Do you know about - 2011 Economic Forecast-Part 1: The World Forecast From a Us Perspective
Federal Reserve Interest Rates History! Again, for I know. Ready to share new things that are useful. You and your friends.2010 is ready for the history books and most of us are glad that year is finally in the rearview mirror. Worldwide economic collapse was avoided in 2009 and the global cheaper stabilized and strengthened some in 2010. However, the pace of saving was very modest in 2010, constrained by the prolonged effects of the Us recession suppressing demand and curtailing imports, and the Eu euro dollar debt accident diverting hundreds of billions from the capital markets to fund internal accident loans. With all the conflicting forecasts and lackluster predictions, what will the future hold for 2011? Here's my forecast for the coming year.
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The World View from the Us Perspective
Overall, the world economic saving is very fragile and economic power is rapidly concentrating in just a few nations surface the Us; the Opec oil exporting countries, the European Union, and China.
Opec
It's old news that economic power continues to grow in the oil exporting nations that we send our dollars to. What might be new news is that the much foreseen, peak in worldwide production occurred in 2007 and 2008, much sooner than most predictions. China's emergence as a major crude importer caused worldwide demand to outstrip production capacity for the first time in history, resulting in spot shop prices that reached record levels. Remember 0 per barrel crude and its succeed on fuel prices?
While many nations export crude, the Opec cartel in general, and Saudi Arabia in particular, tries to equilibrium their production to have provide exactly meet worldwide demand. Opec's goal is to get maximum value for its diminishing resource, while balancing the knowledge that too slight provide will drive up prices and push the world cheaper into recession (which results in lower production and income for their member countries). Expect the Saudis to vary their production to try and hold spot shop price at -0/bbl to perform this balance.
However, China's emergence onto the world stage to compete for ready oil supplies means that the era of cheap energy is ending. We just haven't realized it yet because the Great recession in the Us (the world's biggest importer) has temporarily reduced its internal consumption and made more provide ready on the world market.
In the meantime, China has additional increased its crude oil imports, taking up some of the slack. In this scenario the stage is set for an large growth in oil prices when the Us cheaper recovers and returns to importing at old levels to meet its energy needs.
The Opec lowest line - The most likely scenario is for a slow, steady growth in crude oil prices throughout 2011 as the global cheaper gradually recovers.
An alternative scenario is for crude prices to remain essentially stable if demand is suppressed by chronic recession in the United States or China's real estate bubble bursts, sending it into economic recession (see below for more on this possibility).
Europe
The once robust European Union is more and more often being viewed as a misfit conglomeration of "have" and "have not" countries.
Germany and France are the economic powerhouses of the Eu. The economic weaklings are the so-called Piigs countries, Portugal, Italy, Ireland, Greece, and Spain, whose national budgets have been fueled by huge levels of deficit spending for any decades. In many cases now servicing the associated debt consumes double digit percentages of their national allocation (Ireland's is an phenomenal 32%!) and is straining them to the breaking point.
There is large fear that these countries could default on their national debt obligations, dragging down the value of the euro dollar and endangering the economies of every Eu member. In 2010 Germany led the bailout endeavor for Greece, which has had to sell out its national allocation by a whopping 12%. The reduction in customary government services and associated layoffs has not been received well by its citizens as news coverage of the many nationwide demonstrations has shown.
Ireland, which offered token resistance to the idea of a Eu bailout, was next on the list. Arguably, it's in the worst financial shape of any of the Eu member nations for two reasons. First, many years of deficit spending in concert with so many of it's sibling Eu members.
However, unlike other Eu nations, Ireland also had its own real estate bubble growing, which finally (and inevitably) burst. Irish banks began to go insolvent when the values of mortgaged real estate dramatically declined. To quell a rising financial panic the national government then took the bold (and very risky) step of publicly guaranteeing all deposits, after the fact, in order to stave off economic collapse. Unfortunately, the large resources required to make good on that certify coupled with inadequate regulatory oversight to spot troubled banks before they failed, exceeded even what the Irish government could muster. The Irish government is now sporting a new 0B+ Eu loan to bailout its banks and keep the cheaper functioning.
But, like Greece, the Irish bailout came at a cost of laying off thousands of government workers (further pushing up unemployment), cutting government salaries, and, most unfortunately, cutting the government pensions of those already retired. And also like Greece, Irish citizens are protesting in the streets over the reduction in salaries and services.
The creditworthiness of these countries had declined to the point where they were unable to borrow on the world shop (at cheap interest rates) to fund their governments, and they wouldn't have been able to borrow at all if they had retained their national currency. Next on the bailout list may be Portugal or Spain.
Note that Great Britain, which still uses the pound sterling and not the euro, is currently running equally high allocation deficits, although for fewer years than its European neighbors. It has begun allocation reduction efforts driven by 2010 selection results, which has resulted in the many civil aid layoffs since World War Ii and has reduced this once proud world power, whose national anthem is Rule Britannia, to investigating the sale of the Royal Mail aid to a foreign company and exploring ways of sharing operating costs of its new aircraft carrier with rival France.
Will the value of the euro dollar collapse or be abandoned by some Eu members? It's unlikely in the intermediate term because the weaker nations don't want to leave a currency backed by economically stronger nations. If stronger nations like Germany and France reverted back to the mark and franc, they would suffer an avalanche of capital inflow from those abandoning the weakened euro to seek currency stability.
