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Secular stagnationists gaining support

Published Monday, September 21st, 2015

This week’s exam question is to compare and contrast the following two statements:

— “China is not a source of risk but a source of growth for the world”

— “There is a high and rising likelihood of a Chinese, emerging market and global recession playing out”

The first statement was made by Chinese Premier Li Keqiang 10 days ago at the World Economic Forum in Dalian and the other by the global chief economist at Citi Willem Buiter who was a former Bank of England rate setter. Mr Buiter is far from alone in his concerns. We now know that they are shared by the Federal Reserve to such an extent that it was a key factor in Thursday’s decision not to raise the interest rate this month and may force it to renege on its long term guidance that there will be a rise this year.

Last week’s Fed backpedal has brought an end to the bad news is good news stock market knee jerk. It is the wakeup call needed to remind investors that if real global economic fundamentals are not healthy then corporate revenue and profit growth cannot keep growing on thin air.

to read the rest of the report, please click here

Posted by David Hufton