The world on the verge of a precipice
Material posted: Publication date: 31-08-2015
The collapse of stock indexes and the decline in the value of commodities to multi-year lows for many was a shock. But sooner or later it had to happen, because the National Bank of developed countries to inject trillions of dollars into the markets after the 2008 crisis, which has not been transformed into investments in the real economy. The question now is whether the US government and China to keep the world from a new crisis.

«Crying and a gnash tooth... The World markets of actions continued to decrease against a situation in the Chinese market and disappointment in the American actions», - so have characterised occurring in last days on world platforms of analytics Sberbank CIB.

Falling in stock markets has begun on Friday. A formal occasion was the publication of an index of business activity in processing sector of China which has appeared weak (47,1 points) that has confirmed fears of investors concerning delay of economy of Heavenly Empire.

«Similar two-day decrease in quotations (7,0 % and more) were not observed since December, 2008. Then within two months at an index S&P 500 has stood out about ten adverse days when two-day fluctuations have exceeded current scale of changes», - mark in Sberbank CIB.

On Monday the Chinese index Shanghai Composite has failed on 8,5 %, the European index STOXX Europe 600 has fallen to 5,3 %, British FTSE 100 has lost 4,67 %, and American S&P 500 has finished the auctions by decrease almost on 4 %.
On Tuesday share platforms Asian-Pacific region (ATR) have finished the auctions divergently: while in some markets correction upwards after recession the day before has begun, stock exchanges of China and Japan have shown negative dynamics (in particular, index Shanghai Composite has failed on 7,63 %, and Japanese Nikkei 225 has decreased for 3,96 %). After «black Monday» the basic share indexes of Europe have closed the auctions of Tuesday in plus. At the same time the American index Dow Jones has established a new antirecord. For the first time for 119 years of the existence it within four days decreased more than on 200 points on end. S&P following the results of day has lost 1,35 %.

Investors wait for resolute actions from the Chinese authorities on growth stimulation. But the devaluation which has begun recently of yuan only has added questions and has generated new fears. There were this time suspicions that Beijing will begin currency wars with the USA and other countries that threatens to undermine even more stability of the financial markets and world trade.

On the other hand, «there is no impression that the Chinese authorities supervise a situation», the head of strategic department of bank group SEB Thomas Tjugesen has declared in interview Bloomberg.

All it occurs against a proceeding soap opera to increase of rates by the Federal Reserve System of the USA. The next session of committee on operations in open market Fedrezerva will take place in September, and at least up until that time the markets will continue to be in a hover. If rates are raised, it will lead to rise in price of dollar and still bolshemu to easing of other currencies.

While the monetary authorities of China and the USA keep high level of uncertainty concerning the actions even on immediate prospects, the markets will continue shtormit. Certainly, in this muddy water many traders will make fortunes, but as a whole the situation becomes too astable and the new collapse can happen at any moment.

By and large, the global economy and could not recover from crisis of 2007-2009 and to leave on a steady rise trajectory, and the world is on the threshold of new shocks.

To that it is a lot of certificates. Economics of underdevelopment stagnirujut, many currencies strongly devalvirovany. The Chinese economy as it was already marked, brakes. Gross national product growth is slowed down from 7-10 % a year to 6 %. Export and import fall, and the bubble in stock market is blown off. On turn real estate sphere.

EU as a whole and an eurozone in particular are in a condition of recession or weak growth (for example, this year rating agency Moody's expects increase in gross national product of a zone of euro at 1,5 %). Plus to that euroofficials and could not find the decision of the Greek problem. Even present "compromise" when to the country will allocate new credits in exchange for "reforms", looks only next time-out. And now Europe still should understand from hundreds thousand illegal migrants that will not add a drive to Old World economy.

The USA formally since 2009 left recession and have overcome unemployment, but rates of increase of economy have appeared low. And the real picture of an event in the largest economy of the world is hidden from general public.
As admitted in July of this year of bureau of the economic analysis of Department of Trade and Commerce (BEA), it regularly overestimated quarter indicators on rates of increase of gross national product since 2011.

