…the
expansive fiscal and monetary policies implemented by governments to
spur growth might have laid the foundation of the next economic
crisis…Those debt-financed fiscal policies and accommodative
monetary policies had been only moderately successful in promoting
growth, with public and private debt levels in the world now too
high…Fiscal as well as monetary policies have reached their limits.
If you want the real economy to grow there are no shortcuts which
avoid reforms…Talking about further stimulus just distracts from
the real tasks at hand. We, therefore, do not agree on a G20 fiscal
stimulus package as some argue in case outlook risks materialise…The
debt-financed growth model has reached its limits. It is even causing
new problems, raising debt, causing bubbles and excessive risk
taking, zombifying the economy".—Wolfgang
Schaeuble Germany's Minister of Finance at
the
G-20
In
this issue:
Phisix
6,800: 6.3% 4Q GDP; Why Has December Imports Collapsed by 26%???
Philippine Bank Stocks Plunge!
-4Q
GDP at 6.3%? Really? Then Why Has December Imports Collapsed by
26%???
-Has
the December Import Crash Been Symptoms of a Formative Global
Recession?
-December
Import Crash: Where was Strong Domestic Demand?
-December
Import Crash: Statistical Ruse to Buoy 4Q GDP?
-Phisix
6,800: Mixed Performance, Divergence and Overbought Conditions
-Has
the Pummeling of Banking Stocks Signified the Effects of Yield Curve
Inversions?
-Global
Stock Markets: Oil Prices as Du Jour Stimulus and the Cockroach
Theory
Phisix
6,800: 6.3% 4Q GDP; Why Has December Imports Collapsed by 26%???
Philippine Bank Stocks Plunge!
4Q
GDP at 6.3%? Really? Then Why Has December Imports Collapsed by
26%???
The
headline of the week should highlight of the incredible collapse by
December imports!
So
what just did happen to December imports?
Here
is the government’s PSA on the December meltdown:
(bold emphasis added)
The
total imported goods by the
country for the month of December 2015 amounted to $4.056 billion, a
decrease of 25.8 percent from $5.470 billion
recorded during the same period a year ago. The decrease was due to
the negative performance of nine
out of the top ten major imported
commodities for the month led by other food & live animals
(-47.9%). The other eight negative performers were: feeding
stuff for cereals not including unmilled cereals (-33.1%); electronic
products
(-30.3%); miscellaneous
manufactured articles
(-18.1%); mineral fuels, lubricants and related materials (-14.1%);
telecommunication
equipment
and electrical machinery
(-9.0%); iron and steel (-5.4%); transport
equipment (-3.3%); and industrial machinery and equipment (-3.2%).
Moreover, total imports for the year 2015 registered a 2.0 percent
increase, that is from $65.398 billion in 2014 to $66.686 billion in
2015).
The
balance of trade in goods (BOT-G) for the Philippines in December
2015, registered a surplus of $603.03 million. This is in
contrast with the $667.47 million trade deficit in the same month
last year.
While,
basically the domestic financial markets ignored the data, the
government panicked. The government via the National Economic and
Development Authority even issued a statement intended to mollify the
public:
(emphasis mine)
The
Philippine Statistics Authority reported today that the total
payments for imported goods in the country declined by 25.8 percent
in December 2015, the
steepest monthly year-on-year decline recorded since April 2009 when
it fell by 37.1 percent.
This halted the six consecutive months of positive growth in imported
merchandise.
“Despite
this decline in December, strong
domestic demand will prop
up imports growth in the near term, as we expect continued expansion
in inward shipments of power-generating machines, office and
electronic data processing machines, and telecommunications
equipment. Investor confidence in the country is still growing and is
seen to increase investments. This will in turn boost demand for
imports of capital goods as well as raw materials and intermediate
goods,” said NEDA Deputy Director-General and Officer-In-Charge
(OIC) Margarita R. Songco.
In
December 2015, the value
of imported capital goods, a leading indicator of strong
economic activity, remained resilient as it increased 20.9 percent to
US$1.5 billion in December 2015. This accounted for 37.8 percent of
total merchandise imports for the period.
But
the downturn in imports of raw
materials & intermediate goods (-53.2%) and consumer goods
(-20.3%) pulled down total imports.
Import payments for raw materials and intermediate goods declined in
December 2015 with lower imports of materials & accessories for
the manufacture of electrical equipment (-74.1%) sourced mainly from
Taiwan, Japan and Singapore. This partly mirrors the decline in
global electronic and semiconductors sales in December 2015 due to
softening global demand.
