will definitely affect the rest of the world.