Three Signs to Indicate Global Economic Breakdown
Recently, the world has been shocked to discover a sudden and unexplained downfall in oil prices. This unexpected scenario has severely wounded the Rissian ruble. On the other front, India too feels threatened by China’s extreme spending yet slowing growth which is supposed to endanger India’s economic ambitions. The Japanese economy is also expected to grow “modestly” this year. The eurozone countries are also struggling with their own weakening economy for some time now.
There are visible signs of a potential economic meltdown at every turn, around the globe. Listed below are three prominent factors that could be deciding factors if the leaders of different countries will be able to transform their economies this year so as to avoid the expected and deadly economic fall which, in all likelihood, would take several years to recover from.
1. Eurozone Deflation
Since the euro has plummeted the oil prices along with the bond yields have also gone down in the eurozone countries. Reuters, an international news agency reports that the inflation for these areas is going negative for the first time since 2009, as reported last Wednesday.
The euro fell to $1.1819 on Wednesday in the expectation that the European Central Bank will print more euros,. Meanwhile, countries such as Austria, Belgium, Canada, Australia, Japan, and Germany have reached their “record lows” for long-term borrowing. While oil as a commodity has not shown any signs of rising in its prices. The Brent crude has also dropped below $50 on Tuesday. As per the information it was more than $115 in June 2014.
2. Unemployment Status in Europe
The U.S. has seen some relief in the rate of unemployment, while on the other hand, it has shown a mixed picture in Europe. Germany also has hit its “record-low” unemployment rate at 6.5 percent in December and is doing quite well. However, Italy on the other front is suffering from its worst unemployment ever.
In November, Italy has seen the unemployment rate at its peak since it began recording unemployment stats, in 1977. Even Pope Francis has shown concern about unemployment numbers. He said in June that the global economy was in danger and is therefore concerned about the growing rate of unemployment.
3. U.S. Treasury Bond Yields Hit Low ( below 2 percent)
Today, investors are looking for safe bets and fleeing stocks in favor of bonds. Many of them have fled to the U.S., in an effort to protect their investments. This diaspora is also a result of increasing fears about the happenings in the eurozone and how it may affect the U.S. The 10-year Treasury note has also hit its lowest point since May 2013, on Tuesday, dipping below 2 percent.
Accompanied by the Dow Jones Industrial average, all these developments have caused a poor start to 2015. Bill Gross, the bond manager at Janus Capital and former manager of PIMCO, has weighed in with advice for this week.
As part of his 2015 investment outlook he commented that, with asset returns going south, investors should consider Treasuries and high-quality corporate bonds. He has warned the investors through these words, “Be cautious and content with low positive returns in 2015. The time for risk-taking has passed.”