Barack Obama was elected to his second term last night. I was a bit relieved just because I thought Romney’s pro-austerity stance puts the whole country at risk since the private household sector is in an ongoing deleveraging, and both the government and households can’t cut back at the same time without a serious reduction in growth. Who knows what promises he would have followed through on…
Probably a far more important leadership change that currently not as followed in the media is the change in China. Watch closely as there could many repercussions to this change…..
China’s political process 1
China’s political process 2
Interesting post and graphics by Dwaine Van Vuuren over at FinancialSense:
“The Global Economy is on the brink of a recession with 58% of 29 OECD countries experiencing business cycle contractions. The chart below shows OECD defined global contractions (grey shaded areas) together with the percentage of 29 OECD member countries experiencing slowdowns. It is evident that whenever 50% or more of countries enter contraction (red dotted line) that the odds of global recession are very high.
The conclusion is that the world economies are in a precarious state but many are making soft landings and the % of countries in recession seems to have peaked. There is cause for concern for contagion to the U.S which means we must watch world economy status and the U.S recession models from our Recession Forecast Ensemble even closer for faintest signs of weakness. A fall into recession in the U.S is likely to be a very rapid one if it occurs against the current world backdrop. Getting out the stock market too soon can be very costly, as has been the case over the last 13 months since ECRI’s first recession call. For this reason we are not hitting any panic buttons on our side just yet.”
The big question is whether or not the world economies are bottoming out or if this is only the beginning. The best phase of the business cycle to invest is when leading indicators are bottoming out, as pictured in the framework below by Wolfe Trahan. Will a shock derail this bottom? Or will we experience a global recovery finally? Only time will tell, but I would be watching cues from the Shanghai Composite, Emerging market relative strength and base metals.
Source: Wolfe Trahan
Pierre Poilievre – Economic Freedom Speech
Interesting speech from a Canadian MP. While it is true that the Canadian government has its finances in order, relatively speaking, it will be interesting to see how they step in once the private household sector begins the much anticipated de-leveraging process. Who will step in to offset the previous demand created through the debt-financed spending spree? The government? The corporate sector? We shall see….more on this to come….