World turbulences ahead ? #IMF #Forex #Economy

10 years ago, the global economy seemed to be on the mend. Interests rates down to 1%, UK was in its 12th year of uninterrupted growth, China was a part of WTO and everyone firmly believed in self correcting markets. The monetary system crash was unforeseen and a surprise. IMF confessed that it had been guilty of groupthink and played down the signs of trouble.
2014 is not that different from 2004. The global economy is mobile again, with the cheap money available.

Some optimists believe that the period of low inflation and continual expansion has returned after the hiatus caused by the crash. Recessions are rare and countries eventually revert to a trend rate of growth. This could either be the start of another long global upswing, another case of groupthink. Maybe the IMF is yet again choosing to ignore the signs in 2014 which might lead to another turbulence. 5 of such sings are

  1. The global economy’s dependency on exceptionally low interest rates. The trough in interest rates has been lower in each subsequent cycle and they are now barely above zero.  
  2. The bond market crashed as the world’s central banks cautiously try to return monetary policy to a more normal setting with a modest and gradual increase in official interest rates. 
  3. Everyone relied on Shale Oil and Gas to be our next source of energy. However 15 major companies have written off $35bn in investment since the boom began. Getting oil and gas out of the ground is proving costlier and less profitable than expected
  4. the risk of resource conflicts within the next five to 10 years unless the international community gets serious about dealing with global warming. The catalogue of extreme weather events – from floods in the UK to droughts in Australia – is growing. 
  5. Rising inequality – a tiny elite now grabbing the lion’s share of global growth. At the bottom, and increasingly for those in the middle as well, it is a case of wage squeezes, high unemployment, debt, austerity and poverty. The 85 richest people on the planet own the same wealth as half the world’s population but seem oblivious to the risk of widespread social unrest.

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