Global Market Crash Inevitable: World Economies Heading Into Recession, Falling profits and Raising Taxes EVERYWHERE
S&P has just whacked its growth forecast for Europe.
It now sees a contraction of 0.8% this year, and 0.0% growth next year.
European markets have gone red.
Italy’s benchmark FTSE MIB had been up slightly earlier in the day, but is now down 0.6%.
Standard & Poor’s Rating Services on Tuesday pared down its economic forecast for the euro zone in 2012 and 2013 in response to indicators that “paint a bleak picture” for the region. “The data are confirming our view that the region is entering a new period of recession, after three quarters of negative or flat growth since the final quarter of 2010,” according to Jean-Michel Six, the rating agency’s chief economist for Europe, the Middle East and Africa.
The below chart comes from Morgan Stanley’s latest Strategy Forum deck, and though it’s simple, we suspect a lot of people haven’t seen it yet, or really haven’t made the connection between the chart and other big economic stories of the day.
This is the chart that’s contributed to the collapse of the Shanghai Composite.
This is the why the Baltic Dry Index is down 60% this year.
It’s why US manufacturing indices are giving off the weakest signs of the economy.
If the US goes into a recession in the next year, this will almost certainly be why.
After a lengthy skein of yearly gains, quarterly corporate profits are falling — a sign that the economy may soon decline as well.
While professing optimism over the outlook for 2013, when they examine the current quarter, a growing number of pundits have come to the conclusion that the near term is not quite as rosy.
According to The Wall Street Journal, S&P 500 SPX -0.22% earnings are expected to decline in the current quarter compared with the same period last year.
For those who follow corporate earnings closely, this should come as no surprise. With the third quarter almost over, the number of companies cutting their expectations for the current quarter has risen to four times the number raising theirs.
This is the weakest ratio in 11 years. When combined with slow growth, little pricing power and margins that are about as high as they can go, this suggests a decline, year over year, of 2%-4%.
It’s no secret that the foreign policy of the United States tends to reflect the world views of the occupant of the White House.
Sure, there used to be some homage paid to the notion that “politics stops at the water’s edge,” but that hasn’t really been true for generations. Particularly if you are out to improve the world, you are going to wind up exporting your own ideas about world improvement.
Free-market types will urge freer markets, even when these take the form of the kind of corrupt privatization that gave rise to Russia’s oligarchs. And the Obama administration, well, it thinks the wealthy need to be taxed more — everywhere.
“One of the issues that I have been preaching about around the world is collecting taxes in an equitable manner — especially from the elites in every country,” Secretary of State Hillary Clinton said in her speech at the Clinton Global Initiative Monday.
After the stock market crashed on October 29, 1929, the government’s solution to the crisis was to raise the top tax rate from 25% to 63%. Successively this was increased to 79% and then to 94%, effectively choking off capital formation, investment, and the incentive to start new businesses.
Not until World War Two broke out in Europe in 1939 and threatened the security of the United States and its allies did Franklin D. Roosevelt reverse his failed policies that had stretched out the Depression, turning to private enterprise to build the airplanes, tanks, and guns that would be needed to defeat the Axis powers and, in 1941, the Empire of Japan. Capitalism saved America.