Home' Trinidad and Tobago Guardian : November 26th 2015 Contents NOVEMBER 26 • 2015 www.guardian.co.tt BUSINESS GUARDIAN
INTERNATIONAL | BG21
We re well into the seventh year of an economic
and stock market recovery. The economic expansion
hasn t been as robust as many would like and the
recovery has been uneven, as some have fared better
than others in the aftermath of the worst economic
contraction since the Great Depression. But you can t
deny that things are much better than they were
during that fateful 2007-2009 period.
Many sceptics continue to believe that the entire
recovery is artificial. A lot of this has to do with the
emotional scars that a financial crisis can have on
people. Take a look at this study from Allianz Global
which shows that many baby boomers and Gen Xers
are still very much affected by the crash in a number
Like the Depression babies of the past it seems
that a severe economic and market downturn have
had a huge psychological impact on certain groups.
Here are some more lingering effects from the financial
1. The media s tone has shifted. The media is not
going to get caught cheerleading the next bub-
ble. No one wants to be remembered for the magazine
indicator this time around. The media more or less
missed the past crash. I get the sense that they re
not going to be fooled again even if that means that
they will now automatically consider everything that
goes up in price to be in a bubble.
While the majority of newspeople and organisations
were far too trusting of financial markets in the late-
1990s and mid-2000s, it seems that the transfor-
mation is now complete in that a majority of them
are now hardcore skeptics. They all want to call the
top the next time around.
2. Investors do not want another boom-bust
cycle. Sure, a few perma-bears seem to think
everyone is euphoric again, but that s mostly to keep
with their narrative. I don t see how you could con-
clude that investors have completely forgotten about
the financial crisis.
If anything, this could be the first forced bubble
in history as no one really wants to go through all
of that again so quickly. I m not saying it won t hap-
pen---as we ve all seen, anything is possible---but I
have a hard time believing that investors are euphoric
at the moment.
Even with the gains we ve enjoyed since the 2009
lows it still feels like people have never fully bought
into it from the get-go. Everyone seems to be waiting
for another downturn to hit.
3. Bad news is still easier to believe. The investors
I encounter are overwhelmingly negative about
the long-term future of the economy and financial
markets. People have a hard time believing good news
and progress. Most people these days seem to assume
4. Fed-bashing is now the 5th professional sport.
There s been a growing contingency in the
financial community who s sole mission, it seems,
is to constantly bash every single move made (or not
made) by the Federal Reserve.
This group would love to live in a bizarro, coun-
terfactual world where the Fed does the exact opposite
of what they ve actually done. It s not just that they
complain about the Fed on a weekly (or daily) basis;
it s that they take it so personally. They assume that
all of their mistakes in the markets have been caused
exclusively by Fed policy. There s no need for personal
accountability when the Fed makes for a perfect
Business Insider's Ben Carlson
It's flash PMI day
for the eurozone
economy, and it's
ing managers' index
(PMI) results offer a
very early indication
of how an economy
is performing, long
before any hard offi-
cial data comes out.
On Monday morn-
ing the early services
PMIs for November
came in at the
Since the month's
not over yet, it's only
the "flash" result,
with numbers for
Germany and France.
Anything above 50
signals growth in a
sector, and anything
below that indicates
that it's contracting.
In short, the higher
above 50, the better.
Here's what we
have so far:
• France manufac-
turing PMI: 50.8
(50.7 expected, 50.6
• France services
PMI: 51.3 (52.6 ex-
pected, 52.7 previ-
• Germany manu-
facturing PMI: 52.6
(52 expected, 52.1
• Germany services
PMI: 55.6 (54.1 ex-
pected, 54.1 previ-
• Eurozone manu-
facturing PMI: 52.8
(52.3 expected, 52.3
• Eurozone serv-
ices PMI: 54.6 (54.1
expected, 54.1 previ-
For the eurozone
as a whole, those
readings are the best
for four and a half
years, and job cre-
ation is also at its
highest level since
2011. The eurozone
economies have been
growing more solidly
recently, but it's a
slow recovery. AP
For the first time in nine years, the
United States is ready to hike interest
rates. Meanwhile, major central banks
around the world are still engaging in
enormous quantitative easing pro-
grammes to jump-start their
Japan has dipped back into its fourth recession in
five years despite the most massive quantitative easing
experiment the world has ever seen.
Slow economic growth and low inflation has the
European Central Bank considering another dose of
China s central bank may be on hold after its two-
day devaluation in August wreaked havoc on global
markets. The PBOC doesn t want to risk losing its
bid to have the yuan included in the IMF currency
This growing divergence in central bank policy
around the world has created a great imbalance in
the global economic order, which establishes the very
real potential for a rising dollar to trigger the next
global financial crisis.
The divergence in economic growth and central
bank policies has caused the dollar to break out in
a big way. The US Dollar Index (DXY) broke out of
a 30-year downtrend that began with the Plaza Accord
way back in September 1985.
There may be a new mega bull market forming in
the US dollar.
The rising dollar is a big problem for the massive
amount of dollar denominated debt held outside of
the US. And this trend could very well be the trigger
for the next global financial crisis.
The biggest consequence of a rising dollar
Low interest rates in the US have led to an explosion
of borrowing in dollars around the world; especially
in emerging markets.
Data from the Bank of International Settlements
show that there is over US$9.7 trillion in dollar
denominated debt held outside of the US---up from
US$5.6 trillion at the end of 2008.
Much of that rapid growth in debt occurred in
Companies and governments in emerging markets
have borrowed in dollars because of the ultra low
interest rates available, but they earn the money to
pay back those loans in local currencies.
It doesn t matter how profitable a business is if
the local currency is falling relative to the US dollar.
It becomes more expensive to repay the loan with
every uptick in the dollar and sinks the company
further into debt.
The rising dollar could force international borrowers
into a very messy process of deleveraging. There are
a number of ways that could play out. Given the size
of those loans though, a major blowback on the US
and other developed markets should be expected.
since 2011 The biggest threat to the
global economy in 2016
Lingering effects of the financial crisis
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