Ambrose Evans-Pritchard-Back To A Bearish View

After a walk on the optimistic side last week (see my post here), Ambrose Evans-Pritchard is back on the bear train. Here are some of the facts he cites in making his case for a steady slide of the world into economic catastrophe.

  • Japan-Exports fell 35% in December. Industrial output fell 9%. The economy is contracting at an annual rate of 12%.
  • Germany-Orders fell 25% year-on-year.
  • France-Home prices fell 9.9% in the fourth quarter.
  • Spain-Unemployment up to 3.3 million or 14.4%. Projected to hit 19% this year.
  • Ireland-Lost 36,500 jobs in January. This would be equivalent to a monthly loss of 2.3 million in the U.S.
  • Ukraine-industrial output fell 27% in December.
  • Russia-Industrial output fell 10% in December.
  • Latvia-GDP fell 29% in the fourth quarter.
  • Poland-Sixty percent of home mortgages are denominated in Swiss Francs. The zloty has fallen by 50% against the franc since July.

Believe it or not he has more to say about the U.S. and the E.U. In summary, he thinks that Bernanke’s gamble that he can bring down long-term interest rates is failing and the Fed is losing credibility in the markets. As for the EU, he continues to berate the authorities for their timid response to the crisis and expresses his oft repeated prediction that their will be a back door bailout of the more desperate cases by the community as a whole.

Pritchard ends his article with his view of the likelihood of policy prevailing.  “My own view, sadly, is that there is no hope at all of stabilizing the world economy on current policies.” I suppose that you can’t fault him for his pessimism. At the same time, it is possible to pick other pieces of economic data and make the opposite case. Maybe not for all countries but certainly for some. I also think it’s too soon to be writing off the Fed’s ability to manage its way through this, the recent run-up in interest rates nothwistanding.

There is also no good reason to assume that all countries are going to suffer equally in this recession. It may well be that some will indeed suffer a depression while others merely get badly dented. I expect in the end that’s what we are likely to see. The U.S. with its distinct advantage of owning the world’s reserve currency probably stands a better chance than most of muddling through.

more: read the whole article here

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