Register

Peak Oil is You


Donate Bitcoins ;-) or Paypal :-)


Page added on March 10, 2020

Bookmark and Share

A tipping point for the global economy

Consumption

The conflict over oil production between Saudi Arabia and Russia this weekend has sent oil prices plummeting and comes on the heels of growing worries about the spread of coronavirus.

This marks the first time the global economy has been buffeted by simultaneous supply shocks. The two are related. The conflict among oil producers was spawned by a slump in oil demand caused by the spread of coronavirus worldwide and its impact on the global economy.

The combined shocks have sent Treasury yields close to zero and the U.S. stock market near bear territory on the eleventh anniversary of a record bull run. The 7 percent sell-off of the Dow Jones on Monday marked the worst day since the 2008 Global Financial Crisis. Markets are now signaling a tipping point has been reached with the global economy on the cusp of recession.

Last week, the Organization for Economic Cooperation and Development (OECD) already had lowered its projection of 2020 global growth to 2.4 percent, just below the threshold it uses to gauge worldwide recession. This projection assumes the coronavirus epidemic peaks in China this quarter and outbreaks in other countries are mild and contained. The OECD anticipates global growth could drop to 1.5 percent in 2020 if the outbreak is not contained.

Prior to this weekend’s developments, most forecasts for the U.S. economy called for growth to slow this year but for it to avert recession. One reason is the economy gained momentum in the latter part of 2019 in response to Fed easing and the phase one trade deal with China. Also, recent jobs growth has been solid and consumer confidence has stayed high.

Yet, investors now fear a U.S. recession. One reason is a growing number of industries are feeling the fallout of coronavirus, including airlines, cruise lines, transport, hotels, restaurants and other services. With oil prices plummeting, moreover, U.S. shale oil producers once again confront price levels close to break-evens for them, just as they did in 2015.

The situation in financial markets is extremely fluid. While the media have focused on the sell-off in equities, the corporate bond market is critical because it is the principal source of finance for many businesses.

One concern is that liquidity in the corporate bond market has dried up. And credit spreads for corporate borrowers have widened considerably, especially for lower quality issuers. Looking ahead, their access to credit is likely to become limited.

But the current situation is not as bleak as it was in the fall of 2008. The main difference today is financial institutions are better capitalized and less vulnerable to runs.

By now, the Federal Reserve is widely expected to lower interest rates further and ultimately bring them closer to zero. But the impact of Fed rate cuts on the economy will be limited considering how low they are.

It remains to be seen whether investor confidence will be bolstered by further expansion of the Fed’s balance sheet. Some commentators have mentioned the possibility of the Fed purchasing corporate securities. However, even if the Treasury secretary were to sanction it, the feasibility is questionable because the corporate bond market is less liquid than treasuries or agencies.

For these reasons, most economists believe the more effective channel to combat fear of the coronavirus is via fiscal policy and informed health care policy.  The Trump administration reportedly is considering a payroll tax cut that could elicit bipartisan support. Beyond this, however, it will be tougher for the two parties to find common ground.

So, where does this leave investors? My take is they should keep several considerations in mind.

First, the fallout from the coronavirus and plummeting oil prices will be temporary, not permanent. In this regard, it is clearly easier for oil producers to reach a compromise that will stabilize prices than it is to halt the spread of coronavirus.  But the virus will be contained at some point, hopefully by late spring or summer.

Second, the U.S. economy has proved to be highly resilient to shocks in the past because it is well diversified, both in terms of industries and geographic location of businesses. Even during the 2008 financial crisis, which was the worst the country experienced since the Great Depression, it subsequently went on to experience an enduring recovery and financial prosperity.

The big unknown today is whether policymakers will craft policies that can bolster investor confidence and aid the natural adjustment process. While the stock market rallied on Tuesday’s open, it is likely to remain highly volatile until there is greater clarity on the impact of the coronavirus spread.

the hill



132 Comments on "A tipping point for the global economy"

  1. JuanP on Thu, 12th Mar 2020 9:30 am 

    “Bitcoin And Bullion Blasted As
    Traders Sell Everything”
    https://tinyurl.com/rmxh6j3 zero hedge

    “This is liquidation… of everything.”

  2. FuelShortageComing on Thu, 12th Mar 2020 9:35 am 

    Whites do not care about the future of Western civilization. Most Whites people prefer to see Western civilization and Europe destroy. Most Whites don’t want to give a functioning civilization to shit skins, we prefer to destroy it before transferring it to shit skins.

