Back in early
2011, I was one of the few economists to warn that global GDP growth would
slow dramatically in the near future and that the emerging market economies
would not be immune from that upcoming contraction. My prediction was based
on the premise that the then incipient sovereign debt crisis in the developed
world would cause the export-driven BRIC economies to stall. We now know that
the Japanese economy is contracting, while Europe's GDP is falling off a
cliff. And just last week we received more concrete evidence that emerging
market economies are starting to feel the pinch from the developed world's
interest rates by ¾ percentage point after reporting that their GDP
growth during 2011 dropped to 2.7%, down from 7.5% in the prior year. China
lowered their GDP forecast to 7.5% in 2012, from the reported 9.2% in 2011.
The Indian economy grew at its slowest pace in more than two years at the end
of 2011, as high inflation and Euro-zone insolvency put downward pressure on
the economy. Russia's GDP grew by 4.2% in 2011, and is predicted by S&P
to drop down to 3.5% this year. And the United Nations predicts that global
GDP will only increase by a paltry 0.5% in all of 2012.
McDonald's corporation corroborated the global slowdown in growth when they
announced their earnings report for Q4 last week. The company missed their
fourth quarter revenue target and warned about its Q1 operating income due
to, according to the company's press release, "...commodity and labor
cost pressures, particularly in the U.S." But the company also noted
that the main cause of their revenue shortfall for their last quarter was a
sharp falloff in sales from Europe, Asia, the Middle East and Africa.
Can it really
be any wonder why this is occurring? Moronic central bankers across the globe
persist in believing that economic prosperity can be brought about by
printing more money. They also cling to the specious argument that inflation
can't occur when growth is anemic. That gives them plenty of impetus to step
up their monetary madness; even in the face of rising prices.
reality, all you end up getting is a serious dose of global stagflation,
which only continues to increase in intensity. It is my view that the
worldwide slowdown in GDP will cause further iterations of QE to occur within
two quarters, not only in the U.S. but around the world.
since these rounds of quantitative counterfeiting resemble birth pangs in
nature--in that they are occurring more frequently and with greater
intensity--I anticipate the rate of inflation to increase rapidly across the
globe during 2012. As such, I would continue to avoid consumer discretionary
stocks and increase your exposure to precious metals and oil investments on