Nonetheless,
NEDA
sees household consumption remaining strong
with upbeat consumer confidence, low inflation, low interest rates,
better employment opportunities, and still positive outlook on
remittances inflow, which bodes well for imports of consumer goods.
If
one reverts to the PSA data, of the 10 sectors measured, only imports
of metal products registered an advance (by 19.8%), so it’s not
clear where the alleged advance in capital goods imports emanated
from.
In
contrast, the PSA seem to have indicated significant declines of
capital goods imports, in particular, “Transport
Equipment,
contributing 8.4 percent to the total import bill was the country’s
third top import for the month amounting
to $340.16 million. It declined by 3.3
percent
compared to last year’s value of $351.75 million. Imports
of Industrial
Machinery and Equipment ranked
fourth with 6.5 percent share and reported value of $262.21 million
in December 2015. It dropped by 3.2
percent
from $270.80 million in December 2014”. (bold original, italics
mine)
So
what the PSA data seem to have manifested was that December’s
import plunge has not only been broad based, which affected major
industries from capital goods, intermediate goods or inputs for
reexports, and to consumer goods, but even worst, the scale of
December’s crash—based on nominal USD value—has almost
resonated with that of 2008-9!!! (see nominal USD value chart from
tradingeconomics.com
in the lower window)
Let
me repeat, the crash wasn’t just in growth numbers but in nominal
USD levels (or import’s NGDP).
As
usual, the December import breakdown had to be sanitized by the
recitation or incantation of “strong domestic demand”
I
posted the data of Philippine imports during the 4 pre-Presidential
election periods to denote of three things:
One.
If imports were a product of political “uncertainty” then the
adverb “Every time” represents an unalloyed bilge. Why? Only ONE
presidential election reveals of a declining import trend. Guess when
was that? Answer: 1998, or the Asian Crisis!
Elections
of 1992, 2004 and 2010 showed of INCREASING nominal value import
trends.
Second.
Perhaps the observation from a % standpoint could somehow be right
(but this seems dubious, I have no data on this though). But NADA ZAP
ZILCH ZERO of the four election period revealed of a dramatic one
month crash.
While
1998 showed of a steep decline, it was a consequence of a series
of monthly deficits. Moreover, it was a manifestation of a regional
and not a global dynamic similar to the GFC 2008-9. Elections had
little to do with it.
Third
and lastly, both the above tell us that the spin “political
election uncertainty equals crashing imports” represents a fallacy
of composition.
Political
election uncertainty equals crashing imports is simply FALSE!
Has
the December Import Crash Been Symptoms of a Formative Global
Recession?
Yet
NO one seems to even give an effort to figure out why those imports
crashed at all.
The
mainstream’s
kneejerk or mechanical reaction has been to strenuously DENY warts
and all such number—as an anomaly or fundamentally unreal.
Yet
has those earlier big import gains (June to November) led to a vast
stockpile of excess inventories? Or has demand suddenly vaporized? Or
could it have been both?
How
much of those big imports gains were due to the frontloading of
inventories in expectation of further weakening of the peso?
How
much of those significant jump in imports have been a consequence
from false expectations brought about by media and the establishment
G-R-O-W-T-H spin?
Has
the collapse in electronic products imports been additional symptoms
to the deepening of the export recession?
While
such dynamic can be partly blamed on falling prices (see left), even
trading volume has shown signs of inflection (right window).
In
other words, marginal gains yet susceptible to declines…all
depending on global economic conditions
And
sad to say that if the current momentum of global trade intensifies,
then a global recession could be within the cards in 2016 or in 2017.
The
point is here that it would be arrantly myopic to believe that the
Philippines would be immune to global developments.
All
these major economic factors—OFW remittances, BPOs, tourism,
external merchandise trade, FDIs or even portfolio flows—have been
closely linked or tied to the conditions of the global economy.
Most
importantly, the above factors have been driven by the direction of
the USD.
December
Import Crash: Where was Strong Domestic Demand?
And
it would be equally naïve, if not disingenuous, to believe in the
Keynesian catechism of strong domestic demand!
Yet
whatever happened to strong ‘domestic demand’ last December?
Why
has strong ‘domestic demand’ been unable to forestall, or at
least mitigate, December’s massive import breakdown?
Using NEDA’s own explanation “consumer goods (-20.3%) pulled down
total imports”, yet the same agency bifurcate with the claim “NEDA
sees household consumption remaining strong”.
