The falling stock markets and the onset of global recession

Caen bags

On Monday 21 bags of Japan were down -3.9% -5.5% England, France -6.8%, Germany -7.2% and -6.4% Hong Kong. The next day the latter fell another -8.7% (producing losses of U.S. $ 320,000,000 and its worst slump since the Asian crisis of 1988-89) and the Shanghai -7%. Australia experienced its worst fall in its stock in its history within 24 hours. The Mumbai Stock Exchange (India) fell in 48 hours at -12%.

The panic was arrested after the U.S. Federal Bank cut the interest -0.75% (its largest decline in 25 years) and Bush announced a package of U.S. $ 150,000,000 to be injected by encouraging consumption and reducing taxes.

However, new highs and lows and looming crisis as markets are disrupted. So far in January have lost the world about U.S. $ 5,000,000,000 as a result of the depreciation of the value of the shares. In some markets, the fall has meant a loss of -20%.

Everything indicates that this must be the year in which the world is approaching or entering a recession. In an increasingly globalized market, the effects of the crisis of the world's largest economy (the U.S.) are affected.

Even Europe is not to get too low your interest or devalue the high euro for fear that it would boost inflation (which they try to keep the low single digits) and would come down to save. UK only provides lower rates of% 5.5 in a quarter point as you continue to show large depositors, rather than depreciated save a few dollars that offer rates of return, the pound is a currency higher, stronger and creates better interests.

However, the British economy is so intertwined with the U.S. that it is giving the first signs of a downturn, it can spread to Europe and the Commonwealth.

On both sides of the North Atlantic is also reducing property prices, shrinking credit and rising oil prices affect all products.

In Britain, while inflation is 2.5% and the unemployment rate is 5.5%, the sum of the personal debts of its inhabitants is soon to reach $ 3 trillion (over U.S. $ 110,000 per each family). The latter is a time bomb that will generate more bankruptcies and that can slow consumer appetites and therefore sales.

Although for Alan Greenspan, former head of the Federal Reserve Bank of the U.S., your country does not have a recession (the same which he said, occurs in jumps and not gradually), most of the major financial observers believe the mega -power it is entering. The U.S. recession will drag the rest of the world. If it is small effects are not as catastrophic, but Hillary Clinton warns that it must be "long and deep?, Which would lead to strong changes in the economy and world politics and trigger new conflicts and wars.

Turns in the economy

In the U.S. it is usual whenever there is a drop in the economy also drops the ruling party. In 1932 Roosevelt inaugurated 32 years of Democratic dominance after the collapse of Wall Street. In 1980 began the great transformation Reagan Republican. Bill Clinton first came to the White House questioning the Bush crisis ("It's the economy stupid? Was the phrase that was coined to show the Achilles heel of the Republicans) and now his wife wants to repeat the course appearing as the most qualified to give an economic turnaround to the ruling party.

Democrats believe this is because the Republicans have deregulated the economy and much protectionist measures they propose to encourage spending. Part of his program is to invest more in health and raise the incomes of the poorest sectors to encourage consumption. If they win the White House that could affect future FTAs ​​and those raised in the further liberalization of world markets.

The onset of the recession could mean the end of "New Labour?. In 1997 Blair Social showed a "third way? between statism and "neo-liberalism? and its treasurer Gordon Brown boasted of having secured a decade of stability and growth in the British economy that had no parallel in the history of that island. Today, however, the initial popularity which in June reached the premiership Brown has evaporated and the government goes from grave to grave, opening up possibilities for the Conservatives return to power with an agenda of partial detachment towards the European Union.

Even countries with very different politics and economics in the U.S. are affected. China, which is one of the locomotives of global industry with annual growth rates in double digits, may be slowing their pace. This, although it has features of a nationalized and planned economy and state monopoly of the Communist Party relies heavily on U.S. investors and buyers. However, optimists conceive that the U.S. crisis could benefit Beijing by weakening a rival and to cool the overheating of its economy (the same as in 2007 had its biggest jump in thirteen years).

The measures taken by the U.S. Federal Reserve may have arrived late, with weakness or to mask a crisis brewing as it can be harder to bust. The level of spending and personal debt in North America remains one of the highest in its history.

For now, the crisis seems contained. However, British Prime Minister warns that worse things can fall. While this could lead to major adjustments to grow those who say, protectionism and state interventionism, London and Washington postulate greater transparency and serenity.

The market volatility may affect several companies generate a significant shift in the conduct of the mega-power as well as new social conflicts and wars in the world.

International Analyst

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