I recently wrote that global non-financial sector debt has surged to $153 trillion as of 3Q15. Among individual countries, China has witnessed rapid leveraging since the financial crisis of 2008-09. In my view, the debt crisis is still to unfold for China and this article puts into perspective the scale of leveraging in the last few years. After the financial…
Be it the Great Depression of 1929 or the financial crisis of 2008-09, excess leverage has played the most important role in inducing the crisis. Several economists argue that lack of action in 1929 translated into depression, but the decade preceding the great depression was characterized by significant leveraging in the economic and financial system. Coming to present times, the…
In the recent past, I have discussed global slowdown and potential recession in several articles. I also discussed in one of my recent articles that the GDPNow indicator from the Federal Reserve Bank of Atlanta estimates GDP growth for 1Q16 at 1.4% (March 24, 2016 estimate). The Federal Reserve Bank of Atlanta has released new estimates (March 28, 2016) and…
In my last article, I discussed that we are dangerously close to global recession as the services sector activity slumped in February 2016. This article discusses the impact on US corporate sector profits if the rest of the world enters recession. The reason for this discussion is to underscore the point that even if US economic growth remains relatively resilient…
Going by the collapse in the Purchasing Managers Index for February 2016, it is entirely likely that the world is headed towards recession sooner than expected. The chart below gives the manufacturing, services and composite PMI for February 2016 and its clear that services sector activity has slumped.     Global manufacturing sector is unlikely to be the saviour through…
I recently discussed the point that the US economy is slowing down based on the yield spread. The GDPNow indicator from the Federal Reserve Bank of Atlanta further confirms that the US GDP growth for 1Q16 is likely to be weak. The chart below shows the GDP growth estimate as predicted by the GDPNow model at different times in March…
I recently discussed in an article that the per capita income for US population has stagnated or declined in the last 15 years. A direct implication is that living standards have also stagnated or declined for an average middle-class family. This article discusses the wealth inequality in one chart for the United States and the implications of the data when…
In the recent past, there has been lot of discussion on where the Chinese economy is headed and on the country’s banking sector health. The Credit-to-GDP gap is a good early indicator of stress in the banking system and it indeed shows that there are big reasons to be concerned about China’s banking system. In particular, when economic growth remains…
Analysis Overview - The yield spread (10-year Treasuries minus three-month Treasuries) is a good indicator of economic slowdown or potential recession and this article discusses recession probability from yield spread perspective. The chart below gives the yield spread from 1959 to February 2016.     It is important to note that in all recent instances of recession, the yield spread…
Analysis Overview – The per capita disposable personal income growth for the last 15 years in the United States is indicative of the point that there has been potential loss of purchasing power during this period. Disposable Personal Income Adjusted For CPI Inflation – The chart below gives the per capita disposable personal income for the United States for the…