28/12/17

What Will Cause The Next Recession?



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What Will Cause The Next Recession?
// Silver For The People

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mises.org / Dec 27, 2017

The most recent consensus estimates for global Gross Domestic Product growth show a healthy "synchronised" development in most economies. Expectations for the major economies are much stronger than what economists expected at the end of 2016 for the next three years. Seems all concerns about a global slowdown and subsequent recession have disappeared. What has changed?

China

The first major driver of this newfound optimism is China. The Chinese economy has not slowed down as aggressively as predicted nor has the Yuan devalued as much as feared. The counterpart is that deleveraging and structural reforms have vanished from the China debate. Chinese total debt has surpassed 300%. In the first ten months of the year, money supply has increased by 9.2%, significantly above estimates. From January to October 2017, China has added more debt than the UK, EU, US and Japan together, and that should be a cause of concern in the next months.

Bond yields are already rising in China and the stubborn decision of the government to "print" an official growth above 6% is also creating significant imbalances in the economy that will be more difficult to solve if ignored.

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