As the only commercial producer of rare earth metals, will Beijing’s decision to reduce export quotas of the valuable materials endanger the global economy?
By: Ringo Bones
It started over a diplomatic row when Chinese fisherman were caught illegally fishing in Japanese territorial waters back in September 2010. In protest, the Beijing government swiftly stopped selling rare earth metals to Japan, endangering the countries ability to manufacture hybrid cars. Thus making the press and the rest of the world take notice back in October 21 2010 the importance of rare earth minerals, but will Beijing’s decision to curb their rare earth metal exports eventually endanger the global economy?
Even though rare earth metals has recently became the commodities traders’ investment (or is it speculation?) hotspot du jour, from the perspective of the International Union of Pure and Applied Chemistry or IUPAC, the elements often referred to as “rare earths” are neither rare nor earths. The rare earth family of elements are in fact composed of soft, malleable metals – and most of them are not at all in short supply. Cerium, the most abundant, is more plentiful than tin or lead – while thulium, the scarcest, is only slightly rarer than iodine. The rare earth misnomer came about because the oxides of the elements – with its earth-like consistency – were at first mistaken for the elements themselves.
All of the 15 rare earth elements have two outer electrons and eight or nine in the second shell in. They only vary in their electron compliment in the third innermost shell. But among the rare earth atomic structure, the third-shell electron difference is very slight indeed, which make the 15 elements belonging to this group a very close-knit family indeed. A typical mineral containing a single rare earth element more often than not also contains all the others.
The rare earth elements are so nearly identical in their chemical properties that separating them can easily involve thousands of steps. Because of this quirk, the individual rare earth elements in their chemically pure form did not become available in commercial quantities until the late 1950s. Nevertheless, the rare earth family in their less than chemically pure form has been used industrially since the early 1900s in the form of their mineralogical mixtures that occur naturally. Purer forms go into the making of powerful ceramic rare earth magnets like the samarium cobalt magnets used in the electric motors of today’s hybrid cars.
For much of the 20th Century, more than a million pounds of rare earth elements I their low purity form still go annually into the production of an alloy called “misch metal” – German for mixed metal. Combined with iron, misch metal products are used in cigarette-lighter flints. But the main use of low purity rare earths is in iron and steel-making where it is used to absorb impurities and improves the steel’s texture and workability.
A mixture of rare earths combined with carbon produces the intense carbon arc lights once used to light up Hollywood before being replaced by more energy efficient light sources. And a large number of rare earth compounds go into the making high-quality glass for computer monitor use by making the glass completely colorless. Or in other applications, by adding deep color depending on the combination used.
When the news of the People’s Republic of China’s decision to reduce its rare earth metal exports reached the press back in October 21, 2010, the global consumer electronics industry and hybrid car makers almost panicked since they are today’s primary users of rare earth metals in the manufacture of their goods. Unmanned drones and smart bombs made indispensable in America’s “War on Terror” can’t function without rare earth metals.
Even though the United States’ rare earth metal deposits are as abundant as the ones in the People’s Republic of China, the U.S. had since closed its rare earth mines and related processing facilities since 1990 because these can never economically compete with Mainland China due to stricter Occupational Safety and Health Administration (OSHA) rules. Not to mention tougher Environmental Protection Agency guidelines and unlike Mainland China, U.S. miners won’t work for slave wages. Only Mainland China’s wanton disregard of worker safety and environmental protection had allowed it to produce and sell rare earth metals to the global markets at literally rock-bottom prices and restarting the United States' dormant rare earth metal mining industry is not very economically viable at this time.
Wednesday, November 3, 2010
Sunday, October 31, 2010
Much Ado About America’s Jobless Recovery
With the DOW Industrial Average now hovering around the 11,000-point mark with the unemployment rate approaching 10%, is the American economy currently experiencing a jobless recovery?
By: Ringo Bones
The DOW Industrial Average is now “safely” entrenched in the 11,000-point mark and yet the current jobless rate in the U.S. has now crept closer to 10% - comparable to the record unemployment rate spikes of the past 30 years. And yet, there are obvious signs that America’s economic health had already recovered since the 2008 global credit crunch – like the slowly creeping price rise of crude oil and other indicators. Given the current economic data, is the U.S. now currently experiencing a jobless economic recovery?
In an October 22, 2010 interview on the Bloomberg channel, Professor Alan Blinder of Princeton University says that basing on current economic data America won’t be experiencing a long-term jobless economic recovery because America’s current jobless rate is a cyclical jobless rate as opposed to a structural jobless rate. That is, America’s current jobless rate – being cyclical in nature – could easily go down once the economy improves, as opposed in a structural jobless rate where the unemployment rate stays at a fixed rate – and at a rather high percentage rate – even if the economy improves.
