The reversal is largely down to Russia and the rest of the ex-Soviet Union, which BNP estimates have withdrawn $57 billion from world markets.
Russian companies have been shut out of global markets since Western countries imposed sanctions because of the conflict in Ukraine. Those companies are increasingly forced to rely on their own cash reserves or central bank funding to meet external debt repayments.
BobInget wrote:
Funny thing, oil we most depend on is rat in the middle of an all out war zone and we don't know it. I won't bore everyone but Saudi Exports, 10 million B p/d could
be halted for weeks if not longer at any second. Then, Then, we will see panic.
dissident wrote:If the global demand for oil reflected economic growth and not stagnation/decline, then the extra supply of US non-conventional oil would not have satiated the market and the price would not have dropped. The amount of the oil price decline reflects how serious the recession is.
Pops wrote:Just thought I'd point out again that as far as I can tell, the chart in the OP is of oil profits invested outside the producing country - i.e. KSA buys stock in the S&P.
Not GDP
Not even oil profits, just outside investment of profits
Not sure how that relates to recession. It relates to oil profits, oil CapEx, and certainly global interest rates when they take their profits home - although the amount they have taken out is small overall - just not adding more really.
Unless someone has a better take ...
AndyA wrote:Average cycle between recessions in the US for the post WWII period is about 5 years. 5 years 6 months and counting since the last one.
Also note that the drop in expenditures predates the price drop in oil.
"It's a bit jaw-dropping. It all makes you wonder: Do we really have a functioning global banking system when rates are essentially zero?" asked Colas.
http://www.declineoftheempire.com/2015/01/a-simple-story.htmlWe live in complicated times, but I have a simple story to tell.
The phony housing boom in the U.S. went bust in 2008, two years after house prices peaked nationally.
The global economy went into severe recession because the global financial system is highly integrated, so massive bank fraud and bad debt rippled across the world's economies, crippling them in the process.
Central banks all over the world stepped in to re-inflate the global economy. The "stimulus" applied was massive and sustained.
Stimulus seemed to work for a while, especially in so-called "emerging" markets (China, India, Brazil, Russia, others). Those markets had plenty of room to grow.
The "mature" (OECD) economies never did bounce back, despite millions of mindlessly optimistic references to "the recovery," the creation of millions of low-paying jobs in the U.S, and GDP growth based on a host of dubious factors. The EU and Japan are a total disaster.
In 2015, the re-inflation phase has run its course. Commodity prices (crude oil, copper, etc.) are dropping precipitously, indicating that growth in the "emerging" markets has nearly ground to a halt.
There is no new economic frontier to exploit this time around and further stimulus is pointless and probably harmful.
Next stop? No growth or contraction of the global economy, accompanied by much-dreaded deflation.
Is this story true? Maybe. It certainly has the ring of truth. Time will tell. The direction of the global economy in the near future (in 2015) is the kind of thing it is easy to be wrong about.
But I will tell you this: that simple story is the cause of all the economic anxiety the world is currently experiencing. There is lots of anxiety because many observers fear this simple story is true.
http://www.theguardian.com/business/2015/jan/14/copper-prices-fall-fears-looming-global-recession“I’m getting worried that this [drop in copper prices] is telling us not all is right with the global economy and that it is slowing faster than anticipated,” said Robin Bhar, head of metals research at Societe Generale.
“If you asked me three to six months ago, I would have been less worried; I would have said it’s oversupply of oil, iron ore, coal. But the combination of greater supply with weaker demand is suggesting it’s indicative that the global slowdown is taking place.”
GoghGoner wrote:We may not know it but some folks surely do.
Warning: Bond rates are going negative"It's a bit jaw-dropping. It all makes you wonder: Do we really have a functioning global banking system when rates are essentially zero?" asked Colas.
Falling Oil Spells Boon for Most of Asia’s EconomiesTumbling oil prices could prove to be a boon for the many Asian economies that depend on crude imports. With oil at its lowest price in more than five years, governments in countries such as India and Indonesia can spend money on much-needed infrastructure and other growth projects without stoking inflation. Falling crude prices also give China’s flagging economy a boost, allowing its central bank—and others in the region—to ease rates even as a recovering U.S. looks to do the reverse.
Combined with loose monetary policy and a gradual recovery in global demand for goods and services, falling oil prices should help lift emerging Asia’s gross-domestic-product growth this year to 4.7% from an estimated 4.3% in 2014. The decline in oil prices should boost GDP growth in the Asia-Pacific region by 0.25% to 0.5%.
Of Asia’s economies, none is more dependent on oil imports than China. The country spent $234.4 billion to import oil in 2013. That was just below the U.S., which was the world’s top buyer of crude until it was surpassed by China in 2014. Analysts say that if oil prices were 20% lower this year Chinese state coffers could see a $50 billion boost. Depressed oil prices could help China make up for some lost ground in its economy due to slowing industrial growth.
Malaysia, Asia’s biggest exporter of oil, could see oil-related revenue fall to 3.1% of GDP in 2015 from last year’s 5.9%. Low oil prices are set to reduce Australia’s petroleum resource rent tax by US$615 million over the next four years.
Citigroup Sees $1.1 Trillion Stimulus From Oil PlungeThe lowest oil price in four years will provide stimulus of as much as $1.1 trillion to global economies by lowering the cost of fuels and other commodities, according to Citigroup Inc.
“Cheaper oil is an advantage for both consumers as well as industrial and manufacturing operations, especially as winter approaches.” As lower energy prices help reduce commodity costs, they can push down the inflation rate. While freeing up more money for consumers, outsized declines could become a concern in places like Europe, where policy makers are trying to stave off deflation, which can exacerbate an economic slump.
“Lower prices, for most economies, reduce the cost of doing business and support economic growth,” the International Energy Agency said in a report Oct. 14. “Lower prices offer a cushion of sorts against an otherwise vulnerable macroeconomic backdrop.”
A decline to $80 would cost OPEC $200 billion of its recent earnings of $1 trillion, Morse said in an analysis on the topic that was published yesterday in the Financial Times. “It is a big chunk of stimulus. The macro economic analysis of higher oil prices was always that it is essentially a wealth transfer from leveraged spending U.S. consumers to saving Middle East sovereigns, so ultimately it reduces the global velocity of money significantly and it’s a net drag. Now a price fall reverses that.”
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