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20.06.2016 11:56 The World Economy Is Stagnating Like It`s 1937

A financial crisis sends the global economy into recession. The U.S. government responds with a fiscal and monetary stimulus. Growth recovers, and unemployment drops, but the debts and psychological scars of the downturn linger. Consumers repair their balance sheets instead of taking trips to the mall. Investors hoard their capital among fears of low demand. Everyone wants government bonds, pushing benchmark interests rates toward the zero-bound. Inflation remains tepid. Still, policymakers see enough signs of recovery to cut public spending and tighten monetary policy. Is this a description of the economic landscape of 1937 or 2016? Economists at Morgan Stanley warn that the pattern describes both, and to avoid a repeat of 1938`s recession, the Federal Reserve must slam the brakes on raising interest rates, and the federal government must start running up the deficit.

17.06.2016 08:41 US vs China: 3 flash points between the world`s biggest economies

These are not easy times for relations between the world`s two largest economies. Against the backdrop of a slowing Chinese economy and a fiery U.S. presidential election campaign, economic tensions are rife. U.S. Treasury Secretary Jack Lew is part of a team visiting Beijing on Monday and Tuesday for annual talks with top Chinese officials. Here are some of the key points of friction between the two sides: 1. Too much steel. 2. Currency concerns. 3. Feeling less welcome.

15.06.2016 09:28 What lies ahead for the world economy in 2016? Here`s what you need to know

Is there an end in sight to the global economy`s slowdown? Not yet, says the World Bank, which just cut its growth forecast because of a worse-than-predicted performance by commodity-exporting countries. In its latest Global Economic Prospects report, the bank said the impact of the commodities slump, alongside sluggish growth in advanced economies, weak trade and diminishing capital flows, would push global growth down to 2.4% this year, from the 2.9% estimated in January. The World Bank`s downgrade follows a similar move by the International Monetary Fund, which cut its global growth forecast in April to 3.5%, down from 3.6% in January.

13.06.2016 10:44 Russia sees economic growth as `imminent`

Russia`s economy could show signs of recovery by the second half of 2016, assuming an average annual oil price of $40 per barrel, the Central Bank said. The Central Bank of Russia said it was cutting its key interest rate by a half percent to 10.5 percent per year. The bank said growth in the economy was "imminent" with inflation moving toward the target rate of 4 percent by late 2017. The rate cut is the first in nearly a year. The Russian economy has been hobbled by the low price of oil and by Western economic sanctions imposed on Russia in response to its involvement in Ukraine and its annexation of Crimea in 2014. In defending the rate cut, the bank said the worst of the downturn may be in the past as growth starts to take shape. Quarterly growth in gross domestic product is expected no later than the second half of the year. Growth of 1.6 percent in GDP is expected in 2017.

10.06.2016 18:24 Why is Russia`s return to debt market proving problematic?

Russia on May 25 sold its first bond since the country was placed under international sanctions over Ukraine, but its pricing was delayed and the bond was almost half the size that had been expected. Part of the problem for many potential buyers was linked to the role of market utilities which help settle bond transactions. What are settlement houses? All transactions have to pass through the global financial market infrastructure network somewhere. In this case, it is the settlement house, an unobtrusive market utility that serves as the final link in the chain. It is where both the asset and cash meet and are swapped, and the deal is treated as final. Many countries have domestic versions of this ledger, known as a central securities depository. To help international banks and investors frequently moving cash across borders, there are two international CSDs: Belgium`s Euroclear and Luxembourg`s Clearstream, which is owned by Deutsche Börse. The US market typically settles through DTCC, which has less of an international presence.

09.06.2016 12:32 Do China`s Whims Control World Economy?

A well-read and increasingly discussed book, “The Collapse of China” is frightening in its potential actuality, but is realistic enough for a chance to happen. The acknowledged engine behind the world`s pre-“great financial recession” economy, never got back on its feet in 2010, as Europe, the U.S., Germany, and Japan could not extract themselves from the deflationary mire of that disastrous period. When pointing to a watershed that ended China`s amazing economic outburst, spanning a 20 plus year period, instigated by the wisdom of President Deng Xiaoping in 1990, an equally abrupt reversal unfolded with current dictatorial President Xi Jinping. From the beginning of his reign some two years ago, he resumed a Mao-tse-Tung-like crackdown of tightening controls over the “media, internet, and open expression,” considered injurious to his inflexible leadership. This has ushered in a series of economic missteps, slowing Beijing`s growth to its slowest pace in 25 years. While glorifying “entrepreneurship,” Jinping has taken steps to return to the economically unfriendly dictums of the Communist Party.

