A Synchronised Global Economic Slowdown

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Darn! Day after day, the Dow is headed down.

Finally, on Thursday of last week, stocks caught a break. The end of a long losing streak. But then…on Friday…down again, with a 74 point loss for the Dow.

Gold lost money too. Oil closed right on the $90 mark.

What’s going on? The Wall Street Journal reports:

 New signs of a global slowdown are darkening the economic outlook.

On Thursday, the US reported that businesses were slowing their orders of computers, aircraft, machinery and other long-lasting goods. Measures of business sentiment in Europe slipped, and reports from purchasing managers at manufacturers around the globe turned down. Among them, China, the world’s second-largest economy, registered its seventh straight drop in an important manufacturing index.

A slew of data this week suggests that the global economy is slowing down.

With the latest reports, a new economic threat is emerging: That activity is slowing in sync around the globe and not just in a few markets with their own isolated problems. Europe, struggling with the risk of a Greek pullout from the euro area and broader fiscal problems, is the epicenter of global economic concerns right now. But reports of economic trouble are turning up in China, India, South Africa, Brazil and elsewhere.

When the global economy is performing well, synchronized growth reinforces itself and spreads prosperity wide and far. But slowdowns can become interconnected and self-reinforcing, and the global economy has been plagued by them since the financial crisis of 2008.

A synchronized global economic slowdown? Bummer!

But hey, dear reader, would you reach out and pat us on the back?

In 1999, we said the tech bubble was going to pop. We made fun of the techies.

And guess what? We were right. Tech blew up…and never came back.

Okay…okay…we were wrong about some things. We called Amazon the “River of No Returns.” Well…Amazon has done quite well. But where’s Global Crossing? And Pets.com? Boo.com? GeoCities? All dead and gone.

We urged dear readers to buy gold, not stocks. If they had done that they would be way ahead. Stocks went nowhere for the next 10 years. Gold went up 5 times.

Dear readers who got all golded up would have dodged the housing bubble, too. Sell your expensive house, we urged dear readers in 2005 and 2006…and rent! That turned out to be good advice, as the bubble blew up in 2007 and has been in tatters ever since.

When the recession of ’09 hit, economists and pundits wondered what shape the recovery would be. V? or W? We said it would be an L. Down…then dragging across the floor for a very long time.

A real recovery was “impossible,” we said, choosing our words recklessly…but correctly. It was impossible for a debt-soaked economy to recover until the debt had been squeezed out, we said.

Well, here we are, 5 years after the crisis hit, and we’re still at the bottom of the L. Debt is still being wrung out of the private sector…while the feds pour it on the public sector as fast as they can.

Right again! The economy bumps along the bottom…with persistent high unemployment, record low bond yields, and “growth” that is more a product of government gas than real, honest GDP building.

So, what are we going to be wrong about?

Here’s our hunch: that the bottom of this L stretches out for a long, long time. Maybe 10 more years. Maybe 20. Maybe 100.

We’ve got a whole theory to back this up. But since we’re just back from a long weekend we’ll save it for tomorrow!

Regards,

Bill Bonner,

for The Daily Reckoning Australia

From the Archives…

Investing in Gold as World Economies Falter
2012-05-25 – Eric Fry

A Hard Dose of Medicine for the Greek Economy
2012-05-24 – Greg Canavan

Why Sooner or Later in Europe Someone Will Have to Pay
2012-05-23 – Dan Denning

To the Class of 2012
2012-05-22 – Bill Bonner

The Early Stages of a European Bank Run
2012-04-21 – Dan Denning

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Bill Bonner

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1 Comment on "A Synchronised Global Economic Slowdown"

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Gary Lee
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Bill,
No one can win the fed in the world. If they ignore the fed means they are declare war to America and UN, This is a crazy idea for any country in the world to do so. Just look at North Korea.

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