The world largest hedge fund Bridgewater Pure Alpha planet has lost 10% of its assets worth $8 billion in just 2 weeks. This money was the funds of clients who hoped to maintain and even increase their savings. The unprecedented case since over the past 40 years, the fund has brought its depositors $45 billion and never had any losses.
Since the beginning of the year, investors have lost $9 trillion. According to Gavekal Capital, the value of global securities has decreased by 14%. In emerging markets, securities lost 9%, in the US – a little more than 9.3%, in Japan – more than 17%, and in Europe – 17.4%.
At the same time we all remember a record, an unprecedented drop in prices on the stock exchanges in early January.
It would seem that now the stock markets have somewhat stabilized. However, experts believe that this is the calm before the storm. A further drop in the markets is inevitable.
The famous Chinese trader Huang Weimin, whose income exceeded 6200% in the past year, advises all investors to immediately sell their shares, or it will be too late. ‘This year I see no optimism. I advise you to ‘sit’ in the money, wait and watch,’ – he says.
According to Neil Mackinnon, the VTB Capital analyst, after the turmoil in the stock markets, amid low oil prices and due to the devaluation of the yuan, we should wait for a serious crisis in the banking system in the near future.
According to Albert Edwards, the analyst at Societe Generale, the world’s central banks have exhausted the stocks of ‘gunpowder.’
They will not be able to rectify the situation as the strong deflation is coming. It has been triggered by the Chinese authorities that started the yuan devaluation.
The US Federal Reserve, the bulwark of all the central banks in the world, now faces the threat of collapse.
Low interest rates have not saved the situation. And even negative interest rates are not able to change anything for the better, the experts believe. Global investors are skeptical that central banks in general are able to turn the world economy to sustainable growth.
The Chairman of the OECD’s Committee for Economic Development and Evaluation William White believes that ‘the main problem facing the economy right now is too high debt’ – the insolvency problem.
The economy model built on debt has exhausted itself. It is possible to solve this problem only through political measures, William White says.
‘Politicians are very convenient to think that all central banks are under control. However, it is not true. Since the central banks’ measures eventually lose their effectiveness,’ – the expert continues.
Lower interest rates in banks are not the solution. ‘For example, think about the people who save on rent or for retirement. They have the option to work longer and save more. They need a higher rate in order to achieve a certain amount of savings,’ – says W. White.
Low interest rates have led to the fact that people from the middle class whose savings are in banks, became poorer today. In turn, rich people, who have a lot of money, have become even richer. This means that most of the people have ceased to be active buyers of anything, for example, the banking services.
By the way, in Japan, the public spoke strongly against the introduction of negative interest rates in the country’s banks. Almost all Japanese now keep their money in banks. Every third Japanese person receives a pension through banks. Pensions and salaries have not grown since 1990. Therefore, the Japanese do not want to pay the banks for storing their money. As a result, the head of the Bank of Japan Haruhiko Kuroda, who offered to introduce negative interest rates, has faced the risk of dismissal.
In Europe, according to W. White, there are no political institutions that would adequately address these pressing problems.
But it is not only the central banks of various countries that are reeling. The crisis funnel gradually tightens the largest world and small private banks. And it is rightfully.
It would seem that a stable and reliable Deutche Bank can go well to the bottom. The bank of global importance in the past 2015 suffered losses of Euro 6.8 billion.
The Italian Monte dei Paschi has bank actually crashed. The cost of its shares has fallen by a record 60% since the beginning of the year. The main problem is that Euro 200 million issued by the bank as loans are unlikely to be repaid, since the borrowers are unable to do this.
This is just two very illustrative examples. It’s only the beginning…
Well, and what about the world trade – the driving force of the economy as a whole? There is the disappointing news here as well.
The volume of world trade has fallen so drastically that today it is cheaper to charter a 300-meter ship for transportation, than rent a Ferrari, said Michael Snyder, an expert, the author of a number of interesting books on the world economy.
In fact, there is an unprecedented deceleration of the world trade, which threatens its complete stop. This can be judged by the Baltic Dry Index. Experts call it ‘the most important economic indicator, which few people know about’, since this index is an indicator of price changes in the maritime transport of dry goods, such as grain, coal, iron ore, cement, etc. It is calculated by the Baltic Exchange in London.
