As I noted last night, the nasty repercussions of bubble bust conditions have been percolating into the global economy from different directions. [Good luck to the stock market bulls]
Here are more evidences of the escalation of the transmission… (from Bloomberg)
Hong Kong and Vietnam signaled growth may fall short of government forecasts this year as Asian policy makers stepped up efforts to protect their economies and currency markets from the worsening global outlook.
Hong Kong may revise its 2012 economic forecast next month, Financial Secretary John Tsangsaid on July 7. In Vietnam, Deputy Prime Minister Vu Van Ninh said the country may miss its growth target and the central bank told lenders to cut borrowing costs on existing loans to help businesses. The Philippines unveiled plans to contain currency gains that may hurt exports.
The Philippine central bank, the Bangko Sentral ng Pilipinas (BSP) reveals of their mercantilist leanings where destruction of the Peso is seen as the elixir to prosperity. History and theory serves no lesson to political agents who uses mercantilists policies to promote the interest of cronies and the political class in the name of exports (or remittances). Good governance? Duh!
The economic growth slowdown also slams Japan hard (from another Bloomberg article)
Japan’s current-account surplus was the smallest in May since at least 1985 and machinery orders fell the most in more than five years, adding to signs a slump in demand is threatening the nation’s rebound.
The excess in the widest measure of the nation’s trade shrank 63 percent from a year earlier to 215.1 billion yen ($2.7 billion), the Ministry of Finance said in Tokyo today. The median estimate of 24 economists surveyed by Bloomberg News was for a surplus of 493.1 billion yen. Machinery orders, an indicator of capital spending, fell 14.8 percent in May from the previous month, the Cabinet Office said, the biggest drop since comparable data were made available in 2005.
Japan’s trade position has weakened due to growing energy imports after last year’s earthquake and nuclear meltdown and also the yen’s gain of 4.9 percent against the dollar since mid- March. Prime Minister Yoshihiko Noda gave approval for a restart of reactors at the Ohi nuclear plant, which resumed power generation last week, to avoid power shortages and rolling blackouts over the summer.
“Today’s machinery order drop is very large, and it may be a signal that Japanese companies are becoming cautious about investment” amid concern about a global economic slowdown, said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management in Tokyo. “Though exports have been slumping, we don’t expect Japan to have any major trade deficit.”
Given that the economic slowdown emanates from multiple fronts, which amplifies the global contagion risks, for any interventions to have short term palliative effect, they must be really huge, coordinated or in collaboration with central banks of major economies from both BRIC and G-7.
Yet if they do so, expect a major train wreck that would make the 2007-2008 episode a picnic ahead.
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