Numerous economists and analysts call the current global economic decline the biggest recession since WWII. However, no crisis has ever been fought by means of pouring so much money into national economies. Let’s look how much money various governments allocated to support their economies:
· USA – $700B
· China – $580B
· UK – £50B
· Germany – €800B (3 stabilization packages)
· France – €26B
The list can be continued. However, there is still no coming out of the crisis and no rise of the global economy. Moreover, in August 2011 numerous stock indexes collapsed thus making politicians claim new, more substantial financial injections in order to support the stocks and bonds of state-owned enterprises. What is going to happen next?
Facts confirming that the world is on the verge of another major crisis?
According to the experts of , the rumors about the 2nd wave of the global economic crisis would remain rumors but for the 1st wakeup call – the collapse of the major stock indexes throughout the world - Nasdaq, Dow Jones, DAX, MICEX, RTS.
1. Stock indexes cannot collapse only on market panic. There have to be more considerable problems:
· In the eurozone it is about Italy and Spain which are on the verge of default. Together with Germany and Spain , these countries are the cornerstones of the EU’s economy, unlike, Greece, Portugal , Ireland and Iceland.
· The US economy has recently been shocked with an unprecedented cut in its long-term credit rating by Standard & Poor’s.
· China will probably have some major problems as well because a decline in the buying power of the US and EU will result in a sales crisis for China and the entire global economy.
2. Gold and silver are currently moving in different directions. It means that there is a gold bubble, which can burst at any time.
According to the New Technical Analysis introduced by Masterforex-V, silver is flattish and is about to decline while gold is rallying. This is a sign of a price bubble because:
· A steady rally in the market of gold and silver = the strengthening of all assets.
· When you can see gold rallying and silver consolidating in a range at the same time this is a portent of a major crisis (as it was in the first half of 2008).
· A crisis begins as gold and silver prices start collapsing at the same time.
Now let’s look at the chart of the silver futures – the price is consolidating in a range of Daily 2. It has already formed a reversal bearish wave because the internal sloping channel MF w1 is broken:
1. If our supposition about the 2nd wave of the global crisis is right then the role of the media becomes obvious. This scenario can become a shock for billions of people around the world (a delayed US default and… the strengthening of the US Dollar. What people should do next? Should they exchange USD for safer currencies? Should they invest in gold and fixed property? No they shouldn’t because in this case every single market will collapse, including gold, silver, housing market, oil etc.)
2. The political factor: The Fed Reserve is obviously not satisfied with the policy pursued by Obama’s administration. A major crisis is an opportunity to blame President Obama for all the problems in the run-up to the 2012 presidential elections in order to bring the Republicans back to power. When can this scenario take effect? Let’s look at the following charts.
What are the conditions needed to confirm another major crisis?
1. A further decline of stock indexes down to the level of 2008.
2. A strong downswing (collapse) in the market of gold (now it keeps rallying)
3. An upward reversal of the USD index, followed by a collapse.
a) GBPUSD: the criteria is a break below $1.5780
b) EURUSD: a break below $1.3832
According to the experts of , if the scenario eventually takes place the collapse will be rather strong: thousands of points for all the currencies.
How do stock traders treat the forecasts about the 2nd wave of the global economic crisis?
According to Igor Vasev, Chief of the Department of Stock and Futures Trading, , all the US stock indexes - S&P 500, Dow Jones, Nasdaq etc – have reached the major technical levels of support. Below these levels a further decline is highly probable. However the indexes are far from reaching the crisis levels of 2008-2009:
The German DAX also looks weaker despite the growth seen over the recent year.
According to Ivan Kurapov (Dr. Key), Chief of the Department of Market Sentiment Analysis, , it is too early to speak about another major crisis. However, the current market weakness cannot give traders a good opportunity to purchase. The market consolidated below the 8-month range and then made a strong downswing. It testifies to a prolonged decline. The department will keep monitoring the situation and looking for price patterns. Professional investors are recommended to abstain from buying stocks within the next 2-3 months.
What politicians and economists assume that it is possible to avoid another crisis?
Some politicians say that the world suffers from the fear of a major crisis more than form an actual crisis itself.
· In 2009 the IMF and its former Managing Director Dominique Strauss-Kahn assured everyone that the most terrible things were in the past and urged upon all the countries to man themselves and start a slow economic recovery. But then suddenly Strauss-Kahn was accused of a sex crime and lost his post, a couple of months before the global stock market collapse. It looks curious, doesn’t it?
· Brian Moynihan, President and CEO of Bank of America, wasn’t intimidated by Strauss-Kahn’s arrest and kept saying about a steady recovery with no threat of another recession. But then a storm broke out: the US Congress and Obama’s administration had to decide whether to lift the US debt ceiling or to let the US technically default on its debt. Now Brian Moynihan can go on with his optimistic forecasts - the US has (kind of) "survived” and everything will be fine.
· Timothy Geithner , US Secretary of the Treasury, gave an optimistic interview on August 7th - 3 days after the stock market collapse – a day called by market participants “the worst trading day since 2008”.
· Warren Buffet, one of the most successful investors in the world, is sure that after the global economy hits the bottom it will rebound under its own inertia (i.e. will see a recovery). However, he doesn’t specify how high the economy will go and whether there will be another threat of falling into the abyss. Paul Krugman, a Nobel Prize winner, shares his opinion.
· Nouriel Roubini, reconsidered his forecast a couple of times: initially he predicted a collapse then changed his mind in order to keep step with the fashionable trend called “hope for the better”. But in spring 2011 he named a "Perfect Storm" of threats that could slam the global economy in 2013-2014.
Some politicians, including Barack Obama and Aleksey Kudrin, the Finance Minister of Russia, hope for the better but say it is necessary to get ready for the worst in advance, which is right.
Market Leader and would appreciate it if you could participate in a survey. Please, visit the Academy’s forum and answer the question given below:
Will there be the 2nd wave of the global economic crisis?
· Yes, there will
· No, there won’t