In certain cases the scale of "additions" reached five times for a quarter (so, in gross national product third quarter 2013 has grown actually not on 2,5, and on 0,5 %). Gross national product year-on-year increase rates in 2012 with 2,3 to 2,2 %, in 2013 - with 2,2 to 1,5 % have been as a result lowered. The American statisticans regularly show miracles of manipulations. For example, in the first quarter of this year recession on 0,2 % after "specifications" was replaced by growth with 0,6 %.
Have approximately in the same way understood with unemployment. Time and a partial employment help to improve statistics (now the level of unemployment in States makes 5,3 %), but do not do a situation on a labour market more healthy. According to the critics, "occupied" the American statistics considers, for example, even the one who has sold something in a month on $100 at Internet auction eBay.

It is important to note also, as in EU, and in the USA, the era of consumer economics has actually ended. The demand dispersed to unknown heights at the expense of escalating of volumes of delivery of credits, de facto has ceased to increase.
Sales of the largest American ritejlerov do not grow eight years.

Even the minimum rise in prices, and even a deflation caused by falling of cost of oil, promotes consumption increase only within one and a half percent a year. Also it is a huge problem, after all in the same States on consumption it is necessary about 70 % of gross national product.

«Gross national product growth in the USA and the eurozone countries is insufficiently strong to prevent world deflationary shock», - Thomas Tjugesen speaks. Attempts of the national authorities to deduce the countries from recession by means of economy inflating cheap (and actually free) money have given small effect for real sector, but have led to formation of global bubbles in the financial markets and in real estate sphere. Only Fedrezerv of the USA has poured in in financial sector over $3 trln for 2008-2014. Almost six years the rate is at level of 0-0,25 %. About the same rates now at Bank of England, the European Central Bank, Natsbank of Japan.

Simultaneously with it the governments increased all last decade debts. At the USA the state debt makes today about $18 trln (it a little above gross national product volume), at EU - €12 trln (87 % of gross national product). Thus surplus of free money has led to rather strange warps, having created, for example, in Europe a pool of state papers on trillion euro with negative profitableness (taking into account inflation). That is creditors pay to the debtors.

As any leading economy of the world does not grow high rates, and that grew, have started to brake, the prices for primary goods fall. The raw index counted Bloomberg, on Monday has fallen to a minimum of 1999.

Neither metals, nor energy carriers are not necessary in present volumes of world economy. To the oil market, as it is known, problems Saudi Arabia and other Near-Eastern countries which are pumping up the market by unnecessary oil adds to keep level of quotations on a low level and to knock down competitors from the USA extracting slate oil.

The result is sad - devaluation and impossibility to leave on high rates of increase. For the USA it also reduction of tens thousand workplaces in oil and gas branch, and threat of a non-return of the credits typed under slate projects.

So, the current situation in world economy looks rather not very well. The huge volume of free money has not dispersed it, and has transformed into a slow dinosaur who can fail at any moment.

The popular portal Zero Hedge known for alarmistskimi for publications, does not doubt that the new coil of crisis will soon begin: «For us bad times come. A question only in date».

That fact that almost all basic issue centres of the world have already resorted to a policy of cheap money (and have made it rather inefficiently), means that if in foreseeable prospect new crisis ways for struggle against it will be a little will begin.
As marks The Wall Street Journal, it will be impossible to count on traditional tools: interest rates are at a zero mark, tax stimulation is complicated by high levels of a state debt and potential increase in budgetary deficiency because of a generation retirement bebi-bumerov.

«The world economy is similar to the ocean liner without lifeboats», - economists HSBC Bank believe.

Certainly, there are many chances that FRS, People's Bank and the authorities of China, and also can find EU any ways to support growth. It is possible to take a word to the French president François Ollandu considering that «the world economy is strong enough to have prospects of growth which depend not only on a situation in China». Though, if it is fair, even in France words of Ollanda any more do not take seriously.

That is it is better to start to prepare for problems in advance. It is a pity, but there is no certificate to that in the Russian government though someone it understands.

Peter Orehin

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Tags: financial center , economy , crisis , finances