Around the Globe 04.20.2013

U.K. Economy Seen Avoiding Triple-Dip Recession With 0.1% Growth – Bloomberg.

UK GDP Performance

The technical definition of a recession is two consecutive quarters of economic contraction.  If a country merely stagnates (0%) or grows only a tiny bit (0.1%) in one quarter, the definition is not met.  A tenth of a point here or there makes no difference.  The U.K. may avoid recession, but its economy is still doing poorly.  Once the new BoE leader from Goldman Sachs, Mark Carney, is installed this summer, watch for a QE program to rival Japan’s.

Analysis: Japan shock therapy risks disturbing emerging markets | Reuters.

YENUSD 04.20.2013

The flood of money printing causes inflation somewhere.  Where will all this cheap yen wind up? The writer of this piece seems to think that it will be emerging markets, but I do not agree.  The Japanese are risk averse investors, and I think they will plow their money into U.S. markets, which pay much better returns than their own.

Cyprus President Outlines Plan to Rebuild Economy After Bailout – Bloomberg.

Cyprus GDP with Trend

The President’s plan is some window dressing to make it appear that the government is doing something in the face of troika  mandated austerity.  Tax breaks and subsidies will not even put a dent in the twenty percent contraction in GDP awaiting Cyprus.  A real plan to rebuild the economy would include a return to the pound to increase Cypriot competitiveness.

Two Countries, Turkey and Venezuela, Are Candidates for a Crisis.

The headline is misleading, but the article is still useful. It gives five factors one should look for to ascertain if a country is heading to a crisis:

  1. Growing current account deficits
  2. Rapid credit expansion
  3. Surging short-term external debt;
  4. Bubbling stock market prices (50 percent is considered a red flag)
  5. Large growth in real exchange rates.

You can argue that the U.S. currently has all the factors in place except for the first.


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