Most U.S. economists – including Professor Blinder – safely concludes that the current U.S. unemployment data is overwhelmingly cyclical, as opposed to structural, and could return to the previous natural unemployment rate of slightly below 5% once the U.S. economy further improves. Which could spells further good news for the U.S. economy since 70% of the U.S. GDP is due to retail purchases.
But what if the unemployment problem in the U.S. turns out to be a markedly structural jobless rate rather than a cyclical jobless rate? Well, given that the economic nerve centers in the U.S. are now computerized and largely robotic, America could well experience a true jobless recovery with a structural unemployment rate framing the backdrop of an economic prosperity with a 10% or more jobless rate.
Worse still, in an economic climate marked by structural jobless rates, the U.S. economy might become too dependent on the markedly dubious wealth manipulation industry in the murky world of investment banking. Like superfast high-frequency trading which – from time to time – is still prone to market meltdown and market crashes like the recent one that happened back in May 6, 2010.
By: Ringo Bones
The DOW Industrial Average is now “safely” entrenched in the 11,000-point mark and yet the current jobless rate in the U.S. has now crept closer to 10% - comparable to the record unemployment rate spikes of the past 30 years. And yet, there are obvious signs that America’s economic health had already recovered since the 2008 global credit crunch – like the slowly creeping price rise of crude oil and other indicators. Given the current economic data, is the U.S. now currently experiencing a jobless economic recovery?
In an October 22, 2010 interview on the Bloomberg channel, Professor Alan Blinder of Princeton University says that basing on current economic data America won’t be experiencing a long-term jobless economic recovery because America’s current jobless rate is a cyclical jobless rate as opposed to a structural jobless rate. That is, America’s current jobless rate – being cyclical in nature – could easily go down once the economy improves, as opposed in a structural jobless rate where the unemployment rate stays at a fixed rate – and at a rather high percentage rate – even if the economy improves.
Most U.S. economists – including Professor Blinder – safely concludes that the current U.S. unemployment data is overwhelmingly cyclical, as opposed to structural, and could return to the previous natural unemployment rate of slightly below 5% once the U.S. economy further improves. Which could spells further good news for the U.S. economy since 70% of the U.S. GDP is due to retail purchases.
But what if the unemployment problem in the U.S. turns out to be a markedly structural jobless rate rather than a cyclical jobless rate? Well, given that the economic nerve centers in the U.S. are now computerized and largely robotic, America could well experience a true jobless recovery with a structural unemployment rate framing the backdrop of an economic prosperity with a 10% or more jobless rate.
Worse still, in an economic climate marked by structural jobless rates, the U.S. economy might become too dependent on the markedly dubious wealth manipulation industry in the murky world of investment banking. Like superfast high-frequency trading which – from time to time – is still prone to market meltdown and market crashes like the recent one that happened back in May 6, 2010.
Thursday, October 7, 2010
Is Currency Intervention Legal?
Even though countries fortunate enough not to resort to one often look down at countries that do in order to get out of a bind, is the act of currency intervention even legal?
By: Ringo Bones
So far there’s still no legal precedent of any country subjected to punitive UN Security Council sanctions whenever they resort to high-level currency intervention in order to get out of a current economic bind. The world’s leading economists recently criticized the wisdom and sustainability of the Bank of Japan’s latest attempt at currency intervention, primarily done in order to lower the value of their super-strong yen in order to make Japanese exports globally competitive again. To those still unfamiliar with currency intervention, it goes as follows.
Currency intervention is the action taken by of one or more governments, central banks, or currency speculators for the purpose of increasing or reducing the value of a particular currency against another currency. Most economists have a consensus view that currency intervention – more often than not – fizzle out quite quickly since the funds used to make a particular currency artificially low or high in value is ultimately limited in comparison to the level of international trade that floats it as its true arbiter of value.
The value of the yen recently became too strong for its own good because many speculators and some governments – like the Peoples Republic of China – has used it as a safe haven investment. The Bank of Japan’s funds being used to reduce the value of the yen back to just make Japanese export products competitive is ultimately limited in comparison to the war-chest of the various global currency speculators and the Beijing government; Making the Bank of Japan’s first currency intervention since March 2004 ultimately an exercise in economic futility.
