Con­tinue Down­ward Slide

The Playa Times Riviera Maya's English Newspaper - - Enterprise Focus - BY PAT­TIE BERRY - INTERCAM

The global financial news is not good and the global out­look con­tin­ues to de­te­ri­o­rate. In Europe, the largest and strong­est econ­omy, Ger­many, is now weak­en­ing. In Ja­pan, cor­po­ra­tions seem to be los­ing faith in Prime Min­is­ter Abe’s pro­grams and in­vest­ment has hardly moved. In China, of­fi­cial growth in the third quar­ter fell be­low 7, to 6.9 per­cent.

Mostly be­cause of China’s weak­ness, the com­modi­ties’ melt­down hasn’t found a floor and all pro­duc­ers are suf­fer­ing pretty badly. Rus­sia is in re­ces­sion, as is Brazil, which is also fac­ing a po­lit­i­cal cri­sis; Canada is a bor­der­line case, and Aus­tralia and New Zealand are barely hang­ing on.

Slug­gish global de­mand has slowed in­ter­na­tional trade, and the Asian ex­ports pow­er­houses have seen their sales slip­ping for months, es­pe­cially those to China. It isn’t only Asian ex­ports that are suf­fer­ing; from high-tech goods to durables, de­mand has fallen for prod­ucts and fac­to­ries are sit­ting empty and idle.

Hope for re­lief for the world econ­omy can only come from cen­tral banks. In Oc­to­ber, the Euro­pean Cen­tral Bank held its lat­est meet­ing, and Pres­i­dent Draghi made it clear that they are ready to act. Peo­ple´s Bank of China sur­prised ev­ery­one on Fri­day by low­er­ing de­posit rates for the fourth time this year, and all banks’ re­serve re­quire­ments for the third time. The Bank of England, at its last pol­icy meet­ing, made it clear that higher rates are not in the cards any­time soon. The Bank of Ja­pan is ex­pected to leave their pol­icy un­changed, but a new round of bond buy­ing could be an­nounced at any time. Fi­nally, the U.S. Fed is also meet­ing next week, and the ex­perts’ pro­jec­tions for the hike in in­ter­est rates is now be­ing pushed back to March of next year, at the ear­li­est.

All th­ese cen­tral bank ac­tions mean more money is slush­ing around the global financial sys­tem, and the mar­kets are re­spond­ing in kind. Bond yields are down again. And stock mar­kets are steady to up, mostly be­cause we are in the mid­dle of a poor earn­ings sea­son; oth­er­wise, they would prob­a­bly be ris­ing.

The global econ­omy is not well. Mone­tary pol­icy has been the only tool used to stim­u­late world economies six to seven years now and, yes, it has man­aged to lift them out of re­ces­sion, but not to launch them into a strong growth cy­cle. And the pre­scrip­tion hasn’t changed.

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China’s growth dropped a tenth of a per­cent. Ja­panese in­vestors are los­ing faith in mone­tary pro­grams. Ger­many’s econ­omy is weak­en­ing. Rus­sia and Brazil are in re­ces­sion Canada, Aus­tralia, and New Zealand are lean­ing to­wards a re­ces­sion. Global de­mand and in­ter­na­tional trade has slowed.

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