Looming Signs of a Global Recession
By Anirvan Banerji, gefunden auf TheStreet.com: Link

As I noted last month, the key indicators that officially define a recession are now declining in a way seen only during recessions. Logically, then, there are just two possibilities. Either the U.S. is already in a recession -- or this is the worst nonrecession ever.

Recession kills inflation. And yet there are those who still worry about inflation. Many of them believe, despite clear recessionary signs, that a recession has been averted, and that we'll soon see a recovery that will tighten labor markets and raise inflationary pressures. They are just wrong.

Many economists believe that, at least in theory, when the jobless rate stays below the"non-accelerating inflation rate of unemployment" (NAIRU for short), inflation rises. Last fall, as the jobless rate sank to a 30-year low of 3.9%, well below most estimates of the NAIRU, inflation was widely considered a greater risk than recession -- and that's what the Fed reaffirmed after its November meeting.

Just seven weeks later, the Fed began one of the most aggressive series of interest-rate cuts in its history. As economic weakness continued, so did the rate cuts, demonstrating the severe limitations of the NAIRU as a practical policy tool.

The Falling FIG

With the markets finally buoyed in the spring by lower short-term rates and hopes of a quick recovery, the NAIRU perspective fanned worries that with a recession averted, the expected recovery would soon depress the jobless rate and revive inflation pressures.

Yet the"future inflation gauge," or FIG, which, unlike the NAIRU, has an impressive record of anticipating directional changes in the fed funds rate, continues to plunge, just as it did last fall. In other words, a rise in the funds rate is nowhere on the horizon. The recent rise in inflation was, in fact, accurately foreseen by the FIG when it rose to an 11-year high last spring. And this is the point: Since then, it has plunged, and there are no signs of a bottom.

Federal Funds Rate (%) and U.S. Future Inflation Gauge
(1992=100)

Source: Economic Cycle Research Institute

When I showed the above chart at an European conference last October, economists were incredulous. The chief economist of a large German automaker assured me that the best German economists all agreed that there was no slowdown ahead. In fact, 2001 was going to be the year that German growth finally surpassed U.S. growth. That goal may remain a dream for a bit longer.

If Germany goes into recession, which now appears to be a serious possibility, it would be the first time since the first oil shock a quarter of a century ago that the world's three largest economies would be in synchronous recessions. And you can be sure that their neighbors would not remain unaffected.

Already, with Mexico seeing two straight quarters of negative GDP growth, President Vicente Fox has acknowledged that the economy is in recession. Canada's monthly GDP was flat from December 2000 to March 2001, the latest reading. Across the Pacific, Taiwan, Korea and Australia have all seen one down quarter of GDP.

A recession in Germany, which accounts for a third of eurozone GDP, would have serious, Europe-wide ramifications. Yet the European Central Bank, mandated to conduct a one-size-fits-all monetary policy, has so far been able to cut rates only by a symbolic quarter-point. Clearly, even with a global recession looming, it is pretty much up to the Fed to try and revive global growth single-handedly.

So why did the Fed cut rates by just a quarter-point this week? The reason is actually pretty clear.

Had it cut rates by half a point, the NAIRUvians in the bond market would have started worrying about the Fed ramping up inflation pressures and boosted long rates, which would slow the economy further. This would have been pretty counterproductive from the Fed's standpoint.

In any event, interest-rates cuts act with almost a year's lag, so the size of the latest cut is not the point. The immediate issue -- economic recession -- is still the same. Thus, the Fed will keep moving rates down until there are actual signs of recovery in the leading indicators.

The reality is that we may be facing the second global recession in the postwar era. Thus in a global economy, it should be patently obvious that inflation is a nonissue -- except to the bond ghouls trapped in the NAIRU straitjacket.






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Anirvan Banerji is the director of research for the Economic Cycle Research Institute, which was founded by Dr. Geoffrey H. Moore, creator of the original index of leading economic indicators (LEI) for the U.S. Department of Commerce. Banerji is on the economic advisory panel for New York City, and is also a member of the OECD Expert Group on Leading Indicators. At time of publication, neither Banerji nor his firm held positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While Banerji cannot provide investment advice or recommendations, he welcomes your feedback at Anirvan Banerji.



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Danke, Pancho, für den Artikel - gefällt mir gut. Sieht alles deutlich nach credit crunch + Defla aus.

Für mich die entscheidenden Sätze:

-> In reality, with several Asian economies, including Japan, in recession, there was a global glut...
-> The tide has now turned.
-> There is now not only a U.S. recession, but a global industrial downturn, and U.S. import prices are plunging again.
->A Global Recession?
-> Today, recession has hit not only the U.S., but also the world's second-largest economy, Japan...
-> The problem is that the world's third-largest economy, Germany, may also be headed toward a recession.
-> Already, with Mexico seeing two straight quarters of negative GDP growth, President Vicente Fox has acknowledged that the economy is in recession. Canada's monthly GDP was flat from December 2000 to March 2001, the latest reading. Across the Pacific, Taiwan, Korea and Australia have all seen one down quarter of GDP.
-> A recession in Germany, which accounts for a third of eurozone GDP, would have serious, Europe-wide ramifications.
-> The reality is that we may be facing the second global recession in the postwar era...