The Mainland Chinese currency – the yuan – has a value ultimately determined by the country’s volume of trade with the international market, as do most floating currencies these days. While the US government - especially US Treasury Secretary Timothy Geithner - is still irked by the Beijing government’s “suspected” subsidizing of the yuan in order to keep its value artificially low in order to make China’s exports unfairly competitive.
As the US government is already in the process of legislating laws to charge punitive tariffs against Chinese goods imported into the US if Beijing doesn’t intervene to strengthen the value of the yuan. Even though this move reeks of protectionism, the legal gray area that currency intervention has carved itself a niche into is by no means free of moral hazards.
George Soros, the most famous billionaire who single-handedly performed his own successfully executed currency intervention back Black Wednesday of 1992 never spent a time in jail despite of famously known for “breaking the Bank of England”. With an estimated current net worth of around 11-billion US dollars, Soros is ranked by Forbes as the 29th richest person in the world - and probably the most notorious single-proprietorship currency speculator.
With such wealth and influence, Soros can for all intents and purposes practically make up his own “moral sensibilities” as he goes. In 1997, he managed to bring the economy of South-East Asia to its knees by performing his “one-man” currency speculation that triggered the Asian financial crisis of 1997 just because Soros is pissed when the Association of South-East Asian Nations or ASEAN welcomed Myanmar – and the country’s despotic regime - as a member.
So is currency intervention legal? I’m afraid so, but within the legal gray area of a niche that it has managed to carve itself into I just hope that central banks, currency speculators and eccentric billionaires that use it consider the moral hazards that inevitably and inextricably come with it. After all, an overwhelming majority of us still resort to crummy jobs just to earn money.
By: Ringo Bones
So far there’s still no legal precedent of any country subjected to punitive UN Security Council sanctions whenever they resort to high-level currency intervention in order to get out of a current economic bind. The world’s leading economists recently criticized the wisdom and sustainability of the Bank of Japan’s latest attempt at currency intervention, primarily done in order to lower the value of their super-strong yen in order to make Japanese exports globally competitive again. To those still unfamiliar with currency intervention, it goes as follows.
Currency intervention is the action taken by of one or more governments, central banks, or currency speculators for the purpose of increasing or reducing the value of a particular currency against another currency. Most economists have a consensus view that currency intervention – more often than not – fizzle out quite quickly since the funds used to make a particular currency artificially low or high in value is ultimately limited in comparison to the level of international trade that floats it as its true arbiter of value.
The value of the yen recently became too strong for its own good because many speculators and some governments – like the Peoples Republic of China – has used it as a safe haven investment. The Bank of Japan’s funds being used to reduce the value of the yen back to just make Japanese export products competitive is ultimately limited in comparison to the war-chest of the various global currency speculators and the Beijing government; Making the Bank of Japan’s first currency intervention since March 2004 ultimately an exercise in economic futility.
The Mainland Chinese currency – the yuan – has a value ultimately determined by the country’s volume of trade with the international market, as do most floating currencies these days. While the US government - especially US Treasury Secretary Timothy Geithner - is still irked by the Beijing government’s “suspected” subsidizing of the yuan in order to keep its value artificially low in order to make China’s exports unfairly competitive.
As the US government is already in the process of legislating laws to charge punitive tariffs against Chinese goods imported into the US if Beijing doesn’t intervene to strengthen the value of the yuan. Even though this move reeks of protectionism, the legal gray area that currency intervention has carved itself a niche into is by no means free of moral hazards.
George Soros, the most famous billionaire who single-handedly performed his own successfully executed currency intervention back Black Wednesday of 1992 never spent a time in jail despite of famously known for “breaking the Bank of England”. With an estimated current net worth of around 11-billion US dollars, Soros is ranked by Forbes as the 29th richest person in the world - and probably the most notorious single-proprietorship currency speculator.
With such wealth and influence, Soros can for all intents and purposes practically make up his own “moral sensibilities” as he goes. In 1997, he managed to bring the economy of South-East Asia to its knees by performing his “one-man” currency speculation that triggered the Asian financial crisis of 1997 just because Soros is pissed when the Association of South-East Asian Nations or ASEAN welcomed Myanmar – and the country’s despotic regime - as a member.
So is currency intervention legal? I’m afraid so, but within the legal gray area of a niche that it has managed to carve itself into I just hope that central banks, currency speculators and eccentric billionaires that use it consider the moral hazards that inevitably and inextricably come with it. After all, an overwhelming majority of us still resort to crummy jobs just to earn money.
Monday, October 4, 2010
Is Basel III A Financially Sensible Bankruptcy Protection For Banks?