    There will never be another modern society because Whites population is too low and we refuse to build another one just to be forced to shared it with the shit skins.

    Going forward there is just death. misery, pain, hunger

  3. Duncan Idaho on Thu, 12th Mar 2020 9:58 am 

    I fear we are going to need another brilliant appearance by Orange Donny and his untrained monkey Larry Kud-LOW-IQ.
    Just keep Larry away from the blow.

  4. Duncan Idaho on Thu, 12th Mar 2020 10:16 am 

    Dow 30
    21,553.45
    -1,999.77(-8.49%)

    At least its under 2000

  5. Davy on Thu, 12th Mar 2020 10:31 am 

    “Institutional racism against european is now acceptable in the US.”

    Depends heavily on where you go. Blue colonies have it and the wide open red areas no racism for Europeans. It is more than racism too it is economic class as well. It is rural vs city. Lots of tribal feelings but this has been the nature of the US and it is manageable. It is not manageable in the EU zone because this is about national identity and racism.

  6. Hello on Thu, 12th Mar 2020 10:39 am 

    >>> it is manageable

    It’s simply a changing world, changing culture, changing identity. Europeans are on the retreat, big time in the US/Canada. But also in europe.

    Is it a problem? Depends entirely on the person. I value tradition, and for me it’s painful to have my heroes vilified and see my traditions and values going down the drain. For others it’s liberation.

    Life goes on. We all know that empires come an go. Too bad I have to live in times to see my world getting destroyed. But hell you can’t choose the time to get born.

  7. Duncan Idaho on Thu, 12th Mar 2020 11:27 am 

    Dow 30
    21,394.15
    -2,159.07(-9.17%)
    This is over the heads of the Fat Boy and the Thugs.
    They are experts at ripping people off, and socializing the rich, but this is baffling.
    Not matter how many lies the Fat Boy tells, the effect is minimal.

  8. Abraham van Helsing on Thu, 12th Mar 2020 11:36 am 

    A word of hope…

    https://www.dailymail.co.uk/news/article-8104195/Late-psychic-Sylvia-Brownes-eerily-prophetic-words-spark-claims-predicted-coronavirus.html

    “‘In around 2020 a severe pneumonia-like illness will spread throughout the globe’: Late psychic Sylvia Browne’s eerily prophetic words spark claims she predicted coronavirus”

    https://i.dailymail.co.uk/1s/2020/03/12/14/25889494-8104195-image-m-24_1584024999245.jpg

  9. Duncan Idaho on Thu, 12th Mar 2020 11:44 am 

    “Rodrigo Duterte, president of the Philippines, has announced that the whole of Metro Manila, the country’s capital, is to be placed under effective quarantine, according to reports.

    All travel in and out of the capital region will be halted for a month from 15 March until 14 April, Duterte said after a meeting with an inter-agency task force on the Philippines’ response to the outbreak, according to a report in ABS-CBN News. The site reported Duterte as saying:

    Community quarantine is hereby imposed in the entirety of Metro Manila

    It’s a lockdown. There is no struggle of power here…It’s just a matter of protecting and defending you from COVID-19.”

  10. Duncan Idaho on Thu, 12th Mar 2020 12:11 pm 

    “My aim is to agitate & disturb people.
    I’m not selling bread, I’m selling yeast.”

    — Unamuno, wall grafitti from Paris, May 1968

  11. Duncan Idaho on Thu, 12th Mar 2020 12:26 pm 

    Well, what did 500 billion get the Fat Boy?
    Dow 30
    22,228.71
    -1,324.51(-5.62%)
    700 points.

  12. Davy on Thu, 12th Mar 2020 12:29 pm 

    That is a great quote Duncan. I think I will use that and claim it as my own. My aim is to agitate and disturb everyone too. Except I am not some pussy granola munching liberal like you or that anti-American loser. I irritate and agitate the American way, I only value one set of opinions. The ones the government and media have inserted in my noggin for me to believe in.

    God bless the USA.
    And please promptly deport JuanP. He is a illegal loony that drinks and parties all day long.
    And he wrecks my forum and makes a mockery of my moderating and control.

  13. JuanP on Thu, 12th Mar 2020 12:40 pm 

    Great quote Duncan. I think I will use that and claim it as my own. My aim is to agitate and disturb everyone too. Except I am not some pussy granola munching liberal like you or that anti-American loser. I irritate and agitate the American way, I only value one set of opinions. The ones the government and media have inserted in my noggin for me to believe in.

