The World in 2013

1340751_39871220The changing of the calendar is always a euphoric moment for humanity. As exciting as it is though, world events will be more like just an evolution of the previous year, except perhaps for China, which will see a new leadership this summer.

For one, in Washington, Barack Obama will continue on with his second term, although with a new lineup of secretaries. The European Union will continue to be haunted by austerity issues and economic volatility, with recession not a remote possibility. Chinese manufacturing will slump, especially compounded by a looming housing bubble.

In the Middle East, the specter of the so-called Arab Spring will linger, especially in Egypt and Libya, where their supposedly new leaders are confronted by mass protests and calls for ‘real’ reforms. The increased Western pressure on Syria and Iran will continue to play a role in the price of energy as a new war looms in the Persian Gulf.  Diamond prices will continue to go down as gem stones take on new prominence and increase in their value.

Russia’s accession to the World Trade Organization will put increasing pressure on the West to lower or eliminate government subsidies and protectionist policies. Emerging economics like India, Brazil and Indonesia will play more important global economic roles this year as well.

In the consumer electronics sector, Apple and Google will continue to battle each other through patent wars and the like, which will stifle innovation instead of encouraging it. Samsung will be bringing the war to Apple on this front as well, rather than the reverse. The tired brands of Microsoft and Nokia will continue to push fresh ideas on their products and services to regain market share.

Indeed, this year will be a continuation of the events of last year. Nevertheless, it is an exciting year ahead.

Advertisements

Four Years On: Did We Really Recede from the Recession?

As much as the political elite in the US and EU would like us to believe we ‘recovered’ from the great economic meltdown of 2008, so much of it is actually the reciprocal: unending  declines in investor confidence, clipping of businesses, credit downgrades, social spending cuts, protracted unemployment, very minimal hiring, housing still puling the economy down, and the default predicaments haunting the EU.

All these seem to point to a double-dipped recession, although unsurprisingly, policy makers, especially the ones supporting wars abroad do not admit to this. It is reasonably to state that unemployment in the US is the biggest hindrance to a ‘real recovery’. For one, a high unemployment rate directly affects two things: without jobs, people dramatically cut their spending. As an effect, the government then spends billions to save these people from becoming destitute. This means a reduction in GDP, a tighter government budget, and more deficits. Although some sectors have recovered, such as the auto industry, they arrived at recovery via the layoff route.

Add to that the rise in oil prices this year due to the new Arab Spring and you get inflation back in the picture. Consumers spend even less when confronted with high prices: cotton price has gone up this year thus increasing the price of basic clothing by at least 20%, and the same goes for food like sugar, meat, and corn-based products.

Real estate and housing could be the real drag to US recovery from the 2008-2009 recession. Home equity continues to decline since 2006, so worse today than before that companies are tearing down unsold homes to avoid taxes. As a result, uncertainty in the housing sector also drags finance and net wealth sectors and most especially construction.

Also less obvious is the fact that non-financial companies are holding on to their stimulus money at near record levels, and the consumer is not far from doing so as well. What does this mean? This means that they are more nervous about the future, much like saving up for the stormy days, as they say.

Did we just record a 1.3% GDP growth and 9% unemployment this year? As such, it is hard to see whether Bernanke and his economists were too quick to declare the end of the economic meltdown. In addition to confidence, economic indicators really do point to a recession that really never ended.

On the one hand, as well all know, the NBER (responsible for calling the shot on the start and end of a recession) was unsure to declare that the 2008-2009 recession was really over during 2009. It’s been two summers since, and same as in 2010, this year, more people are convinced that we really didn’t recover and that we are headed to another disaster. Historically, it took the NBER almost 1 year to admit that the recession started in December 2007 and that it took almost 2 years to announce that the IT bubble of 2001 was over. Who knows when the NBER will announce the end of this present recession?