As the latest incarnation of the Basel Accord, does Basel III really provide the most financially sensible way to provide protection against a repeat of the 2008 global credit crisis?
By: Ringo Bones
Born out of the governments in the industrialized West experiencing first-hand the shock of the global credit crunch, the latest incarnation of the Basel Accord – the Base III Agreement – was seen as a saviour of governments now weary of using taxpayers’ money to prop-up ailing banks. This “New Deal” for central bankers aims to reduce risks of future financial crisis through proposed Core Tier I Capital requirement reforms – in other words increasing the banks capital reserve. But is this a sensible solution against a future financial crisis?
As it was the Bank of International Settlements being one of the first to warn against the looming 2008 global credit crunch months before it actually happened, the Basel III Agreement was readily agreed with open arms (or was it via political clout?) by central bankers and senior regulators. With required aims to triple the size of banks’ capital reserve in comparison to previous Basel Accords in order to protect against another banking crisis, plus the proviso of cutting bonuses of bank executives if they can’t maintain the newly agreed capital ratio. With such stringent capital requirements, one could wonder if Basel III will ever have universal appeal.
As of late, bankers have warned a regional regulation race that could result once Basel III is finally implemented. Not only that, the stringent capital requirements also means less money available for banks to be made available to be borrowed, thus lowering their “potential” earnings - which could eventually hurt fledgling small to medium business firms seeking to borrow funds for capital expansion. Although the new rules are yet to be submitted to the upcoming G-20 meeting in South Korea, it is very doubtful if there is another bankruptcy protection scheme that can provide a better compromise between a bank’s profit earning potential and the risk of a worst-case scenario where a large number of borrowers default on their debts. Like what happened during the subprime mortgage crisis of 2008.
By: Ringo Bones
Born out of the governments in the industrialized West experiencing first-hand the shock of the global credit crunch, the latest incarnation of the Basel Accord – the Base III Agreement – was seen as a saviour of governments now weary of using taxpayers’ money to prop-up ailing banks. This “New Deal” for central bankers aims to reduce risks of future financial crisis through proposed Core Tier I Capital requirement reforms – in other words increasing the banks capital reserve. But is this a sensible solution against a future financial crisis?
As it was the Bank of International Settlements being one of the first to warn against the looming 2008 global credit crunch months before it actually happened, the Basel III Agreement was readily agreed with open arms (or was it via political clout?) by central bankers and senior regulators. With required aims to triple the size of banks’ capital reserve in comparison to previous Basel Accords in order to protect against another banking crisis, plus the proviso of cutting bonuses of bank executives if they can’t maintain the newly agreed capital ratio. With such stringent capital requirements, one could wonder if Basel III will ever have universal appeal.
As of late, bankers have warned a regional regulation race that could result once Basel III is finally implemented. Not only that, the stringent capital requirements also means less money available for banks to be made available to be borrowed, thus lowering their “potential” earnings - which could eventually hurt fledgling small to medium business firms seeking to borrow funds for capital expansion. Although the new rules are yet to be submitted to the upcoming G-20 meeting in South Korea, it is very doubtful if there is another bankruptcy protection scheme that can provide a better compromise between a bank’s profit earning potential and the risk of a worst-case scenario where a large number of borrowers default on their debts. Like what happened during the subprime mortgage crisis of 2008.
Monday, September 27, 2010
Should Local Communities Manage Their Own Microfinance Funds?
Given that they themselves are the primary beneficiaries of this shared financial resource, are local communities at a better position to manage their own microfinance funds?
By: Ringo Bones
Maybe it was the works on concepts of management and governance of shared or common resources of the 2009 Nobel Economics laureates Elinor Ostrom and Oliver Williamson that got me thinking that local communities are in a better position – in comparison to the central government – in managing their own microfinance funds. After all, as the primary beneficiaries, they are way better in deciding their own best interest when it comes to their own common resource usage than representatives from the central government, right?
When it comes to governing and managing common or shared resources, systems that combine central government and local community governance and management are currently the system that does the best. Good governance – with a nuanced approach – always has been the best method in identifying where markets and firms are most efficient, especially when it comes to fiscally important financial transactions. It may not be immediately self-evident, but when it comes to managing shared resources, it is best to think locally – and act globally.
By: Ringo Bones
Maybe it was the works on concepts of management and governance of shared or common resources of the 2009 Nobel Economics laureates Elinor Ostrom and Oliver Williamson that got me thinking that local communities are in a better position – in comparison to the central government – in managing their own microfinance funds. After all, as the primary beneficiaries, they are way better in deciding their own best interest when it comes to their own common resource usage than representatives from the central government, right?
