Economic Eruptum

January 20, 2016

f264be62c56fb5f5bbc3bea2ac7b5e18Just when you figured the freaked-out plate was full, from global warming to ISIS to Trump/Palin, now comes the cash-flow event — from NASDAQ this afternoon: ‘The Dow Jones Industrial Average tumbled 376 points, or 2.4 percent, to 15640, after earlier dropping as much as 565 points.’

Rapidly-tanking oil prices are sucking everybody down the drain-hole — U.S. crude dropped more than 6 percent today to $27.67 per barrel. Brent further down, at $27.24 per barrel, best day trading stocks in months was the week before so this results where shocking for most.
Adding fuel to the oil-market-scenario is China experiencing the worse economic slowdown in 25 years, creating paper-jitters, and worst-ever yearly start for Wall Street shit, markets down 10.3 percent of value in less than three weeks.
Coupled onto this from Forbes: ‘Wednesday’s slide puts the U.S. market at risk of posting the worst month of trading since October 2008.’

Seemingly the world is going cuckoo…

(Illustration: Pablo Picasso’s ‘The Tragedy,’ found here).

Also, the crazy viewed by the sane can effect the optics — the Washington Post this morning:

A recession, though?
That still seems far-fetched.
Sure, the strong dollar has hamstrung manufacturing, but, as economist Dean Baker argues, our spate of unseasonably warm weather has made that look worse than it really is.
The upshot is that the economy probably won’t grow as fast as before — which was already pretty disappointing — but won’t stop growing at all, either.
And if that’s the case, then former International Monetary Fund chief economist Olivier Blanchard is probably right that this mini-crash doesn’t make a lot of sense.
People are selling not because they have a reason to, but because they think other people do.
It’s panic all the way down.

Yet, if one includes the ‘weird‘ factor, that a whole shitload of  stuff ‘doesn’t make a lot of sense,’ then The Great Recession looms in the brains of the financially-inclined — interesting piece at the Guardian this afternoon on the economic premonition:

William White, a former chief economist of the Bank for International Settlements (BIS), the central bankers club, who now chairs the OECD’s review committee warned that central bankers had “used up all their ammunition”.
“The situation is worse than it was in 2007. Our macroeconomic ammunition to fight downturns is essentially all used up. Debts have continued to build up over the last eight years and they have reached such levels in every part of the world that they have become a potent cause for mischief,” he said on the eve of the event.
The BIS was one of the few organisations to warn during 2006 and 2007 about the unstable levels of bank lending that eventually led to the Lehman Brothers crash.

Last week, an investment analyst at Royal Bank of Scotland advised clients to “sell everything” except the safest high grade bonds after warning of a “cataclysmic” year and the strong likelihood of a stock market crash.
His comments came after the chancellor, George Osborne, warned in a new year speech of a “cocktail of threats” to the UK’s prospects from an increasingly uncertain world economy.

And applying caution: ‘However, Nouriel Roubini, who was even more vocal than the BIS in warning of the 2008 crash, said that the threat of a crash was overplayed: “It is not going to be like 2008-09. There is not the excessive leverage in the financial system that there was last time.”

Only time will tell, and the year’s just started…

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