Post by menorah on May 16, 2007 8:10:03 GMT -5
A good book to buy is David Wilkerson... Gods Plan to Protect His People in the coming Depression. I believe its coming... and things will crash... what do you think? Heres some news today... Should we be like Joseph and prepare..? We should not fear thats for sure.. the books covers many things.. and is a great read.. We must meet with God in the secrect Place.. commune with him...alone and hear his voice to us personally..
Will the US drag the world into recession?
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by John Stepek
May 15 2007
You wouldn't think it to look at the US stock market - or global markets for that matter.
But there's a very real chance that the US will be in recession before the year is out. Former Federal Reserve chairman Alan Greenspan puts the odds at one in three - and he should know; as Robin Aspinall of Halkin Services points out, "it's his recession".
By slashing interest rates indiscriminately every time a minor slowdown threatened the American economy, he has blown a series of bubbles, with the latest one to pop being the housing bubble.
Now his successor, Ben Bernanke, is faced with the prospect of sorting it all out. The only trouble is, things are in such a mess now that Greenspan's weapon of choice - interest rate cuts - won't work anymore.
• Have your say: Is there going to be a recession?
US growth crawling to a halt
"There is no doubt there is a slowdown going on in the US," said Greenspan at the end of last week. "We are clearly having troubles in the capital investment area, as well as potentially in the consumption area and obviously housing being a significant drag."
That's an understatement. US GDP growth slowed to just 1.3% in the first quarter of this year, a four-year low. The weak housing market knocked a full 1% off economic growth, as construction activity slid by 17%. Worse still, Paul Kasriel of the Northern Trust reckons that this estimate is overly optimistic - he believes that GDP growth will be revised down to a piddling 0.8%.
There's no sign of the housing collapse slowing any time soon either. In March, existing home sales were down 8.4%, the biggest fall in 18 years.
And at the same time, petrol prices are hitting record highs. US consumers are now paying more for their gasoline than when Hurricane Katrina hammered New Orleans in 2005. The average price is now $3.07 a gallon.
While oil prices are about $10 a barrel lower than during Katrina, the trouble is with refining capacity, which is at near-15-year lows, due to maintenance problems.
Over-reliance on consumer spending
That's bad news for consumer spending - if Americans are spending more on filling up their cars, that means they're spending less in the shops. And as the US economy is 70% reliant on consumer spending, that means things look likely to get worse before they get any better.
And with inflation still uncomfortably high – in no small part down to petrol prices - the Fed will find it hard to justify cutting interest rates to give consumers any relief.
Some pundits argue that the weak dollar will bale the US out, as other countries import more from America. But as Kasriel points out, exports currently count for just 11.5% of US GDP - and that's already a record high.
US consumers drive the rest of the world too
And the problem for the rest of us is that US consumer spending isn't just important to America - those little shopaholics also account for 29% of the rest of the world's GDP. If US consumption slows down, it will slash demand for exports from the rest of the world.
That will hurt the companies involved, who will lay off workers, thus resulting in foreign consumers spending less, and therefore not buying as many US imports. So it's not so much a case of "Can the rest of the world save the US economy?" It's more a case of "Can the rest of the world break free of the US before it pulls everyone else into recession with it?"
Currently the general consensus is that growth in Asia and Europe will compensate for any US downturn, but Morgan Stanley global economist Stephen Roach is not optimistic.
Just to take a few examples, Mexico and Canada rely on exports to the US for about 25% of GDP. US exports account for 6% of Chinese GDP; and more than 10% of the Thai, Indonesian and Malaysian economies, he says.
Every chance of a US crash
All this might not be a problem – just maybe – if the US simply had a calm, measured slowdown. But in reality, the current situation could rapidly turn into a full-blown recession. Roach believes that with housing in freefall, unemployment in America is likely to pick up soon, which will "only increase the odds of a consumer retrenchment".
If he's right, and "the lead engine of the global growth train goes off the tracks", the rest of the world will be quick to follow and the hopes and dreams of global decoupling will be in tatters.
Who's next in the global property crash?
