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It's a sea of red
in the US and European equity
markets following the victory of president Obama and statements made by ECB president
Mario Draghi. US equities
are now down well over 2%
and most of Europe was
down between 1 and 2 %.
Things would not be any different
if Romney had won.
Regardless of who won,
the global headwinds would
have been the same, and the global economy is in a recession already (it's not widely recognized yet, but it soon will
be).
Bloomberg reports German Stocks Decline
After Draghi Says Crisis Hurting.
German stocks fell
as European Central Bank President
Mario Draghi said the debt crisis is
hurting Europe’s largest economy and the European Commission cut its growth forecasts
for the euro area, offsetting optimism
about U.S. President Barack Obama’s
re-election.
Draghi said the debt crisis is
beginning to take its toll on the German economy. “Germany
has so far been largely insulated from some of the difficulties elsewhere in the euro area,” he
said at a conference in Frankfurt today.
“But the latest data suggest
that these developments are now starting to affect the German economy.”
Forecasts Cut
The European Commission cut
its growth forecast for the euro zone as the debt
crisis ravages southern
Europe and gnaws at the economic performance of export-driven
Germany.
The 17-nation euro economy will
expand 0.1 percent in
2013, down from a May forecast
of 1 percent, the Brussels-based commission said today. It cut the forecast for Germany to
0.8 percent from 1.7 percent.
Divergences Resolved to Downside
Economists are just now coming around
to position I stated in February
and March, that Germany would
not be immune from this.
Here is a brief recap.
February 22: Expect German-Periphery
Divergence to Resolve to the Downside
for Germany
Expect German-Periphery Divergence to Resolve
to the Downside for Germany
The idea that Europe can avoid a recession
is complete silliness. Europe is clearly in a recession already.
The amazing thing is things have not deteriorated more than they have. Unlike the Chief Economist at Markit, I expect the divergence to resolve
to the downside for Germany, not for the divergence
to continue for some time. Given
conditions in Europe and Asia, the odds that Germany is immune from the global slowdown are essentially zero.
April 4: Eurozone Composite PMI® Signals Recession Says Markit; France in Renewed Decline, German Growth Weakens, Italy and Spain Contract Further
In what should
have been expected, but somehow
wasn't, Eurozone weakness is across
the board except for
Ireland bucking the trend for now.
I have been critical of Market
analysis for months and this is the worst
yet.
First they said Germany would prevent a recession, then Germany would decouple, now they suggest
this is only a "technical"
recession and the "the recession
may be mild and brief".
The European recession will be neither
mild nor brief. Spain, Portugal, and Greece
are in economic depressions
with no end in sight.
Spain and Italy (the 3rd and 4th largest eurozone markets) are poised for steeper slides. Germany will not be immune to this as I have stated for months on end.
German manufacturing contracted in March and services sector
will soon follow. For some reason, Markit economists cannot figure this out.
Any Growth
Too Optimistic
Now the EC economists
have finally caught on to
the idea this will not be a mild recession and Germany will not be immune. Well sort-of.
The 17-nation euro economy will
expand 0.1 percent in
2013, down from a May forecast
of 1 percent, the Brussels-based commission said today. It cut the forecast for Germany to
0.8 percent from 1.7 percent.
Both those targets are too optimistic. Germany is going to get hit much harder than
these guys think. German exports will collapse.
Q&A
1.
How can
German exports not collapse with
the rest of Europe in a very
deep recession and a
massive slowdown in Asia
as well?
2.
Just who
is Germany going to
export to?
Those are questions (with
obvious answers) that I have been asking since late 2011 actually.
Look at that wimpy projection of .1 percent growth.
These clowns just cannot predict recession can they? (even when
it is perfectly
obvious a major recession
is underway).
Still, that is quite the downward revision from 1 percent growth to .1
percent growth.
On the betting line, I'll take
the under.
Addendum:
Reader "Bam Man" points out the obvious,
but in an exceptionally good way.
I offer his comment for others to see:
The European Commission economists
are not in the "forecasting business". They are in the "confidence building" business.
As such, it is their duty
to "forecast" growth,
even if it is obvious that
their "forecast"
is ridiculous.
Indeed!
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