    God bless the USA.
    And please promptly deport JuanP. He is a illegal loony that drinks and parties all day long.
    And he wrecks my forum and makes a mockery of my moderating and control.

  14. REAL Green on Thu, 12th Mar 2020 12:53 pm 

    That is a great quote Duncan. I think I will use that and claim it as my own. My aim is to agitate and disturb everyone too. Except I am not some pussy granola munching liberal like you or that anti-American loser. I irritate and agitate the American way, I only value one set of opinions. The ones the government and media have inserted in my noggin for me to believe in.
    God bless the USA.
    And please promptly deport JuanP. He is a illegal loony that drinks and parties all day long.
    And he wrecks my forum and makes a mockery of my moderating and control.

  15. JuanP on Thu, 12th Mar 2020 1:08 pm 

    Stupid me Duncan I said this twice.

    That is a great quote Duncan. I think I will use that and claim it as my own. My aim is to agitate and disturb everyone too. Except I am not some pussy granola munching liberal like you or that anti-American loser. I irritate and agitate the American way, I only value one set of opinions. The ones the government and media have inserted in my noggin for me to believe in.
    God bless the USA.
    And please promptly deport JuanP. He is a illegal loony that drinks and parties all day long.
    And he wrecks my forum and makes a mockery of my moderating and control.

  16. Davy on Thu, 12th Mar 2020 1:57 pm 

    Stupid me Duncan I said this three times.

    That is a great quote Duncan. I think I will use that and claim it as my own. My aim is to agitate and disturb everyone too. Except I am not some pussy granola munching liberal like you or that anti-American loser. I irritate and agitate the American way, I only value one set of opinions. The ones the government and media have inserted in my noggin for me to believe in.
    God bless the USA.
    And please promptly deport JuanP. He is a illegal loony that drinks and parties all day long.
    And he wrecks my forum and makes a mockery of my moderating and control.

  17. REAL Green on Thu, 12th Mar 2020 1:58 pm 

    Stupid me Duncan I said this three times.

    That is a great quote Duncan. I think I will use that and claim it as my own. My aim is to agitate and disturb everyone too. Except I am not some pussy granola munching liberal like you or that anti-American loser. I irritate and agitate the American way, I only value one set of opinions. The ones the government and media have inserted in my noggin for me to believe in.
    God bless the USA.
    And please promptly deport JuanP. He is a illegal loony that drinks and parties all day long.
    And he wrecks my forum and makes a mockery of my moderating and control.

  18. world grater supremacist muzzies lovers assn on Thu, 12th Mar 2020 2:22 pm 

    Obviously it is my mindless master juanPee above

  19. REAL Green on Thu, 12th Mar 2020 2:40 pm 

    Obviously it is my mindless master Davy above

  20. Simple Simon Says on Thu, 12th Mar 2020 3:06 pm 

    Davy, you qualify as a truly masterful fuck wad.

  21. supremacist muzzies jerk aka DavyScum on Thu, 12th Mar 2020 3:12 pm 

    Look who shows up in defense of his master, SuperTard.

    That DavyScum thinks supremacist muzzies jerk is a clever sock speaks to a dumbass entirely divorced from reality.

    How are the muzzie amputation machines working out at SuperTards play farm.

  22. world grater supremacist muzzies love assn on Thu, 12th Mar 2020 5:29 pm 

    supertad
    pls change ur underwear, my goal is 4 days
    supertards are like saints, saints change their underwear regularly, after 5 days

    allah be pleased with you
    you’re lovers of supremacist muzzies

    Muzzie cleric: (((tards))) more dangerous than AIDS and coronavirus, jihad is the cure

    /ht supertard big muzzie beard jihadwatch

  23. world grater supremacist muzzies lovers united on Thu, 12th Mar 2020 5:55 pm 

    i lost a lot of shekles in my 401k but that doesn’t mater. all i want is some lib urns because i know they worth a lot soon
    but i can’t find lib urns

    stop snapping them all up. i’ve been wanting to buy a lib urn since before christmas

  24. supremacist muzzies jerk on Thu, 12th Mar 2020 6:01 pm 

    SuperSupremeTard God IS my kryptonite.

    persons of all religious denominations bow before the SuperSupremeTard God, DavyScum

    God bless the SCUM.

