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http://rajveersmarketviews.blogspot.in/2016/04/the-case-for-global-recession-in-2016.html
Causes of a Recession:
Recessions are caused by several factors. These include:
Hyper Inflation
Deflation
Prolonged Fall in Exchange Rates
Credit Crunches
Collapsing Consumer Confidence
Collapsing Asset Prices
Collapsing Global Trade
Bust following Excessive Speculation e.g., Property Market in Japan -1989
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China:
Chinese stocks are down over 40% from recent highs:
India:
Indias stock market has entered a bear market recently falling 20% from the highs set in 2015:
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USA:
The US S&P 500 is very ominously breaking down from a massive multi-year rising wedge
much like in 2000 and 2008 but much bigger this time around (http://www.charts.stocktwits.com):
4) Dollar Strength:
The Dollar has strengthened against virtually every other currency the last five years (data
from marketwatch.com):
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5) Yen strength:
The Yen has strengthened significantly off late against most currencies suggesting that carry trade liquidation
may begin in earnest globally much like in 2008 (data from marketwatch.com):
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2000 and are set to emerge out of it only in 2020. The last few years of the winter wave could produced the most
pronounced down swing in economic activity much like the last winter wave that was characterized by the Great
Depression of the 1930s. Here is a summary from kondratieffwavecycle.com:
Conclusion:
In conclusion several hall marks of a recession such as collapsing commodities, stock markets and collapsing
currencies have already started to play out as we enter 2016 and deflationary forces seem to be taking control.
Flight to quality in safe haven assets such as the Dollar and Yen suggest risk appetite is rapidly declining. The
massive fall in shipping activity is also providing evidence that a massive slow down is at hand. Excessive
speculation as evidenced by the risk exposures of prominent global financial institutions is also a major concern.
Additionally the velocity of money has collapsed suggesting that the circulation of money through the economy is
simply not occurring despite record low interest rates. Last but not least long term economic cycles also are
suggesting that the upcoming recession could last at least till 2020 and the final effects of this major down cycle are
yet to be felt.
References:
1)
Commodity prices available from, http://www.nasdaq.com/markets
2)
Shipping Said to Have Ceased Is the Worldwide Economy Grinding to a Halt Available from,
http://www.marketoracle.co.uk/Article53636.html
3)
Baltic Dry Index chart available from, http://investmenttools.com/futures/bdi_baltic_dry_index.htm
4)
Long term rising wedge on the S & P 500 available from,
http://charts.stocktwits.com/production/original_50424141.?1456781305
5)
Is Deutsche Bank AG (USA) The Next Lehman? Available from,
http://etfdailynews.com/2016/02/04/is-deutsche-bank-ag-usa-the-next-lehman
6)
Velocity of Money Below Great Depression Levels, available from,
https://www.armstrongeconomics.com/international-news/north_america/americas-current-economy/velocity-of-mo
ney-is-below-great-depression-levels
7)
Kondratieff wave cycle, available from, http://www.kondratieffwavecycle.com/images/kondratieff-wave2.jpg
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