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Austerity and loose monetary policy to dance the 2016 global economic prospects

By William Elliott,2015-06-12 01:52
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Austerity and loose monetary policy to dance the 2016 global economic prospects

    Austerity and loose monetary policy to dance the 2016

    global economic prospects

    takeaway

    The United StatesStable economic recovery;Europe continued negative environment, but the euro zone between creditors and debtors economies increasingly unbalanced;Emerging markets"The worst time is over";butThe oil priceNext year could be one of the major risks to the global economy and enterprises, so that the economy is facing huge pressure in oil producing countries.

    On December 18, the eu summit in Brussels, Belgium, eitherThe BritishTo take off the referendum as leverage to force the eu to renegotiate its claim rights, or refugees caused the schengen border coordination problem, have failed to make substantive progress, too much uncertainty destined for 2016.

    At the same time, the fed for the first time in ten yearsIncreases in interest ratesOnly two days, the price of crude oil and after hitting a low in recent years,CanadaAustraliaRussiaEtc.commoditiesExporter currency against the dollar has tumbled.Dollars after when interest rates are at zero, monetary tightening cycle impact on financial markets as well as other economies has just emerged, but the future dollar rate rhythm to external influence is more difficult to assess.

    In FranceSociete generale(601166,Stocks!Chief economist) card Neil (Olivier Garnier), the federal reserve to raise interest rates for a sustained recovery of developed economies would not be affected, but will result in some emerging economies to avoid recession efforts more difficult.

    "For those who want to keep the stability of the currency emerging countries, will have to raise interest rates, but in fact its economic growth is slowing down or even a recession, to do the opposite."Neal said.

    Principal global investment, chief economist at Bauer (Bob Baur) a similar view."Experienced a rebalancing of economic growth in 2015, 2016 in developed economies will continue to improve, and become more competitive, the big can't go wrong."He said.

    But in other economic scholars point of view, the European central bank has chosen the wrong direction, miss the boat.

    The myth of Europe: under the easy road

    In just two weeks ago the fed to raise interest rates, the European central bank announced to cut eurozone again overnight deposit rate 10 basis points to a record low of 0.30%, at the same time will be a month to buy 60 billion euro membership asset purchases of Treasury bonds and other delay 6 months, we will continue to increase quantitative easing.

    Consistent over the past six years, Europe and the United States central bank easing of monetary policy differences appeared for the first time today, the economic recovery is relatively good in the eu member states Britain also is expected to follow soon raise interest rates in the United States, but in terms of the euro zone, and certainly will continue to stay on the loose monetary policy stance.

    Located at the center for European policy studies in Brussels (CEPS), director of the latticeRossPh.D. (Daniel Gros) criticized the European central bank (ECB) under low inflation only know more quantitative easing measures, the results will not only intensify imbalance between creditors and debtors economies in the eurozone, once interest rates to restore normalization, may also have serious financial turmoil.

    The eurozone consumer price index has been hovering around zero, and core inflation, even lower than 1%.The European central bank is meant by easing to stimulate investment and consumption demand, to boost economic growth, but Mr Gross, the euro zone's core countries credit is enough, not because of the European central bank policy and increase spending;A more expansionary monetary policy, may strengthen the eurozone has a nascent recovery, but as a cost, but increase the imbalances in the euro area.

    After the federal reserve to raise interest rates, the euro against the dollar has depreciated when the exchange rate to December 18, 13 to 1.0836, analysts generally determine the euro still have value space, may even fall below 1:1 next year.

    However, vulnerable will also drive the euro zone exports, or will help keep the European economic growth.

    The European central bank is expected in 2015, 2016 and 2017, the euro zone's GDP growth of 1.5%, 1.7% and 1.9%, respectively, in 2017, inflation is expected to increase to 1.6% from 0.1% in 2015.But in carney as economists, until 2019, the European central bank (ECB) I'm afraid I won't be 2% inflation target.

    The point is, the longer artificially cheap phase continuation, distortions will be, the more to fix later brought economic trauma.To obtain stable and reliable economic recovery of Europe, more need to focus on structural reforms itself, the enhancement enterprise competitiveness, reform the Labour market, reduce its debt ratio.

