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Commentary

World Recession Is Here

From Stratfor’s Geopolitical Diary (Subscribe only)

The world, at least by our reckoning, is now officially in recession.

The downturn has three strands. In the United States, the subprime housing collapse triggered a liquidity crisis. In Europe, the American liquidity crisis triggered a much broader and deeper banking crisis. And in Japan — and the rest of East Asia — the enervated demand in the United States and Europe is now triggering an export crisis. Three very different but interlinked recessions have now formed something that the world has not seen since 1975: simultaneous recessions throughout the developed world.

Other data certainly confirm the prognosis. Shipping rates on major container ships have, by some reports, fallen 98 percent (demand for shipping mirrors demand for Asian exports). The 13-week U.S. Treasury bill now bears a 0.005 percent payout — technically not zero, but considered effectively zero by most reporting methods — indicating that everyone is shifting holdings into the lowest-risk assets. And a spare glance at 401k accounts or their equivalents will inform anyone who has been in a coma for the past few weeks that the markets — American, European or otherwise — have been pummeled.

The bottom line is that the global economy is in a situation where countries are going to start cracking. Iceland, actually, has cracked already — but with only 330,000 inhabitants, it conceivably could have gone down in flames without being a harbinger of things to come in the rest of the world.

The news in general is a lot worse than I have expected, and a lot earlier than expected. This is going to be a deep, dark recession. The next ten years are going to be extremely tough. For India too. I think it’s time to tighten up and ride it – and it will take a long long time. If we are lucky, in India, we’ll see only a three to five year downturn.

  • Technovestor says:

    >Looks like nifty 1500 next year is now not a distant possibility – back to where it all began…… As a recent report from First Global puts it – the India China Horror Movie now begins.. short India / China 30-50%… We should atleast shoot the people who will come out with nifty targets 4000 next year..

  • Anonymous says:

    >stop being so pessimistic boss! its ok to be realistic but predicting 10 bad years is probably streching it too far! Be optimistic ! Start looking at positives around you. This is not the end of the world !!!!! Every dark cloud has a silver lining.

  • Deepak Shenoy says:

    >Anon: I hear you mate. I’m feeling lousy being pessimistic; yet, it’s better to be a realist than to rely on hope. I would love to be wrong. And I will be among the first to admit it.

    There is a silver lining! There are recession oriented businesses, a lot of money is made. Yes, in the stock markets also. So it’s not entirely unwelcome.

  • Anonymous says:

    >Deepak, just wondering what is your basis for saying that recession is here for 10 years etc. why not 1 or 2 or 4? Is this your gut feel or some number crunching involved .. not that I am completely skeptical of what you are saying just that it would interesting to know ..

  • Deepak Shenoy says:

    >Anon: Gut feel, entirely.