[economic forecast 2008] various sources

First a round up of various sources

Urged on by the tip of the Anonymous whip, the Higham takes his first faltering steps into the field of economic analysis. Why not start with the future?

Might as well go in off the deep end ... would you august economists out there give this the once over?


The World Bank forecast of growth


The IMF forecast of output


China growth recession

the odds of a significant growth recession in China – at least one year of sub-6 per cent growth – during the next couple of years are 50:50. With Chinese inflation spiking, notable backpedalling on market reforms and falling export demand, 2008 could be particularly challenging.

Financial sector

On the one hand, we have a banking sector that has a demonstrated capacity to generate huge crises because of the incentives to take on under-appreciated risks. On the other hand, we lack the will and even the capacity to regulate it.

[The] financial sector that generates vast rewards for insiders and repeated crises for hundreds of millions of innocent bystanders ...

Relief measures in the U.S. include:

* The Mortgage Forgiveness Debt Relief Act of 2007
* GSEs to expand their purchases of conforming mortgages effective March 1
* Proposals to aid homeowners directly at lender expense

Price of crude

[S]ky-high price of crude oil and refined product. Pushed upward by world-wide speculative Mid-East war fears and increases in demand (especially from China), increasing energy prices act as an inflationary "tax" on domestic production and consumption throughout the market economy.

Higher costs of production will lower profits; higher prices will reduce some consumption. The only good news here is that any substantial economic slowdown in 2008 will eventually moderate the price of oil and other commodity prices as well.

Oil consumption

Consumption.. World oil consumption is expected to grow by 1.4 million bbl/d in 2008, about 0.2 million bbl/d lower than last month’s assessment, due to increased risks of a global economic slowdown in 2008 (World Oil Consumption).

Commodities overall

We expect commodities to perform well over 2008 – Commodities are anticipated to benefit from turbulence in other financial markets “This asset class tends to do well in periods of rising inflation and political uncertainty – events which tend to depress other asset classes, such as equities and bonds.”

Systemic risk - Morgan Stanley

But even this uncertain and wobbly outlook is subject to downside risks. If the combination of monetary and fiscal stimulus fails to get traction, the adverse feedback loop might intensify, promoting, as Chairman Bernanke noted in testimony this week, bank failures and systemic risk.

Systemic risk - LEAP 2020

In the United States, this new tipping point will translate into a collapse of the real economy, final socio-economic stage of the serial bursting of the housing and financial bubbles (1) and of the pursuance of the US dollar fall. The collapse of US real economy means the virtual freeze of the American economic machinery: private and public bankruptcies in large numbers, companies and public services closing down massively

...any comparison with the previous crises of our modern economy would be fallacious. It is neither a “remake” of the 1929 crisis nor a repetition of the 1970s oil crises or 1987 stock market crisis. It is truly a global systemic crisis, that is to say a crisis affecting the entire planet and questioning the very foundations of the international system upon which the world was organised in the last decades.

Neither Asia nor Europe (or more precisely ‘nor the Eurozone') will suffer the roughest, the most sustainable and the most negative impact of the ongoing crisis; but the United States will, as well as all the countries/economies strongly linked to the US (what our experts have decided to call “the American risk”)

The global systemic crisis is in fact the beginning of an economic « decoupling » between the US and the rest of the world, knowing that the non « decoupled » economies will be dragged down the US negative spiral.

Bloomberg disagrees on decoupling

...stock markets have already lost between 10 and 20 percent since the beginning of the year (10), and, on the other hand, the collapse of the real economy in the US by the end of Summer 2008 will drag down all stock markets. According to LEAP/E2020, international stock markets will probably drop by 50 percent in average compared to 2007 (including in the emerging countries) ...

Mervyn King at the Bank of England says:

Sending a warning to families who expect the value of their home to increase in the coming years, Mr King added: "Looking several years ahead, there’s no reason to expect house prices to be markedly above where they are now. It’s conceivable there might be falls in house prices."

Analyses by the Anonymii

Commodity prices will continue to rise in the short term until the increase in global inflation draws a response from central banks, especially in China.

(1) no reason to think that commodity prices or inflation will stabilise in the short-to-medium term. Energy and commodity prices are being driven by two factors that will ensure they are largely insulated from any slowdown in the United States:

(a) Strong demand from China which is offsetting slower commodity consumption in the United States and (prospectively) in Western Europe.

(b) Strong investment inflows as institutional and private investors re-allocate funds from large and liquid but underperforming equity and bond markets to small, illiquid but out-performing commodity assets, which is having an outsized impact on commodity prices.

(2) prices for crude & other commodities have continued to soar, and that trend looks set to be extended. Until China’s commodity appetite slows, or investors lose their enthusiasm increases fuelling inflation will continue.