    Also, the European central bank (ECB) provided by the cheap money could eventually has not really into the real economy in Europe, but in the profit-seeking nature of capital inflows to raise interest rates after the U.S. market, led to the continued weakening Europe's quantitative easing effect.

    "With normalizing interest rates, loan, stock andThe real estateMarket price bubble will shrink, "the world economy research institute forecast center director Dr Coates (Stefan Kooths) said," in the process, there must be the risk of heavy selling by the market, but also can't so terrified exit expansion of monetary policy will continue to delay."

    Emerging markets: the worst time has in the past

    The federal reserve to raise interest rates is considered to be America's recovery from the financial crisis in 2008 is an important milestone, but for emerging markets, is now facing a dilemma: follow the dollar is losing export competitiveness lead to economic pressure, let a devaluation is a large amount of capital outflow, and the dollar interest rates will raise its corresponding debt costs in dollars.

    Next year will be held in the summer Olympic GamesBrazilIs typical of the "victims".At present the country's inflation rate has reached double digits, interest rates are as high as 14.25%, and may be forced to continue to increase.

    "America's monetary policy always cause trouble in Brazil," James carville said, "Brazil's economy is in recession, was supposed to relax monetary policy, but that will only lead to capital outflows is more serious, currency devaluation and inflation soaring".

    Varied with the emerging nations, however, cannot treat as the same.Next year may implement acrossThe Pacific Ocean.Partnership agreement (TPP) and the European and American free trade agreement and so on all can help eliminate tariffs and trade barriers, promote the recovery of international trade, China's advocacy of"One Belt And One Road"Strategy also help emerging countries to increase investment, to boost economic growth.

    Global chief investment officer at ubs wealth management about fair (Mark Haefele) that is based on the monetary policy is still relatively loose, and the European central bank and other global central Banks continue to hold loose stance, he expects the global economy, including emerging economies will ride out the mild rate hikes.

    "The federal reserve interest rate hike will be treated with caution, so emerging markets maintain the usd could continue to contained the cost of debt, although it is impossible to recover after a period of prosperity, but in emerging markets is the worst may be over."Hector phil said.

    Hector fair also points out that the loose monetary policy and corporate profits under the condition of the continuous rise, and EuropeJapanThe potential returns of the stock market will be the highest.Ubs will its emerging market rating from "underweight" to "neutral".

    Oil prices or a new source of risk

    On December 17, the organization of petroleum exporting countries (OPEC) to a basket of crude oil prices fell to $32.33 a barrel, the lowest since 2004.Oil prices next year could be one of the major risks to the global economy and enterprises.

    From June 2014 to $115 a barrel oil prices fell to $45 at the end of November 2015, the market value of the world's oil companies have cut more than $100 trillion, deflation is more serious, Russia, Brazil and other raw materials exporter's currency has depreciated.

    Ministerial conference of the organization of petroleum exporting countries (OPEC) in early December unable to reach a decision, and not released the definite target in oil, let the diving risks to oil prices once again.Goldman sachs said, based on the global crude oil inventory is full, the emerging market economy slowing,IranEmbargo lift etc., or fall in the oil price to $20 a barrel.

    As oil prices fall, has been a sharp drop in energy investment, only 2015 global oil production and exploration investment fell by $150 billion.

    The risks of oil producers to bear the brunt.The Venezuelan economy has almost crash;The elder brother AaronbiyaMexico, Russia and other countries also face a

    severe budget constraints,Saudi ArabiaArab long-term monetary policy began to peg to the dollar under pressure.

    In some scholars point of view, although has a strong reserve positions and relatively conservative macro policy makes the most of the major oil producers to manage the oil price collapse in financial pressure, but in 2016 May be some men.

    "Gulf currencies are pegged to the dollar, may now be will find its own currency is overvalued, in order to remain visible contrast the stability of the dollar, has to improve its own currency price, and the loss of a can promote growth of monetary tools."Neal said.

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