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by John Stepek
May 02 2007
It looks like the Spanish may be the first group of Europeans to experience a painful ending to the global property boom.
Last week, the Ibex index in Madrid was battered as shares in Valencia-based builder Astroc dived after its accounts revealed that some of last year's profits came from the sale of assets to its chairman, leading to fears that the company was trying to prop up its share price. Its fellow building stocks took a tumble as the fears spread to wider concerns about the property market in general.
• Receive free brochures about foreign property
But the wonder is that it has taken investors this long to become nervous.
• Do you think there is a property crash on the way? Have your say on our messageboards.
Spanish house prices have risen 270% in the past 10 years. But now house price growth is faltering, slowing from annual double-digit gains to growth of 7.2% in the first quarter of this year. In many areas, the Costa del Sol included, prices are falling.
And the truth is that the statistics on the Spanish property market make for frankly terrifying reading for anyone who is thinking of, or is already, investing there.
Massive oversupply
The supply and demand statistics are awful for a start. More than 800,000 homes were built last year - that's more than France, Germany and Italy combined. That's even though Spain has the lowest birth rate in the EU, along with Italy – women now have just 1.3 children on average.
That's all bad enough - but Spain's market is also unusually vulnerable to rising interest rates and panicky speculators. In a country of 40 million people, four million foreigners own property, including 250,000 British people.
One of the main reasons that property bulls - and sometimes more sober experts - often claim that house prices won't fall is because if you own a home, and prices are falling, you will tend to hold off selling unless you absolutely have to. So the supply of homes on the market dries up, keeping supply and demand broadly balanced, meaning prices remain roughly stable, until conditions pick up again.
No desire for many to hold
This is debatable on many levels - but even if you accept that argument, the problem for a market like Spain is that holiday home owners and fly-to-letters have neither the desire, nor in many cases, the financial reserves to sit on a property that is falling in value. And that's not even considering the number of ex-pats who emigrate, only to turn around and come back within the first few years of moving.
On top of that, many second home-owners are largely relying on money released by remortgaging their main residential property. So with interest rates rising, for example, in the UK, sustaining two homes is becoming more difficult for all those property moguls who have overstretched themselves to buy their place in the sun.
European handcuffs
In Spain, the situation with interest rates is even more grim. Because it's part of the eurozone, Spain can't set its own interest rates. And the reality is that eurozone rates are largely set with Germany in mind. The trouble is, Germany has been at pretty much the opposite end of the business cycle from the rest of the world (except maybe Japan) for about 10 years now. Rates were very low when Spain joined the euro, which fuelled the boom in the first place - as Bank of Spain governor Miguel Fernandez Ordonez says: "The single monetary policy has meant that excessively loose conditions for our economy have been almost continuous."
• The best-value places to live abroad
But now that Germany is recovering, eurozone rates are rising rapidly - there have been seven hikes since December 2005, and there's no sign of the European Central Bank stopping. And in Spain, a whopping 96% of mortgages are on floating rates, rather than fixes - so every rise hurts almost every mortgage holder.
• Find out about how to finance an overseas mortgage
Stretched to breaking point
With average household debt having climbed from 75% of disposable income in 1995 to 133% now, that means a lot of Spanish households look incredibly overstretched and vulnerable, just as the market is turning down.
Bernard Connolly of Banque AIG last week didn't pull any punches when he told The Telegraph: "Spain is going to face the very direst of economic circumstances: a cycle of recession, deflation and widespread private sector default - a depression in fact."
Those are strong words – and they certainly don't chime with the idea that it'll be time to go bargain-hunting in Spain any time soon.
And the rest of Europe?
But what about the rest of Europe? Ireland has a very similar problem to Spain, in that its boom was ignited by arguably unsuitable low interest rates when it joined the euro. Now that rates are ratcheting up, the Irish market is starting to see a similar impact on house price growth – asking prices fell 0.5% in the first three months of this year, with prices in some of the best parts of Dublin experiencing double-digit falls.