  25. supremacist muzzies jerk on Thu, 12th Mar 2020 6:09 pm 

    Supertards this is now my favorite place to go:

    https://www.trumparea.com/tag/funny

  26. world grater supremacist muzzies lovers united on Thu, 12th Mar 2020 7:11 pm 

    supertards,
    as long as trump is not amputating all muzzies then he’s a muzzie lover.
    but biden and (((supertard))) sander are also muzzie lovers.

    he cuddled with cockroach. cockroach says follow laws of allah only. which means kill (((supertard))) sanders unless he hides behind the guarda tree. i’m sure (((supertard))) doens’t know that.

  27. Theedrich on Fri, 13th Mar 2020 2:00 am 

    Wuhan virus lethality only 0.1%, mainly moribunds.  The reason for the general hysteria (much of it irrationally directed at Trump) is not the death rate.  It is the Seneca cliff *.  Various media sources report that, if, due to the new Russia-Saudi oil flood and without selling oil at a minimum of $35/barrel, the shale-oil producers are unable to make a profit, many of them will go bankrupt by late summer.  In brief, this will cause a chain reaction resulting in the severe and permanent devastation of the U.S. petroleum industry.  The government would of course inflate madly, but that might work only for a short time.  The Chinkvirus will aggravate the problem, especially if the politicoes here and abroad shut down mass-attendance events, businesses and venues for any length of time.  Whackos will come out of the woodwork claiming that it’s all divine punishment (or Trump’s fault), etc.  And all the king’s horses and all the king’s men will not be able to put Humpty together again.

    But long ago Tainter (The Collapse of Complex Societies) predicted that the interlocking nature of the world economy (e.g., America depending on slave labor in ecologically poisonous outhouselands) would eventually cause global collapse due to overcomplexification.  This is the inevitable consequence of BAU.

    But hey.  The most important thing is White genosuicide, right?

    * “It would be some solace for our weakness and our affairs if everything were to perish as slowly as it comes about.  (As it is) now, growth proceeds slowly, (whereas) collapse happens speedily.”
     —  Lucius Annaeus Seneca minor, Moral Epistles, Book 14, Letter 91 to Lucilius:
    « Esset aliquod imbecillitatis nostræ solacium rerumque nostrarum, si tam tarde perirent cuncta quam fiunt;  nunc, incrementa lente exeunt, festinatur in damnum. »

  28. I AM THE MOB on Fri, 13th Mar 2020 3:36 am 

    China and Russia’s meddling ‘a clear threat to the security of Canada’: intelligence report

    https://www.cbc.ca/news/politics/nsicop-report-foreign-interference-dnd-spying-1.5494486

    Now CHINA is colluding and meddling in Western elections!

    THIS IS AN ACT OF WAR!

    HIT EM HARD!

  29. FamousDrScanlon on Fri, 13th Mar 2020 4:14 am 

    sure theedrich, Italy & a hundred other countries have quarantines knowing it’ll damage their economies just to make Trump look bad.

    The world vs trump & the MAGA-Tards. Another American exceptionalism love story.

    “Wuhan virus lethality only 0.1%”

    Source?

  30. JuanP is stupid on Fri, 13th Mar 2020 4:48 am 

    This is juanPee

    FamousDrScanlon on Fri, 13th Mar 2020 4:14 am

  31. I AM THE MOB on Fri, 13th Mar 2020 5:33 am 

    Canada to welcome 1 million immigrants over three years despite fears of recession

    https://www.thestar.com/news/canada/2020/03/12/canada-to-welcome-1-million-immigrants-over-three-years-despite-fears-of-recession.html

    THIS IS HOW WE WIN!

  32. Davy on Fri, 13th Mar 2020 6:26 am 

    “The Real Oil Demand Shock Is Yet To Come”
    https://tinyurl.com/udkmdgc oil price

    “more shocks are on the horizon as the world’s number one crude oil consumer–the United States–begins its own war on the deadly virus. When China first issued travel bans in its areas hardest hit by the coronavirus, or COVID-19, oil demand took a beating, and analysts tried to work out just how much oil demand would be lost. As it became clear that China didn’t have the situation contained, other countries closed their borders and halted or tapered air travel, worsening the demand outlook…From zero to negative territory? OPEC was the most recent body to revise down its oil demand growth, from 980,000 bpd for 2020 last month, to 60,000 bpd–essentially a zero growth forecast. As people stockpile necessities preparing to stay home, sporting events and other entertainment canceled, and academic institutions sending kids home, the demand growth for oil is set to take additional hits. Expect further analyst revisions in the coming month, and look to the number of confirmed US coronavirus cases and public sentiment as a bellwether for oil demand growth’s–or loss’s future.”

Leave a Reply

Your email address will not be published. Required fields are marked *