Huh?
By overlooking the cause of falling consumer goods exports, just how
can one make a conclusion that household consumption will remain
strong? Abracadabra???!!!
Again
just where will domestic demand come from?
Agriculture
and manufacturing has been stagnating, exports have been in a
recession as OFWs remittances have been trending towards zero (or
even negative) growth.
Yet
media, authorities and their experts make it appear as if these
sectors don’t have the demand
to affect the real economy. As if the weakening of these sectors
won’t infect or spread to the other sectors. The public has been
made to believe that the economic activities have little relevance
from one sector to another.
Yet
what happens to the frantic race to build supply capacity in order to
cater to them? Will incomes and earnings from these bubble industries
be enough to sustain them? Will overcapacity not lead to a decline in
investments that would affect current investments and jobs?
Let
me use the Robinsons Land (RLC) case which
I discussed last week as example. RLC officials admitted that
occupancy rates in 2015 were at 95% or vacancy rates were at 5%. Seen
from an industry basis, given
the spreading weakness of the general economy (which should now
include imports and probably wholesalers),
the rush to build supply would risk the ballooning of the vacancy
rates or the lowering of occupancy rates.
Yet
the swelling of vacancy rates would not only put pressure on the
profits of property developers and mall operators, they are going to
heighten strains from credit conditions—which have financed the
supply side growth as well as the demand side growth via
receivables—both of which will impact capex growth.
Media
quoted that RLC announced that capex
for 2016 would be at Php 16-17 billion from Php 15 billion, which
should represent only 6.7% or 13.3% growth. Given
the headline bullishness of the industry, those numbers can be seen
as surprisingly conservative!
In
other words, RLC’s capex spending for the past 2 years hardly went
beyond Php 15 billion yet
every announcement would seem like growth because of the increase in
the so-called top line numbers as announced by the company.
And
since the public don’t seem to look back, but to trust every word
of what the establishment says, they continue to harbor the
impression of G-R-O-W-T-H!
In
reality, RLC’s capex has hardly grown, may not likely grow and
could even contract this year in spite of the firm’s present
announcements.
The
reason for this as previously explained, has been the insufficient
cash flows for any meaningful capex growth, and that the firm have
become increasingly depended on credit to finance operations,
residual expansions and sales.
Yes
such is another wonderful example of the money illusion: The illusion
of growth as a function of credit expansion.
Moreover,
just
where are the jobs?
While
government narrative has been that jobs continue to grow, this hasn’t
been supported by the real world. In case of online jobs, job
placements continue to crash. 2015
was a crash for the entire year relative to 2014.
Despite
the company’s repeated spin that job placements will improve,
Monster.com’s employment index continues to founder.
The
firm notes that for December, “Philippines
registered a -36% year-on-year decline in online recruitment
activities in December 2015. Although still negative, this is an
increase from the -46% reported in November 2015. - The BFSI industry
had the steepest year-over-year growth at 6%, while the
Production/Manufacturing, Automotive and Ancillary sector saw the
most decline at -63% Customer Service jobs experienced the highest
growth at 6% year-over-year, while Hospitality & Travel fared the
worst at -63%”
While
it may be true that -36% may look like an improvement from -46%, -36%
remains a huge negative number.
Gosh,
has political correctness pushed us to become so dense or obtuse such
that we cannot or have been prohibited to even distinguish a collapse
from growth?
While
having picked up job placements in the same way as Monster.com last
December to early January, online firm A’s numbers continues to
deteriorate.
I
will have to exclude Online Job B from future reports because job
postings have been in a monumental meltdown: from 36k last April to
just 1.5k last week!
Heck,
how are companies today recruiting people? Via the more costly
traditional media where readership are being eroded by the web? Or
through viral or word of the mouth?
Nonetheless,
those job placements seem to reflect on the real conditions of the
economy rather than those sanguine headlines.
As
a side note, here is the government’s employment index as of 3Q
2014.
From
the PSA:
(bold mine) Total Employment Index increased at 2.8
percent growth slower from its 4.0 percent growth
in the same quarter last year. Trade
pulled down the index with a 1.4 percent drop from
the previous year. The
rest of the industries slowed down:
Real Estate at 5.7 percent (from 11.2 percent); Private Services at
4.4 percent (from 6.3 percent); Manufacturing at 3.6 percent (from
4.0 percent); Mining and Quarrying with 2.7 percent (from 3.2
percent); Finance with 2.1 percent (from 10.0 percent); and
Transportation and Communications with 0.1 percent (from 3.9
percent). Only Electricity and Water rebounded from a drop of 2.2
percent to positive 0.4 percent this year.