Mensch, die ganze Welt dreht sich um und schaut nun vom Schuldenturm kilometerweit abwärts. Die Frage ist, ob noch ein ein weiterer Wahnsinns-Schluck aus der Mega-Pulle drin ist oder ob es ab jetzt von Montag bis Sonntag heißt:"Payday, Rechnungen begleichen. Kein Aufschub mehr." Hat die Kredit-Orgie ein Ende oder gibt's noch 'nen kräftigen Schluck (woher)?

Tobias

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Danke für die Zusammenfassung und passend dazu ein
Artikel aus der ´Straits Times´ aus Singapur,
übernommen von Bloomberg.

---

Asia weighed down by $3.7 trillion in bad loans

Economists fear that regional growth may be hampered as banksare leery of handing out fresh loans

HONGKONG - Asia has a US$2 trillion (S$3.65 trillion) problem: bad loans at banks that will keep the region from a sustainable economic rebound.

In Thailand, one-fifth of all loans are in default; in Indonesia, about one-third; and in the Philippines, a quarter, according to estimates from governments and analysts.

Banks in Asia will have to work through these loans before lending afresh. Until that happens, the region may not see a repeat of the 8 per cent annual growth rates chalked up in the early 1990s.

Four years to the day after Thailand devalued the baht, a move that sparked a regional recession, Asian economies are again reeling. While policymakers have been quick to lay the blame for current economic woes on falling exports to the US, the real root of their problem lies closer to home.

'Bad loans are going to affect growth for years,' said Dresdner Kleinwort Wasserstein chief economist for Asia Tatha Ghose.

'When the current downturn is over and people need to invest again, financial systems will be bottlenecked because banks will not be able to provide financing.'

Economies from Japan to Thailand and Singapore to the Philippines shrank in the first quarter. South Korea's growth is expected to slow by more than half this year, and Indonesia and Malaysia expect their economies to slow. That is a far cry from the past two years.

Booming exports to the US helped pull South Korea, Indonesia and Thailand out of the 1997-98 recession. The return to rapid growth papered over the need to clean up the mess left behind and allowed governments to avoid the social and economic upheaval of closing down deadbeat borrowers.

Japan is a prime example of the economic damage that can be wrought when loans go sour. An 11-year slump has left lenders with as much as US$1.1 trillion of bad and risky loans, equal to almost a quarter of gross domestic product in the world's No 2 economy.

The problem is also deterring foreign investment, particularly in South-east Asia. Foreign investment in Asia, excluding Japan and China, fell by about 17 per cent between 1997 and last year to just over US$50 billion. A lot of money was reallocated to China.

'The rest of the world has a better understanding of what's happening in these economies' now than it did in 1997, said Nomura International banking analyst Kelvin Chan. 'They don't really care about South-east Asia.'-- Bloomberg News


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>Danke, Pancho, für den Artikel - gefällt mir gut. Sieht alles deutlich nach credit crunch + Defla aus.
>Für mich die entscheidenden Sätze:
>-> In reality, with several Asian economies, including Japan, in recession, there was a global glut...
>-> The tide has now turned.
>-> There is now not only a U.S. recession, but a global industrial downturn, and U.S. import prices are plunging again.
>->A Global Recession?
>-> Today, recession has hit not only the U.S., but also the world's second-largest economy, Japan...
>-> The problem is that the world's third-largest economy, Germany, may also be headed toward a recession.
>-> Already, with Mexico seeing two straight quarters of negative GDP growth, President Vicente Fox has acknowledged that the economy is in recession. Canada's monthly GDP was flat from December 2000 to March 2001, the latest reading. Across the Pacific, Taiwan, Korea and Australia have all seen one down quarter of GDP.
>-> A recession in Germany, which accounts for a third of eurozone GDP, would have serious, Europe-wide ramifications.
>-> The reality is that we may be facing the second global recession in the postwar era...
>Mensch, die ganze Welt dreht sich um und schaut nun vom Schuldenturm kilometerweit abwärts. Die Frage ist, ob noch ein ein weiterer Wahnsinns-Schluck aus der Mega-Pulle drin ist oder ob es ab jetzt von Montag bis Sonntag heißt:"Payday, Rechnungen begleichen. Kein Aufschub mehr." Hat die Kredit-Orgie ein Ende oder gibt's noch 'nen kräftigen Schluck (woher)?
>Tobias

...oft gesagt: Es ist wohl vorbei, es geht einfach zu schnell!
Danke für den Artikel und die Zusammenfassung.

Tobias, deine neue eMail-Adresse habe ich noch nicht.

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