The 2011 Eu lowest line - The Eu will remain intact and (with the exception of Great Britain) will remain committed to the euro. That stability is good for the world recovery. However, Eu economies as a whole will underperform because of the hundreds of billions of euros in internal loans that will be diverted to bailout its weaker members. Look for the Eu to form some type of controls to preclude its deficit spending members from chronic to drag down the whole Union. The Eu's potential to be an economic powerhouse will be unfulfilled until the finances of its major members are set in order.
China
Economic power is rapidly shifting east and military power will soon follow. China is Very rapidly spicy beyond being merely a technologically backward player to becoming a dominant force on the world economic stage. One example of China's pace of improvement is its achievement of being only the 3rd nation in the world to place a human being in orbit, a excellent feat by any measure.
China is awash in the dollars amassed from their long term trade surplus with the Us, so many in fact, that they cannot turn them into the yuan, the Chinese national currency, to directly power their cheaper because dumping such a huge amount of dollars on the open shop to buy up the ready yuan would severely devalue the dollar (sudden oversupply) and drive up the value of the yuan (sudden scarcity), production Chinese exports much more expensive. Obviously China doesn't want to impair its export driven cheaper by production those exports more expensive.
So, what is China doing with all the dollars it's keeping but can't convert? It's approximately nothing else but buying entire countries and continents!
China is aggressively spicy to regain sources of raw minerals to ensure that its economic improvement can continue. It has invested heavily in Australian mining companies to the point where Australia now derives a critical measure of its Gdp from mineral sales to China. China wants to additional growth its ownership stake in these Australian corporations, but the Aussie government has refused to allow additional investment prominent to majority ownership, fearing a faultless takeover of its national mineral wealth.
China is also investing heavily in natural resources over the African continent. Africa has very few large cap mining corporations on the continent (DeBeers of South Africa being one of the few exceptions), so China is dealing directly with each country's national government to negotiate exclusive deals to form their mineral wealth.
For African nations, in exchange for the exclusive right (key words) to exploit their mineral resources China offers to use its financial and technological muscle to rapidly form the mines, often located in remote areas, and associated infrastructure like rail lines and ports, along with guarantees to employ a large segment of a nation's habitancy in each mine's operation.
This rags-to-riches promise is obviously spicy to impoverished governments with slight economic means to form their mineral resources on their own, but it comes at a terrible price. So far the workforce for these mines has nothing else but been hired locally, but their new work situation is far from Utopian. In most cases they "work for the company store" as was coarse in the Usa a century ago, are charged exorbitant rent for living in barracks far from home, and make nearly every purchase at high price from local retailers thoroughly owned by the company. As you might suspect, slight is left to send home to the house after meeting these expenses.
Meanwhile, supervision remains firmly in the hands of the Chinese corporations, effectively preventing African nationals from gaining supervision taste and improving the intellectual capital of their country.
The succeed of all this performance will be to ultimately drive up the cost of strategic minerals worldwide as China locks up the remaining mineral resources essentially at the cost of extraction.
Finally, China is in the midst of its own housing bubble fueled by rampant real estate speculation, very similar to what the Us experienced early in this century. The rapidly growing Chinese middle class has very few financial instruments to spend in, but real estate is ready to anyone with sufficient cash to fund the purchase. In a Chinese version of Flip This House, individuals and extended families are investing in real estate for the sole purpose of the prospect of selling in the near future at large profit.
After watching the fallout when the bubble burst on the American market, Chinese officials recognize the dangers and are taking steps in their command-and-control cheaper to cool things off. Recently, foreigners have been slight to a purchase of a singular home in China, the government is urging banks to curtail credit used for real estate purchases (not foreseen, to have much of an succeed since most purchases are 100% cash), and is talking about limiting the amount of houses, apartments, or condos that their citizens can own at one time.
If the Chinese real estate bubble bursts causing a huge loss of personal net worth like the American bubble did, you can expect China's internal consumption to dramatically decline, reducing the volume of consumer goods that China imports from around the world. A dramatic reduction in Chinese imports could tip the world back into recession as exporting nations lose the jobs and income exporting to China provides.
The 2011 China lowest line - China's consumption of world resources has reached the point where it affects worldwide shop pricing and availability. If China's cheaper continues to perform well in the coming year, it will compete more aggressively on the open shop for slight global resources.
Much depends on either the government can reign in internal real estate speculation. The most probable scenario is that China will successfully cool off the overheated housing shop that threatens its economy. However, if the real estate bubble bursts, then China's new middle class will lose a critical measure of its wealth, driving down internal consumption. Dramatically reduced imports of luxury goods and high end artificial products will impact the global saving and could yield other global recession.
The 2011 World Economic Forecast
Most likely scenario - Slow, steady economic improvement as the Eu powerhouses (Germany and France) continue to fund bailouts of its heavily indebted partners in the euro dollar and China avoids its own economic recession by deflating its real estate bubble.
Alternative scenario - Worldwide recession if any European nations abandon the euro dollar and revert to their own sovereign national currencies or China's real estate bubble bursts, seriously reducing its internal consumption and the imports it drives. The recession could be severe in this scenario, since the United States' own economic saving will not have progressed to the point where it can make up for the reduced demand on the world market. The countries who will be least affected and could emerge as new economic superpowers would be Germany, France, and the Opec countries who have amassed decades of oil trade surplus funds.
I share my economic forecast for the Us in 2011 Economic Forecast - Part 2: The United States (Us).
Which scenario will come to pass? It's hard to tell because we haven't been here before, but I've shared my best guess. Do you think I nailed it or do you have a different opinion? I look send to your thoughtful comments, insight, and opinions.
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