The buzz of a US economic recession has been circling around, the US sub-prime mortgage crisis that started early September 2007 has dealt a big blow to consumer spending as well as household liquidity and has spread out on a global scale relating to banks and financial institutions relating to sub-prime markets.
Many well known financial groups such as Merryll Lynch, Citigroup, Barclays and Northern Rock of UK has been partly been a casualty in part or wholly in all these Sub-prime crisis. Citigroup even announced a 4300 employment cut by the end of January 2008 and Allan Greenspan, the former Federal Reserve Chairman, last Friday made a notable remark saying the United States is significantly at-risk of facing a recession. Greenspan made those statements while speaking during the Cambridge Energy Research Associates(CERA) Week 2008 event.
Greenspan cited "we are clearly on the edge" placing the odds at 50% or better that the economy will go into recession. But significantly due to low interest rates in the past years and the recent lowering of interest rates by the new Fed chair Bernanke several times in the past 3 months has encourage more and more liquidity into the market and thus has prevented the economic downturn of the US market.
Recession being defined in macroeconomics as the decline in a country's gross domestic products (GDP), or negative real economic growth, for two or more successive quarters of a year.
However the 2007 3rd and 4th quarter results of GDP of the US economy hasn't been release yet and this all the more makes everyone jittery as to the outcome of the figures.
Rising oil prices which has so far reached $100/barrel at the start of the year 2007 and has slowly been managing to stay hold between the $80-90/barrel in the recent week and would definitely affect inflation among many economies dependent on Oil, the China economy heating up and overflowing liquidity has also not been too helpful though China may be experiencing the opposite of what the US has been going through these days, too much liquidity or funds in the market can also pose a different economic backslash especially when China's economy grew another 11% in 2007 wherein the economic managers of China are trying to temper to atleast 10% for the entire 2008 and the US long been wary about the control currency control on the yuan and only in the past months has the People's Bank of China allowed the free flowing devaluation of their currency.
People's Bank of China's years of controlling their currency is now posing a threat of over heating, if the business and government could not pour their excess liquidity into more economic value and new business entities or investments abroad. Even with the recent active role being played by China on the economic life of most African nations, there is still so much overflowing funds that needs to be tamed from their economy. China has been exploring ventures in mining, oil, power generations, transportation, even healthcare and education in African nations.
Last year China organized an African-Sino Summit where China writes off US $1.3B of 31 of Africas poorest nations and thus pledged more educational and healthcare support for the African nations(lucky for them, when will we have such a generous sponsor!!!)
The contrast in the US state and the China economy have both significant impact on the world economies especially if the US goes into recession since alot of world economies are dependent on the consumer spending and purchasing power of the dollar. China on the other hand may gain some temporary relief as majority of their exports are dependent on the US economy, the relief may come in the slowing of their overheated economy.
As many economists has been projecting, I also do not believe the US economy is entering into recession. perhaps a slowdown yes, but a recession would be unlikely at this time, especially with the coming US election, the crunch on the sub-prime sector which may have a long term effect and would more or less caution banks and financial markets to be moderate with their accounting as to avoid write offs unless they are China who can easily forgive debts. "Forgive us of our debts as we forgive our debtors".
Many well known financial groups such as Merryll Lynch, Citigroup, Barclays and Northern Rock of UK has been partly been a casualty in part or wholly in all these Sub-prime crisis. Citigroup even announced a 4300 employment cut by the end of January 2008 and Allan Greenspan, the former Federal Reserve Chairman, last Friday made a notable remark saying the United States is significantly at-risk of facing a recession. Greenspan made those statements while speaking during the Cambridge Energy Research Associates(CERA) Week 2008 event.
Greenspan cited "we are clearly on the edge" placing the odds at 50% or better that the economy will go into recession. But significantly due to low interest rates in the past years and the recent lowering of interest rates by the new Fed chair Bernanke several times in the past 3 months has encourage more and more liquidity into the market and thus has prevented the economic downturn of the US market.
Recession being defined in macroeconomics as the decline in a country's gross domestic products (GDP), or negative real economic growth, for two or more successive quarters of a year.
However the 2007 3rd and 4th quarter results of GDP of the US economy hasn't been release yet and this all the more makes everyone jittery as to the outcome of the figures.
Rising oil prices which has so far reached $100/barrel at the start of the year 2007 and has slowly been managing to stay hold between the $80-90/barrel in the recent week and would definitely affect inflation among many economies dependent on Oil, the China economy heating up and overflowing liquidity has also not been too helpful though China may be experiencing the opposite of what the US has been going through these days, too much liquidity or funds in the market can also pose a different economic backslash especially when China's economy grew another 11% in 2007 wherein the economic managers of China are trying to temper to atleast 10% for the entire 2008 and the US long been wary about the control currency control on the yuan and only in the past months has the People's Bank of China allowed the free flowing devaluation of their currency.
People's Bank of China's years of controlling their currency is now posing a threat of over heating, if the business and government could not pour their excess liquidity into more economic value and new business entities or investments abroad. Even with the recent active role being played by China on the economic life of most African nations, there is still so much overflowing funds that needs to be tamed from their economy. China has been exploring ventures in mining, oil, power generations, transportation, even healthcare and education in African nations.
Last year China organized an African-Sino Summit where China writes off US $1.3B of 31 of Africas poorest nations and thus pledged more educational and healthcare support for the African nations(lucky for them, when will we have such a generous sponsor!!!)
The contrast in the US state and the China economy have both significant impact on the world economies especially if the US goes into recession since alot of world economies are dependent on the consumer spending and purchasing power of the dollar. China on the other hand may gain some temporary relief as majority of their exports are dependent on the US economy, the relief may come in the slowing of their overheated economy.
As many economists has been projecting, I also do not believe the US economy is entering into recession. perhaps a slowdown yes, but a recession would be unlikely at this time, especially with the coming US election, the crunch on the sub-prime sector which may have a long term effect and would more or less caution banks and financial markets to be moderate with their accounting as to avoid write offs unless they are China who can easily forgive debts. "Forgive us of our debts as we forgive our debtors".
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