07.06.2016 14:24 Uncertainty clouds outlook for the global economy

The prospects for a sustained and strong recovery in the world economy are increasingly in doubt. The outlook for global growth remains clouded as economic risk is compounded by political uncertainty. Last week the president of the European Central Bank (ECB) said the pace of the recovery in the euro area may be slowing; although the bank has revised upwards its growth forecast for 2016 from 1.4 to 1.6 per cent. Nevertheless, Mario Draghi considers the risk to growth is “tilted to the downside”. Likewise, the OECD has warned that the global economy could stall this year. Excessively loose monetary policy employed to help boost growth, which began in the US and UK in 2009 and was followed later by the ECB, has resulted in historic low interest rates and huge purchases of sovereign debt by central banks. These measures, the OECD says, have been in place too long and may now be counter-productive.

05.06.2016 13:55 US economy adds fewest jobs in five years

In another indication of a deepening slump in the US economy, the Labor Department reported yesterday that the US economy added only 38,000 jobs in May, the lowest monthly job growth since September 2010. The report was released merely two days after US President Barack Obama declared in a speech in Elkhart, Indiana that the belief, widespread in the US population, that the economy is doing poorly is a “myth.” “By almost every economic measure, America is better off,” Obama declared. The latest figures sharply contradict such claims. Summarizing the findings of the report, Laura Rosner, an economist at BNP Paribas, told the Associated Press, “The shockingly low payrolls gain in May provides further evidence that the economy is showing clear signs of slowing.” In addition to the dismal rate of payrolls growth, the Labor Department said a massive 459,000 people left the workforce last month. In other words, 12 times more people gave up looking for work than got a job last month. Simultaneously, the Labor Department reported the number of people working part-time, but who would prefer to have full-time work, increased by 468,000 in May. The labor force participation rate decreased by 0.2 percentage points, after an earlier 0.2 percent decline in April, to a nearly four-decade low of 62.6 percent.

03.06.2016 21:00 OECD Warns of Faltering Economic Growth, Cuts Forecasts

The world`s economy is ensnared in weak growth and vulnerable to falling into another deep downturn unless governments take urgent action, the Organization for Economic Cooperation and Development said. Releasing its semiannual economic outlook, the Paris-based organization amplified its call for governments to stimulate their economies by expanding investment and implementing policies that fuel competition, increase labor mobility and strengthen financial stability. “The need is urgent,” OECD chief economist Catherine Mann said. “The longer the global economy remains in the low-growth trap, the more difficult it will be to break the negative feedback loops,” she added. The OECD called on governments in February to head off risks to the global economy by ramping up investment spending. The starker warning in the May economic outlook indicates little effective action has been taken and highlights the further dwindling of prospects for more sturdy growth. In the most recent sign of reluctance among major economies to embark on fiscal stimulus, the Group of Seven leading industrialized nations stopped short of announcing coordinated action at a meeting last week. The OECD said global economic forecasts have fallen by around 0.3 percentage points in six months. The organization lowered its growth forecast for the combined economy of the 34 OECD countries to 1.8% this year and 2.1% in 2017 from 2.2% and 2.3% respectively in November. The OECD now expects the U.S. economy to grow 1.8% this year and 2.2% in 2017, instead of 2% and 2.2% as it forecast in February and 2.5% and 2.4% in November.

01.06.2016 19:41 Russia`s hard times aren`t over yet

Following the 2014 annexation of Crimea, introduction of Western sanctions, and fall in oil prices, Russia`s economy entered a recession in 2015. The consensus among Russia watchers is that the economy will only start to grow in 2017, but even then the growth rate will be relatively low — between 1 and 2 percent per year. The reason for this is threefold. First, the decline in oil prices has played a major role. The Russian economy is still very dependent on oil prices. Even though Russia`s central bank has moved to a floating-exchange-rate framework, Russia could not avoid the recession, given the 50-percent drop in oil prices. The ruble depreciation buffered the shock but could not have shielded the economy completely. Second, Western sanctions reinforced the impact of the decline in oil prices. If not for the sanctions, the Russian government, banks, and corporations could have borrowed their way out of the crisis (especially given that the overall external debt was not large). Third, the Russian economy was not in good shape even before 2014. The post-Great Recession recovery ran out of steam already in 2013. After reaching pre-crisis GDP level in mid-2012, Russian economic growth started to slow down. By early 2014, the Russian economy started to stagnate with the growth rate oscillating around zero.


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