State of the Global Economy, October 2018

GE as predictor for the economy. The reason is that when companies want to grow they are going to go to a company like GE for the supplies they need while doing construction. This means that General Electric will be one of the first companies in America to feel the effects of the recession.

This is also what happened in 2007-2008. General Electric’s stock crashed just prior to the Great Recession. The reason for this is because companies stopped doing new construction, and stopped ordering from GE. 12 months after GE tanked, the economy went into recession. This did not happen in 2000 because the stock market crash was isolated in tech stocks, it was not a systemic problem like we had in 2007-2008 with the housing bubble crash or the massive trade war which Donald Trump has started over the last 12 months.

When Obama left office on 20 January 2017, we had a very healthy yield curve. Our yield curve is changing at one of the fastest rates in American history. Canada is not looking good, and neither is Mexico. I am fairly certain we will have a recession before the next Presidential election with everything I am reading.

Japan right now has an extremely healthy yield curve. China is becoming steeper (which is good). India has a negative yield curve at the moment. Australia looks healthy. In Europe, Germany and France are both healthy, and the United Kingdom is about to feel the full brunt of Brexit with the uncertainty their stupidity has brought them. Labour and the Liberal Democrats have an opportunity to make the Tories irrelevant for the 2020s. There is no nice way to say it. Russia’s economy is unhealthy. On the bright side, it looks like Greece is finally starting to recover from Austerity. Norway looks fine.

Indonesia doesn’t look good.

I agree with the EIU that there will likely be a regime change in Venezuela within 2 years. Their yield curve is an absolute horror show.

Colombia’s yield curve is steadily improving. Brazil is finally coming out of the darkness from the recession they had last year. Argentina is going to finish the recession they have been going through.

Optimistic

  • China
  • Japan
  • Germany
  • France
  • Australia
  • Colombia
  • Brazil
  • Vietnam

Confused

  • India

Pessimistic

  • United States 
  • Russia
  • Canada
  • Mexico 

Apocalyptic, the combination of political events and extremely negative bond yield curves make these countries look doomed in the short run.

  • United Kingdom
  • Venezuela
  • Argentina

Finally, when reading these, it is good to take into account that China, the United States, India, Japan, Germany, and Russia account for over half of all global GDP. Only 7 countries, China, India, the United States, Indonesia, Brazil, Pakistan, and Nigeria contain half of the global population.

The United States and United Kingdom are in very similar situations right now. Heavily isolationist policies by their governing Republican and Conservative Parties (yes, yes, I know Brexit was a referendum, but the people were misinformed on what it means) have led their countries to ruin. The Republican Party has stood by their President as he burns our trading relationships, and with their political trifecta they have led us to ruin. This is exactly what happened the last time they had a Trifecta, they were kicked out in 2006, at which point the housing bubble was imminently going to pop. GE crashed the next year. The Conservative Party has stood by “Brexit means Brexit” which has dissuaded investment in the United Kingdom with the needless uncertainty which is destroying their economy right now.

When it comes to Canada and Mexico, I think they are responding to the policies of the United States government due to being so heavily intertwined economically. The recession will likely not be as bad as it will be here in the United States, but it is not going to be good.

India is suffering high unemployment, which is nothing new, and corruption has been improving somewhat (they have improved their ease of doing business index) yet for some reason they have a negative bond yield curve, which is a change from a year ago. They have rather high inflation, but is below where it used to be. Be wary of India, but I see no reason for panic.

Argentina has had a fairly severe recession and their government has adopted a pro-cyclical approach to their economic policy by instating austerity. Decades of poor economic mismanagement is catching up with them. It is very sad.

But not nearly as sad and aggravating as how the criminal syndicate United Socialist Party under Maduro and Chavez has led Venezuela to ruin. They have trampled the human rights of their country, turned themselves into an oil state, mismanaged those funds (as is so fucking common) and now their economy is crashing, with little hope of recovery before a revolution or coup kills him. Hopefully it comes soon so that Venezuelans can recover from the travesty they have caused. The inflation and depression is Weimar Republic levels. Their yield curve reflects it. There is no good reason anything should have anything but disdain for what they have done to their country.

There you have it. I don’t know if my theory about General Electric is correct or not, but given everything else it seems likely. There are some parts of the world with reason to be optimistic, others less so. Hopefully politicians will make decisions to improve overall wealth and health of nations, and that those who have not will get the punishment they deserve proportional to their crimes.

Yield curves are available at www.investing.com

Leave a Reply

Your email address will not be published. Required fields are marked *