When it comes to governing and managing common or shared resources, systems that combine central government and local community governance and management are currently the system that does the best. Good governance – with a nuanced approach – always has been the best method in identifying where markets and firms are most efficient, especially when it comes to fiscally important financial transactions. It may not be immediately self-evident, but when it comes to managing shared resources, it is best to think locally – and act globally.
Monday, August 16, 2010
Super-Strong Yen in 2010: Bane for Japanese Exporters?
As one of the primary investment safe-havens, are currency speculators inadvertently creating a super-strong yen at the expense of high-quality Japanese exports?
By: Ringo Bones
The world’s currency speculators and hedge fund managers had been as of late using yet again the Japanese yen as a safe-haven investment, a move that could ultimately make the currency super-strong. Add to that the Mainland Chinese financial firms in a current buying frenzy of 5 billion US dollars worth of Japanese sovereign debt and one could wonder if this could spell a death knell to Japanese exporters – especially one specializing in the manufacture of premium-quality specialist products.
In the Far East, even though Mainland China have already matched – even exceeded - the production capabilities of Japanese export firms, China is still several years away from equalling Japan in quality terms. When it comes to manufacturing premium specialist products – as in scientific and precision engineering gear, even hi-fi - is still a skill that China has yet to climb a steep learning curve to match the Japanese and American and even German competition.
Never mind the American and German expertise in this field because in the ASEAN region, Japanese specialist products have already carved themselves a niche when it comes to reasonably-priced alternatives to American and German products of comparable quality. A super-strong yen also places most export firms at a disadvantage. Making their high-quality but reasonably priced products less competitive overseas when competing with cheap and wonky Mainland Chinese produced goods. A lower profit margin resting from a super-strong yen could drive a significant number of Japanese exporting firms into bankruptcy.
By: Ringo Bones
The world’s currency speculators and hedge fund managers had been as of late using yet again the Japanese yen as a safe-haven investment, a move that could ultimately make the currency super-strong. Add to that the Mainland Chinese financial firms in a current buying frenzy of 5 billion US dollars worth of Japanese sovereign debt and one could wonder if this could spell a death knell to Japanese exporters – especially one specializing in the manufacture of premium-quality specialist products.
In the Far East, even though Mainland China have already matched – even exceeded - the production capabilities of Japanese export firms, China is still several years away from equalling Japan in quality terms. When it comes to manufacturing premium specialist products – as in scientific and precision engineering gear, even hi-fi - is still a skill that China has yet to climb a steep learning curve to match the Japanese and American and even German competition.
Never mind the American and German expertise in this field because in the ASEAN region, Japanese specialist products have already carved themselves a niche when it comes to reasonably-priced alternatives to American and German products of comparable quality. A super-strong yen also places most export firms at a disadvantage. Making their high-quality but reasonably priced products less competitive overseas when competing with cheap and wonky Mainland Chinese produced goods. A lower profit margin resting from a super-strong yen could drive a significant number of Japanese exporting firms into bankruptcy.
Will There Be A Double-Dip Recession in 2010?
Despite the pessimistic – but logical – economic outlook harbored by the US FED Chairman and US Treasury Secretary, will there be a double-dip recession in the second half of 2010?
By: Ringo Bones
Our global financial markets are indeed confidence driven. Look no further than the recent pessimistic – but logical – economic outlook of US Federal Reserve Chairman Ben Bernanke and US Treasury Secretary Timothy Geithner has recently sent various stock markets across the globe in an unprecedented sell-off. Maybe it might just be the current dismal jobs market in the US is somewhat hard to overlook, but still – like a celebrity diagnosed with a manic-depressive disorder – our still recovering global financial market still needs constant reassurance just to maintain its bottom line. But a more pressing concern is that will there be a double-dip recession in the US and elsewhere around the world during the second half of 2010?
Despite the pessimistic outlook of the United States’ financial top brass, most of the world’s leading economists are still confident that the occurrence of a global double-dip recession in the second half of 2010 is still very unlikely. A prolonged economic recovery slowdown perhaps, but still, there are already historic precedents that a global double-dip recession might not happen at all during the second half of 2010. And the following is the oft used explanation cited by leading economists.