Low
is HIGH, down is UP, few is Many!
December
Import Crash: Statistical Ruse to Buoy 4Q GDP?
Yet
let me offer a REASON to doubt on the PSA’s IMPORT numbers.
Perhaps
this
may have been designed to bloat 4Q GDP
Remember
GDP= C+I+G (X-M)
where
GDP represents the summation of Consumer, Investment and Government
spending PLUS net exports (or exports MINUS imports).
So
what they may have done was to crash the December imports! And
perhaps pass on the deducted numbers into the future. So the audacity
by the officialdom to claim “anomaly” or convey of confidence
predicated on “strong consumer demand”.
Or
has the Bureau of Customs padded on the December numbers?
It
is likely that December’s crash has represented both real and
statistical frills.
Yet
another possible statistical ruse to embellish the GDP. Of course, I
have noted here that revving up the GDP has been primarily designed
to gain access to credit.
All
these have been intended not only to buoy the political capital of
politicians but most importantly, as originally formulated, GDP was
engineered for politicians to gain access to public’s resources.
Applied particularly in modern or contemporary times, GDP have been
designed to help ensure
easy ACCESS to cheap credit.
Easy
access to credit is required to finance political spending.
Easy
money policies not only translate to easy access to cheap credit, it
entails lower costs for maintaining debt.
Yet
if jobs and investments have been in a decline, just where will such
spending come from? Pork barrel based spending, which are merely
transfers from taxpayer to politicians are sustainable sources of
spending?
Has
it not been truly bizarre where election uncertainties would be
attributed by certain experts as causing the import collapse which
the other seems as a reason to buy stocks? Experts seem as grasping
at the straw to keep the illusions alive.
Phisix
6,800: Mixed Performance, Divergence and Overbought Conditions
And
speaking of stocks, the Philippine equity benchmark, the Phisix,
closed down with a marginal .31% deficit this holiday abbreviated
trading week.
The
slight decline had been a manifestation of a mixed market. It has
likewise represented the aggressive use of last minute pumps or
marking the closes in two
days
by Team Viagra to stave off substantial losses.
From
a technical perspective, after reaching its first resistance level,
the Phisix (PSEi) appears to be in a consolidation phase, with
incipient signs of overbought conditions
The
mixed market can best be seen from the sectoral performance, where
outcomes had been divergent for the week. Two industries posted gains
while the rest or the majority registered losses.
The
banking-financial sector led the losers, down by a surprising 3.54%
followed by the other three, the mining (-1.34%), service (-.69%) and
the property sectors (-.22%).
Gains
from the industrial (+1.23%) and the index heavy holding sector
(+.48%) provided the offsetting force to cushion the index’s
retreat.
Yet
among the PSEi components, 9 issues advanced while 19 issues
declined. Meanwhile, two issues were unchanged.
The
broader market was evenly split between the dominance of advancers
and decliners on a daily basis during the 4 day session.
Nevertheless
in aggregate, for the week, advancing issues eked out a slight margin
of 13 over declining issues over the week.
Average
weekly peso volume was at still light at Php 7.142 billion. But
volume had been buttressed by special block sales, mainly from
Semirara and Star Malls. Special block sales at Php 9.1 billion,
accounted for about 31.85% for the week’s total volume.
As
I have noted last week, the
peso rally may happen when the sale of USD bonds will be formalized
or concluded. Apparently, the $2 billion record low coupon rates fund
raising by the government through USD bonds the other week escaped my
radar screen. So this has likely spurred the peso to rally or the
USD Php to fall by .315%.
And
it is important to note that the recent steep rally in Asian stocks
has mostly been supported by the temporary weakening USD.
Has
the Pummeling of Banking Stocks Signified the Effects of Yield Curve
Inversions?
It’s
interesting to observe of the quasi crash by the banking index last
week.
As
noted above, the banks represented the biggest drag on the index
where the banking and financial sector slumped 3.54%!
In
the recent past, the bank and financials index (green) have been
tightly correlated with the price movements of the PSEi (red).
However this week, the banking index dived even as the PSEi had
mostly held ground.
The
headline index consists of THREE banking issues which are considered
heavyweights. Said differently, the three firms—namely BDO Unibank,
Bank of the Philippine Islands and Metrobank with respective PSEi
share weightings of 5.2%, 5.2% and 3.84% as of Friday’s close—have
been part of the top 15 biggest market cap.