Don't forget us here at home
Meanwhile, interest rates across the rest of the world, including here in the UK, are on the rise. The conditions that fuelled the global property boom – cheap money and easy credit – are coming to an end. Don't be surprised if the pain in Spain spreads a lot further before the end of the year.
Will the US drag the world into recession?
advertisement
by John Stepek
May 15 2007
You wouldn't think it to look at the US stock market - or global markets for that matter.
But there's a very real chance that the US will be in recession before the year is out. Former Federal Reserve chairman Alan Greenspan puts the odds at one in three - and he should know; as Robin Aspinall of Halkin Services points out, "it's his recession".
By slashing interest rates indiscriminately every time a minor slowdown threatened the American economy, he has blown a series of bubbles, with the latest one to pop being the housing bubble.
Now his successor, Ben Bernanke, is faced with the prospect of sorting it all out. The only trouble is, things are in such a mess now that Greenspan's weapon of choice - interest rate cuts - won't work anymore.
• Have your say: Is there going to be a recession?
US growth crawling to a halt
"There is no doubt there is a slowdown going on in the US," said Greenspan at the end of last week. "We are clearly having troubles in the capital investment area, as well as potentially in the consumption area and obviously housing being a significant drag."
That's an understatement. US GDP growth slowed to just 1.3% in the first quarter of this year, a four-year low. The weak housing market knocked a full 1% off economic growth, as construction activity slid by 17%. Worse still, Paul Kasriel of the Northern Trust reckons that this estimate is overly optimistic - he believes that GDP growth will be revised down to a piddling 0.8%.
There's no sign of the housing collapse slowing any time soon either. In March, existing home sales were down 8.4%, the biggest fall in 18 years.
And at the same time, petrol prices are hitting record highs. US consumers are now paying more for their gasoline than when Hurricane Katrina hammered New Orleans in 2005. The average price is now $3.07 a gallon.
While oil prices are about $10 a barrel lower than during Katrina, the trouble is with refining capacity, which is at near-15-year lows, due to maintenance problems.
Over-reliance on consumer spending
That's bad news for consumer spending - if Americans are spending more on filling up their cars, that means they're spending less in the shops. And as the US economy is 70% reliant on consumer spending, that means things look likely to get worse before they get any better.
And with inflation still uncomfortably high – in no small part down to petrol prices - the Fed will find it hard to justify cutting interest rates to give consumers any relief.
Some pundits argue that the weak dollar will bale the US out, as other countries import more from America. But as Kasriel points out, exports currently count for just 11.5% of US GDP - and that's already a record high.
US consumers drive the rest of the world too
And the problem for the rest of us is that US consumer spending isn't just important to America - those little shopaholics also account for 29% of the rest of the world's GDP. If US consumption slows down, it will slash demand for exports from the rest of the world.
That will hurt the companies involved, who will lay off workers, thus resulting in foreign consumers spending less, and therefore not buying as many US imports. So it's not so much a case of "Can the rest of the world save the US economy?" It's more a case of "Can the rest of the world break free of the US before it pulls everyone else into recession with it?"
Currently the general consensus is that growth in Asia and Europe will compensate for any US downturn, but Morgan Stanley global economist Stephen Roach is not optimistic.
Just to take a few examples, Mexico and Canada rely on exports to the US for about 25% of GDP. US exports account for 6% of Chinese GDP; and more than 10% of the Thai, Indonesian and Malaysian economies, he says.
Every chance of a US crash
All this might not be a problem – just maybe – if the US simply had a calm, measured slowdown. But in reality, the current situation could rapidly turn into a full-blown recession. Roach believes that with housing in freefall, unemployment in America is likely to pick up soon, which will "only increase the odds of a consumer retrenchment".
If he's right, and "the lead engine of the global growth train goes off the tracks", the rest of the world will be quick to follow and the hopes and dreams of global decoupling will be in tatters.
Who's next in the global property crash?
advertisement
by John Stepek
May 02 2007
It looks like the Spanish may be the first group of Europeans to experience a painful ending to the global property boom.