Even though our current global financial woes was primarily caused by the subprime mortgage crisis that started in the US near the end of July 2007 that was inadvertently allowed to spread around the world, we already have a handle on how to deal with such “financial emergency”. Though now only of academic interest to economists, the “mini recession” or “growth recession” of 1966-1967 exposed the American people to a credit crunch that curtailed housing prices and shaved 20% off stock prices. Many economists see our slowed global recovery as a mere growth recession it follows the textbook definition of such.
As in when the production output and employment growth for half a year or more are significantly less than the average trend or rate of growth – as what is happening right now in America – an economy is said to be in a growth recession, even if the actual growth rates never turn negative. But is it yet too early to panic?
The signs that seem to point to the inevitability of a double-dip recession in 2010 – the lagging jobs creation and dismal manufacturing growth in the US – can be hard to deny. Worse still, a lack of “organic growth” instead of just the “artificial” growth due to the economic stimulus packages could inevitably lead to the fragile global economic recovery back into recession.
While America’s middle class has recently become the country’s nouveau poor due to mortgage foreclosures that drove a growing number of them into bankruptcy and the UK government becoming too obsessed with balancing between economic growth and recession, Germany had recently experienced its greatest quarterly GDP growth rate yet since the 1991 reunification. An economic growth that made the Eurozone countries outpaced the United States and strengthened the euro once again.
Another reason why almost all economists are still optimistic enough to predict that a double-dip recession will probably never happen for the rest of 2010 because the financial reforms already in place to make sure the global credit crunch of 2008 will not happen again. And yet almost all of them say that a bullish economic recovery is still far off into the future.
Given that the global economy is very much confidence driven and can be compared to a manic-depressive celebrity that needs constant reassurance just to function socially. Then it is still safe to say that a double-dip recession is still and has always been just around the corner. If not in 2010, there’s always next year to worry about.
By: Ringo Bones
Our global financial markets are indeed confidence driven. Look no further than the recent pessimistic – but logical – economic outlook of US Federal Reserve Chairman Ben Bernanke and US Treasury Secretary Timothy Geithner has recently sent various stock markets across the globe in an unprecedented sell-off. Maybe it might just be the current dismal jobs market in the US is somewhat hard to overlook, but still – like a celebrity diagnosed with a manic-depressive disorder – our still recovering global financial market still needs constant reassurance just to maintain its bottom line. But a more pressing concern is that will there be a double-dip recession in the US and elsewhere around the world during the second half of 2010?
Despite the pessimistic outlook of the United States’ financial top brass, most of the world’s leading economists are still confident that the occurrence of a global double-dip recession in the second half of 2010 is still very unlikely. A prolonged economic recovery slowdown perhaps, but still, there are already historic precedents that a global double-dip recession might not happen at all during the second half of 2010. And the following is the oft used explanation cited by leading economists.
Even though our current global financial woes was primarily caused by the subprime mortgage crisis that started in the US near the end of July 2007 that was inadvertently allowed to spread around the world, we already have a handle on how to deal with such “financial emergency”. Though now only of academic interest to economists, the “mini recession” or “growth recession” of 1966-1967 exposed the American people to a credit crunch that curtailed housing prices and shaved 20% off stock prices. Many economists see our slowed global recovery as a mere growth recession it follows the textbook definition of such.
As in when the production output and employment growth for half a year or more are significantly less than the average trend or rate of growth – as what is happening right now in America – an economy is said to be in a growth recession, even if the actual growth rates never turn negative. But is it yet too early to panic?
The signs that seem to point to the inevitability of a double-dip recession in 2010 – the lagging jobs creation and dismal manufacturing growth in the US – can be hard to deny. Worse still, a lack of “organic growth” instead of just the “artificial” growth due to the economic stimulus packages could inevitably lead to the fragile global economic recovery back into recession.
While America’s middle class has recently become the country’s nouveau poor due to mortgage foreclosures that drove a growing number of them into bankruptcy and the UK government becoming too obsessed with balancing between economic growth and recession, Germany had recently experienced its greatest quarterly GDP growth rate yet since the 1991 reunification. An economic growth that made the Eurozone countries outpaced the United States and strengthened the euro once again.
Another reason why almost all economists are still optimistic enough to predict that a double-dip recession will probably never happen for the rest of 2010 because the financial reforms already in place to make sure the global credit crunch of 2008 will not happen again. And yet almost all of them say that a bullish economic recovery is still far off into the future.
Given that the global economy is very much confidence driven and can be compared to a manic-depressive celebrity that needs constant reassurance just to function socially. Then it is still safe to say that a double-dip recession is still and has always been just around the corner. If not in 2010, there’s always next year to worry about.
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