In
the same pecking order, curiously the same issues suffered -1.98%,
-6.86% and -4.74% for the week.
Mainstream
media reports seem eerily silent on this. Why?
I
have long propounded that the yield curve will ultimately matter.
Actions
at the bond market and the yield curve determine the direction of the
interest rates as well as the interest rate arbitrages by financial
institutions.
The
core financing of the Philippine bubble principally depends on them.
Despite
this week’s big rally on Philippine treasuries, brought about by
the $ 2 billion bond raising, with the bulk of the recovery occurring
at the front end, the recent declines in banking stocks could
have
reflected on the recent inversion of the many parts of the domestic
yield curve.
As
examples, spreads of the 10 year 1 month bill bounced off last week’s
inversion (upper left). The 10-2yr spread remains very flat or at 41
bps (upper right). The 10-3yr spread moved away from negative to ZERO
(lower left). The curve’s belly, the 10yr-5yr variance remains
NEGATIVE for the third week -19.8 bps (left).
And
in spite of this week’s big rally in Philippine treasuries which
led to the slight widening of spreads, the overall trend remains
headed toward INVERSIONS (green sloping downtrend line).
Severe
flattening of yield spreads to negative spreads or the yield curve
inversions point to the dramatically tightening liquidity
environment. Such translates to diminishing arbitrage from maturity
transformation (borrow short-lend long) or the shrinkage of net
interest margins for banks. Of course, the secondary effect would
entail of lesser credit activities from the banks.
And
considering that credit has functioned as the lifeblood of the
contemporary zero bound formal economy, then this will likely have a
spillover effect on the real, mostly, formal economy, as well as to
asset prices.
As
I have noted in the past:
Said
differently, a reduction
of credit activities will lead to a substantial repricing of the
considerably overpriced and mispriced assets.
Hence,
overpriced and mispriced assets maybe vulnerable to violent
adjustments (a.k.a crashes)…
Now
if half of the banking balance sheets have constituted loans and
other the half have been divided into financial (and property)
assets, and fees, then both will similarly be vulnerable to a
downturn in economic activities and from a hefty repricing of assets.
To
make a long story short, this
means there will be a transmission and feedback mechanism through the
sequence of slowing credit growth to NGDP to earnings to asset
pricing to credit risk and vice versa.
So
if my suspicions are correct, then this week’s divergence between
bank stocks with the general markets will hardly last.
Instead,
price action of banks could be ominous of a convergence, a
forthcoming selling episode. Add to the likelihood of the mean
reversion are likely signs of overbought conditions.
And
perhaps by next week, we may know from the BSP’s disclosure whether
January 2015’s credit and liquidity data will corroborate on this
week’s bank selloffs.
As
of December, the rate of expansion of both bank credit and domestic
liquidity appears to have resumed its descent, down to 13.1%
(see below) and 8.3%.
With
the exception of the last two quarters of 2015, bank credit growth
has mostly mirrored GDP activities whether seen from annualized (top)
or quarterly (bottom) or when compared to NGDP or current based
(real) GDP.
In
short, GDP
has mainly been a function of mostly credit conditions.
Moreover,
credit intensity or credit required to produce GDP has been
accelerating to the upside even as NGDP and banking system loan
growth have both in decline. This implies that the former have been
declining more than the latter. This also suggests of the diminishing
returns from credit growth on the statistical GDP. And more
importantly, the rise of credit risks.
For
all the bullishness being foisted on the public by media—which have
mainly been premised on statistical charades, financial market pumps,
roseate projections by mainstream outfits, and economic sophisms
masquerading as ‘expert’ opinions to defend the status quo by
denying all possible risks—has been the utter blindness to very
foundations to the ungluing of the façade.
Global
Stock Markets: Oil Prices as Du Jour Stimulus and the Cockroach
Theory
Global
stock markets had been sharply volatile last week.
Stock
markets of many developed nations have swung from big gains to big
losses and back to big gains.
However
the character of global markets seems to have changed. China’s
influence over global markets appears to have dissipated or has
shifted mostly to the price of oil. In short, for now, developments
in the Chinese stock markets have been sidelined for other concerns
particularly on oil. Add to the subsidiary concerns have been the
Brexit or British Exit from the EU.
While
the G-20 meeting was also factor that helped revived the ‘animal
spirits’, it was oil that took the limelight.
US
crude’s WTIC’s 10.5% spike coupled with Brent oil’s 7.1% surge
fed into many developed economy’s stock market gains.
