A flurry of concern has emerged globally over an ominous confluence of events. Thomas Thygesen, chief economist of the large Eurpoean investment group SEB and Olivier Blanchard former chief economist of the IMF have highlighted these.
Thygesen, at a conference in London this past few days , targeted four issues : oil price, the US, markets , and China.
The US . It is alleged by some that the US Fed Reserve acted too quickly in ceasing quantitative easing or stopped printing money to prop up a growing but too slow growing economy. They say this apparently because everyone else is doing so poorly the world needs a continued strong US and by stopping the easing the dollar has perhaps gotten too strong.
The dramatic drop in the oil price is now percolating throughout the global economy and many countries and companies are stressed, like Russia, Sudia Arabia, Venezuela etc and even large global oil and gas companies see falling profits and share prices. Add to this falling prices in many other commodities and many problems arise.
China ia slowing down and changing slowly to a consumer led economy from investment , hard rock type emerging economy. Complicating that is China ‘s reluctance to allow ordinary economic forces to operate , like capital flows , and the free flow of information , and you have real concern about the state of the world’s second largest economy. Add to that the problem with other emerging economies like Brazil .
Markets are obviously spooked by all this and hence volatility emerges. All the world’s markets are affected in this ever interdependent world.
What bothers me in all of this , and even more than the factors mentioned, is the lack of emphasis on debt and borrowing. I mean , if the US is not ready now to stop the printing of money, euphemistically known as quantitative easing, when in the name of common sense will they be able to stop it? And Europe , instead of getting into the game too, should just get back to the conditions of the Union and budgeting that were agreed to in the beginning. I don’t think it is possible to manipulate one’s way back to reasonable markets, growth etc without first confronting the basics———-spending only what one takes in. And begin paying down the debt , here, there, and everywhere.