Thursday, July 25, 2019

Lack of Leaders for the Upcoming Recession if ANY



After a decade from the 2008 recession, the only difference in the global economy is lack of leadership within the political parties across the globe and this keeps me awake in the night. From the US to the UK every country has a political risk and mass protest has become a routine affair.  

 Leadership is at risk in every country now. Instability has become a nightmare. The piling up of debt seems to be never-ending the story now and it has already become a balloon. Emerging economies are going to be the worst hit but more than that I fear about the lack of leadership to manage and handle the same. The 2008 recession was faced and managed by a hard group of leaders from all segments across the globe. Do we really have them now?

The global debt has swelled up and the way trade war is going ahead if a recession comes in no government or political party will have the ammunition save the global economy.

The trade war is reducing interest rates and taxes to support growth. In simple words, growth is being pushed by lower income for the Government across the globe. Corporate debts are swelling up to face the heat of trade war and this is the place of intense risk for the global economy.

A country like china who is the prime target of Trade war has got a swollen up Debt pile. Chinese firms accounted for 42% of all corporate bonds issued in EMs this year The combined debts of 30 large Developing Economies rose to 216.4% of GDP in March, from 212.4% a year earlier, sending it to $69.1 trillion in dollar terms.  Chinese firms accounted for 42% of all corporate bonds issued in EMs this year.

Margins are falling and revenues have already plummeted. Corporate debt obligations are becoming a nightmare currently. Global Debt Hits $246 Trillion, 320% Of GDP, As Developing Debt Hits All-Time High.

1.      Debt by sector, Q1 2019 (as % of GDP):
2.      Households: 59.8%
3.      Non-financial corporates: 91.4%
4.      Gov't: 87.2%
5.      Financial corporates: 80.8%


Collateralised Debt game has been played extensively by all the banks. The list as follows:
Key Players in this Collateralized Debt Obligation market are:–

  • Citigroup                                                                           
  • Credit Suisse
  • Morgan Stanley
  • J.P. Morgan
  • Wells Fargo
  • Bank of America
  • BNP Paribas
  • Natixis
  • Goldman Sachs
  • GreensLedge
  • Deutsche Bank
  • Barclays
  • Jefferies
  • MUFG
  • RBC Capital
  • UBS


US economy is entering into an election phase and without any election, it is well clear that Mr Donald Trump will be the President.  So the trade war and debt pile up story and lower interest rates will keep playing its game since Mr. Trump is backed by the US capitalist to create a bubble of the explosion.

He is strongly supported by capitalist and business-centric minds. Those who will propose taxing the super-rich and going for tax cuts for the middle class and lower-earning group of people there will be a significant risk for those politicians to ruin their political life. The vote will go to the ones who will support in making the super-rich to become richer and making wealth transfer tax free and further making consumer suffer from more consumption cost.

The economic numbers will be cooked to portray a robust economic growth but in real terms, it has weakened the fundamental of the US economy post-recession. If a recession comes I find the biggest threat which the global economy faces is the lack of leadership to control and manage the US  has filled up the pockets of the corporate US by lowering taxes and negligible investments in the economy. Buyback of shares stood at $800 billion. Corporations were spending too much of their free cash flow. 
This means that the benefits of the Tax cut and low-interest rates benefit are not passing into investing assets to create long term economic growth. 

The growing debt and falling revenues and growth are going to end at one point and that point is going to be the beginning of Recession.

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