Saturday, 6 February 2016

Is World Economy Trapped in Death Spiral

Let me first of all refer to a news item that CNBC has reported. It says the global economy seems trapped in a "death spiral" that could lead to further weakness in oil prices, recession and a serious equity bear market. It also says that some analysts have turned bearish on the world economy this year, following an equity rout in January and weaker economic data out of China and the U.S. The other explanations include:
  1. U.S. dollar has risen by around 20 percent against a basket of currencies.
  2. Crude oil prices have tumbled by around 70 percent since the middle of 2014.
  3. The dollar would weaken in 2016 and that oil prices were likely bottoming, potentially providing some light at the end of the tunnel.
  4. The forecast reflects expectations of gradual improvement in countries currently in economic distress.
  5. The various factors would lead to significant and synchronized' global recession and a equity bear market.
  6. The silver lining is that the world economy will grow by 3.4 percent in 2016 according to the International Monetary Fund.
These are the excerpts from a report from the developed world prepared by the wiz kids. However, a person like me who belongs to the third world could only laugh at the amateurish approached of a leading international broadcaster.  I would term it ‘an attempt to mislead the audience’ as the media houses operate on the advice of ‘lobbyists’.
To substantiate my point it suffices to say that the global media has been talking about declining number of oil rigs in the US but oil output does not show any corresponding reduction, on the contrary output is on the rise. Reportedly number of active rigs has come down to less that from peak of over 1600.
Lately the World Bank has also warned that global growth rate would come down due to ongoing wars in the Middle East. Interestingly the developed world pushes the countries into proxy wars and then basing these create huge and cry about plunging economies.
I will conclude on the point that the US and Saudi Arabia were partners in taking oil prices to record high and now the animosity between the two is responsible for the rock bottom prices.
Previously the wars were fought with arms but now countries are subjugated by destroying their economies. The most glaring example disintegration of USSR and other living examples are Iran, Iraq, Libya, Nigeria and Sudan.
The moral of the story is that the death spiral is in nobody's interest but rational behavior, most likely, will prevail over. But the broadcaster has shown only one side of the coin. Now it is up to the audience and readers to find out the motives of super powers, their modus operandi and above all the disinformation spread to mislead the people, especially those who are being exploited.

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