And
instead of the former populist theme where “low oil prices equals
bigger consumer spending” that should translate to “higher”
stock markets, today’s low oil prices have now extrapolated to
lower stocks and vice versa. Or, the correlation of stock market
movements and oil prices has increased.
Reason?
Bloomberg
offers four theories: Low oil prices equals global recession, low
oil prices will ignite credit defaults, low oil prices equals low
investments and finally low oil prices equals rebalancing of
portfolios that means liquidations of non-oil assets.
Global
stock markets have become so fickle to look for anything to whet on
their speculative juices.
So
instead of previously fixating on central bank activities, ‘stimulus’
seems to have shifted on how major oil producers agree or disagree to
manage oil prices via prospective changes in production output.
Additionally,
because of the tightening correlation between oil and stocks,
establishment entities like the Wall
Street Journal have even suggested that central bank buying
activities should include oil in their large scale asset purchasing
programs or QE (with reference to the Bank of Japan or BoJ)
This
looks increasingly as more signs of desperation to anchor onto
something as central banks magic appear to be fading.
Yet
what seems to have been overlooked has been the US dollar. The
presently weak US dollar (as shown by the Bloomberg
dollar index at the right window) has provided much space for
oil’s rally.
And
while it may be true that low oil prices will likely increase
pressures on highly leveraged energy firms that may lead to defaults,
the problems have not been confined to the oil sphere.
There
hardly is a single cockroach. The appearance of a cockroach
extrapolates to more hidden ones. That’s based on the cockroach
theory of finance. And the energy sector could be just one of
the many debt impaired ‘cockroaches’ that has emerged.
According
to the Bloomberg, 5,000 publicly listed energy firms have a
combined $3.6 trillion in debt. Such scale of debt has been
distributed as $2.1 trillion in bonds, and the rest, could be in bank
loans. While not all will be affected, many will.
And
cockroaches have definitely been surfacing.
Aside
from stock market and currency crashes, presently, the Standard
& Poor’s US Distress Ratio for junk bonds has already reached
2009 crisis levels. And the sustained rise of the distress ratio
points to even more defaults ahead.
And
the contagion or ‘spillover’ dynamic has only been escalating, as
analyst Wolf Richter explained:
And
it’s not just the oil-and-gas and the minerals-and-mining sectors
that are getting crushed. Of the 607 distressed bond issues in the
ratio, 172, or 28%, are oil-and-gas related and 80 bond issues, or
13%, are minerals-and-mining related. The remaining 59% are spread
across other the spectrum…In
terms of total debt, the third largest sector on the distressed list
is Telecom with 31 S&P rated issuers and $33.5 billion in
distressed debt, followed by Utilities, where distressed debt has
soared 58% in just one month (!) to $32.5 billion, spread
over 37 distressed issues.
And
yet even more cockroaches. The
gold-oil ratio seems to be a harbinger of even more volatility, which
combined with tightening of global liquidity and financial conditions
could even lead to a major adverse event ahead.
The
BCA Research recently warned:
The gold/oil ratio has made all-time highs recently. Not only is this
ratio a liquidity vs. growth indicator, but it also takes a real time
pulse of investor angst, rendering it a reliable fear gauge (see
chart). Worrisomely, crude oil volatility has spiked to levels last
seen during the Great Recession, and is also signaling that the VIX
will follow suit in the coming months.
While
oil prices may be today’s darling, it is just one of the many symptoms of
imbalances that have been unraveling or undergoing violent
adjustments. Eventually, I expect such fixation to lose footing.
Finally,
it has been a curiosity for Citigroup, one of the largest banks in
the world (13th based on relbanks.com
in 2015) to declare that “chances
of a global recession are already high and only going up”.
Mainstream
banks usually don’t go against the interests of political
institutions. That’s unless recession has already been extant or
when such institutions are trying to sell something. The latter seems
to be the case for Citigroup.
So
while the firm says global recession is “increasingly
probable”, “it's not necessarily unavoidable”. That’s because
such would be conditional to Citigroup’s prescriptions. According
to Bloomberg,
“To avoid a recession and to avoid a greater slowdown in potential
output growth than is warranted because of worsening demographics,
the world needs a global version of what we would call 'Abenomics
plus,'" which in Citi's terms would be easy monetary policy
coupled with fiscal stimulus and structural reform that would include
"material deleveraging."
In
short, make sure that government subsidies flows to us and recession
will go away.
___