Last week, the Ibex index in Madrid was battered as shares in Valencia-based builder Astroc dived after its accounts revealed that some of last year's profits came from the sale of assets to its chairman, leading to fears that the company was trying to prop up its share price. Its fellow building stocks took a tumble as the fears spread to wider concerns about the property market in general.
• Receive free brochures about foreign property
But the wonder is that it has taken investors this long to become nervous.
• Do you think there is a property crash on the way? Have your say on our messageboards.
Spanish house prices have risen 270% in the past 10 years. But now house price growth is faltering, slowing from annual double-digit gains to growth of 7.2% in the first quarter of this year. In many areas, the Costa del Sol included, prices are falling.
And the truth is that the statistics on the Spanish property market make for frankly terrifying reading for anyone who is thinking of, or is already, investing there.
Massive oversupply
The supply and demand statistics are awful for a start. More than 800,000 homes were built last year - that's more than France, Germany and Italy combined. That's even though Spain has the lowest birth rate in the EU, along with Italy – women now have just 1.3 children on average.
That's all bad enough - but Spain's market is also unusually vulnerable to rising interest rates and panicky speculators. In a country of 40 million people, four million foreigners own property, including 250,000 British people.
One of the main reasons that property bulls - and sometimes more sober experts - often claim that house prices won't fall is because if you own a home, and prices are falling, you will tend to hold off selling unless you absolutely have to. So the supply of homes on the market dries up, keeping supply and demand broadly balanced, meaning prices remain roughly stable, until conditions pick up again.
No desire for many to hold
This is debatable on many levels - but even if you accept that argument, the problem for a market like Spain is that holiday home owners and fly-to-letters have neither the desire, nor in many cases, the financial reserves to sit on a property that is falling in value. And that's not even considering the number of ex-pats who emigrate, only to turn around and come back within the first few years of moving.
On top of that, many second home-owners are largely relying on money released by remortgaging their main residential property. So with interest rates rising, for example, in the UK, sustaining two homes is becoming more difficult for all those property moguls who have overstretched themselves to buy their place in the sun.
European handcuffs
In Spain, the situation with interest rates is even more grim. Because it's part of the eurozone, Spain can't set its own interest rates. And the reality is that eurozone rates are largely set with Germany in mind. The trouble is, Germany has been at pretty much the opposite end of the business cycle from the rest of the world (except maybe Japan) for about 10 years now. Rates were very low when Spain joined the euro, which fuelled the boom in the first place - as Bank of Spain governor Miguel Fernandez Ordonez says: "The single monetary policy has meant that excessively loose conditions for our economy have been almost continuous."
• The best-value places to live abroad
But now that Germany is recovering, eurozone rates are rising rapidly - there have been seven hikes since December 2005, and there's no sign of the European Central Bank stopping. And in Spain, a whopping 96% of mortgages are on floating rates, rather than fixes - so every rise hurts almost every mortgage holder.
• Find out about how to finance an overseas mortgage
Stretched to breaking point
With average household debt having climbed from 75% of disposable income in 1995 to 133% now, that means a lot of Spanish households look incredibly overstretched and vulnerable, just as the market is turning down.
Bernard Connolly of Banque AIG last week didn't pull any punches when he told The Telegraph: "Spain is going to face the very direst of economic circumstances: a cycle of recession, deflation and widespread private sector default - a depression in fact."
Those are strong words – and they certainly don't chime with the idea that it'll be time to go bargain-hunting in Spain any time soon.
And the rest of Europe?
But what about the rest of Europe? Ireland has a very similar problem to Spain, in that its boom was ignited by arguably unsuitable low interest rates when it joined the euro. Now that rates are ratcheting up, the Irish market is starting to see a similar impact on house price growth – asking prices fell 0.5% in the first three months of this year, with prices in some of the best parts of Dublin experiencing double-digit falls.
Don't forget us here at home
Meanwhile, interest rates across the rest of the world, including here in the UK, are on the rise. The conditions that fuelled the global property boom – cheap money and easy credit – are coming to an end. Don't be surprised if the pain in Spain spreads a lot further before the end of the year.