(3) perceptibly faster inflation ... none of the major central banks ... ready to push back by raising interest rates to curb growth. In fact, interest rate reductions in the United States and United Kingdom appear designed to stimulate otherwise slumping demand.

(4) Higher commodity-driven inflation will make bonds less attractive ... further allocation into commodity futures, intensifying upward pressure on prices .

Thinking about the inflation end-game: H2 2008

(1) speed limit for global growth is set by the availability of adequate raw materials and transportation capacity ... bottlenecks drive inflation rates worldwide ... no "icking up" slack in the global economy.

(2) Fed, Bank of England and ECB largely powerless to control commodity-driven inflation within their own economies. ... only way to return inflation to target levels would be to engineer deep local recessions in which massive unemployment and sharp falls in the prices of non-traded items and non-energy intensive items offset the continuing upward pressure from internationally traded energy and commodity items.

Central bankers prefer to anchor expectations and hope something will turn up to solve the problem for them.

(3) short-term commodity prices and inflation will continue to accelerate

(4) Until global growth slows, especially in China, either of its own accord or because the central banks start tightening monetary conditions ... inflation will intensify.

(5) [V]arious processes suggest the end-game for global growth, inflation and commodity prices is now starting to emerge:

(a) becomes increasingly difficult for central banks to ignore the problem.

(b) challenge to the competitiveness of China’s exporters and its internal social stability ... price controls in autumn 2007 and early 2008 to hold the inflation rate down

(c) Sooner or later, measures to hike domestic energy prices and slow the pace of growth in the manufacturing and real estate sectors ... in H2 2008.

... possible housing-driven slowdown will spread to Western Europe and translate into slower growth in China

... in the US ... homebuilding has slowed but commercial construction activity has held up well. Consumer spending has slowed but is not yet falling and business investment expenditure has remained strong.

... corporate profits have started to fall ... household debt ... default rates ... consumer spending will fall later in the year.

... good reasons to think that the full impact of the crisis will not be felt until H2 2008. Moreover, the slowdown is likely to spread to the United Kingdom and Western Europe, but only slowly ... more apparent in H2.

Bottom line

... the global economy looks set to enter a period of stagflation throughout H1 2008 and extending into H2

... central banks ... set to accommodate rather than push back ... further devaluation in the USD

... upward pressure on prices.

... increases in commodity costs ... if the slowdown spreads to Western Europe and China, commodity demand and hence prices and inflation will moderate ...

... global economy has hit the limits (and gone beyond) its capacity for non-inflationary growth

Note

... above commodity analysis omits to mention the search for better returns by international investors, exiting very large bond markets and low performing equity markets, into much smaller commodity markets.

... true rate of inflation in the US, UK, etc, is anywhere between 6%, and 10%, notwithstanding the constant lies and manipulation of statistics by the respective governments

Anon 2 says

... major uk banks, hedge funds, and other financial bodies are solvency impaired, UK level major clearing banks telling bare-faced lies about their provision (or non provisions) for toxic paper

... millipede is a liar - criticizing China when he is a communist (check his background, father, check the labour peer who kept his father from conscription, etc)

... so China would invade us - their best export market?

... UK, US nationally bankrupt ... taxed to the point of insurrection, and certainly to the point of GDP growth inflection

... millipede [trying for] control of the worlds finite resources.

... currently fighting a proxy war in Afghanistan

... Saudis funding (sometimes indirectly), hezbullah, hamas, iraqi insurgents, al Qeda, thousands of wahabbi learning centres ... we have been providing advance weaponry to these same princes, and backhanding them ... Blair has squashed one inquiry, who will squash the current?

... In geologic and mining circles, Afghanistan regarded as Nirvana

... in another corner of Afghanistan, the Chinese are building roads, railways, schools, hospitals, houses, and monstrous mines

Money supply

... money supply growth in Russia is up 44%, India up 23%, Australia up 23%, Brazil up 18%, U.S. up 16% (M3), UK up 12%, etc.

... massive industrialization taking place in China and India, representing 40% of the humans on earth. While the breakneck pace may slow this year, the need for increasing amounts of commodities will continue for many years.

... supply the major issue

From The Broadsheet Rag

Not exactly economics but I had to put it in somewhere:

We already have a Eurocorps. And the EU are carrying out operations in Chad and Kosovo. So, if anyone thinks that the EU aren’t trying to create an army — Well… They’re a moron.

This week I found more worrying evidence on this subject. The great Javi Il Duce gave a speech at the European Defence Agency Conference.

Home

Meanwhile, I'm looking at ГОРБУЛИНА Ирина Вячеславовна and the Asian Pacific markets.

Prediction

U.S. to implode, decoupling then an issue, commodities high till China slows, systemic meltdown, lying incompetent toadies taken to a public place and hung, drawn and quartered.

Conclusion

Weez knackered, folks ... have a good 2008 :)