The Baltic Dry Index can be called a ‘barometer’ of world trade. Today, this figure has fallen below 300 units. That has not happened ever. The most ‘terrible’ minimum Baltic index happened in 1986 – 556 units. This is 50% higher than today’s value.
After the previous record fall in the eighties, the Baltic index has quickly regained its previous values. Today, however, after the super fall, which has no analogues, it cannot return to its previous positions.
This statistic indicates a serious decline in production and trade around the world. Prices for basic resources, industrial metals – aluminum, iron, and copper – only confirm this.
The figures for exports and imports of goods in different countries testify to the enormous problems of world trade. China – a country that buys and sells more than any other state in the world. Now, according to January indications, exports to China have decreased by 11.2% and the imports reduction just ‘reads off scale’ – 18.8%. Cheap Chinese goods are purchased badly! In monetary terms, these figures are colossal. India – a country with a huge population: the Indian exports have dropped by 13.6%. And In Japan, exports have fallen by 8%, while imports – by enormous 18%.
The US is also still far from being perfect as officials report. According to the December figures, exports have decreased by 7%. The index of industrial orders has been falling for 14 consecutive months.
In this country, figures for domestic trade reduce significantly. Restaurant Performance Index has fallen to a record level of the crisis 2008. The number of orders for large trucks for transportation of goods in January has dropped by 48%, compared to last year. Daimler, which deals with such bulky cargo transportation, was forced to lay off 1,250 of its employees.
Supermarkets are closing across America. Moreover, the speed and extent of the internal trade coagulation are simply amazing.
WalMart closes 154 supermarkets in the United States, and in general – 269 stores all over the world.
K-Mart closes more than two dozen of its supermarkets in the next couple of months.
In 2015, JS Penny closed 47 of its stores, and now plans to close another 40 supermarkets.
Macy’s decided to get rid of 36 stores and lay off 2,500 employees.
The Gap closes 175 stores.
Aeropostale now already closes 84 shops.
Finish Line has announced the closure of 150 of its stores.
Sears closed 600 stores in 2015.
In supermarkets that continue to work the sales are falling rapidly.
Well, now let’s talk about the oil prices and the prospects for the industry in general.
A sharp change in the price of black gold always leads to a buildup of financial markets and thus destabilizes the economy. The reason for this fall in prices, according to experts, is the willingness of Saudi Arabia to earn more and, accordingly, to increase oil production. However, this led to a chain of unintended consequences.
Today, 35% of all oil and gas companies in the world are on the verge of bankruptcy. In 2015, 67 oil producers of the United States went bankrupt.
Even if Russia and Saudi Arabia agree to freeze the oil production at the current level, the international price of this important resource will fall below $ 30 a barrel – the experts say. And the situation is unlikely to be saved.
There is a crisis of overproduction. Now all storage facilities in the different countries of the world are filled, as they say, to the eyeballs. This has been significantly contributed by the LIH oil spread uncontrollably around the world at dumped prices. Rental prices for oil storage facilities are rising.
It has become much more profitable to store oil not on land, but in the ocean. Companies lease oil tankers that ply the oceans, not unloading in ports. It is much cheaper to pay for the rent of a ship at sea than for the storage facility on land.
India, a country which does not have any of its own oil fields, made an interesting proposal. Now, the storage of oil in its storage facilities is free. This service is now absolutely free of charge. In return India gets ‘full tanks’…
It is unlikely that artificial means can now quickly stabilize oil prices. The fall will continue, increasing the world economy’s turbulence.
A ‘snowball’ of growing problems of the world economy threatens to trample down all and sundry. According to statistics and indexes, there is a systemic crisis. In other words, the current economic system is completely outdated. And its collapse is mathematically inevitable.
What ordinary people to expect from the current economic crisis?
The number of layoffs in the United States has increased by 218% during the January compared to last year. Other countries will begin reducing the workforce as well as wages sooner or later, too.
Due to the fact that banks are unable to save the situation, galloping inflation is inevitable: rising prices for ordinary goods and services – food, clothing, and utilities.
Savings in banks ‘for a rainy day’ will reduce significantly, and in the future, the banking crisis may deprive you of all the savings.
We need to get ready for the very prolonged ‘rainy day’ and do not buy latest iPhones, but long storable food, warm and reliable clothing, medicine, and the most important essentials.
Elena Putalova
