The Big Picture
Posted by jdavis on September 11, 2015
This is the first in a new series of pieces, looking at what's material to our economy and worth knowing about.
Sometimes we'll delve deeply into one issue. At other times, such as this, we'll look at a number of issues and comment accordingly.
The size of the World economy is estimated at c $70 Trillion.
The amount of financial derivatives (bets on this or that, essentially): c $700 Trillion. And most require extremely low interest rates so as NOT to blow up. How else do you think City people earn such fortunes? Through lending?
Inflation has plummeted, from a low level to, effectively no inflation. Yet, all those smart pundits on the telly and the radio have expected much higher levels for years - and still do. They have also told us interest rates would rise.
Interest rates have fallen to, effectively, zero from the 1970s to 6 years ago. And we move in almost lockstep with the US. Is there any point asking if the Bank of England will raise? Just look across the Pond.
If you're under 40 you've only ever known falling or extremely low interest rates. If you're over 55 you still think we're an inflationary economy with interest rates which normally rise.
In the year to August 2015, UK British Retail Consortium Sales fell 1%. When did you ever hear of a FALL in retail sales in the UK? Inflation stands at 0.1% (as low as it was over 50 years ago before The Beatles first hit record.)
In the year to June 2015, EU (28 countries) economic growth was 0.4%. That's pretty close to no economic growth in the larget economic bloc in the World.
In the year to August 2015, China (the second largest economy in the World), exported 5.5% LESS than the prior year. China imported 13.8% LESS than the previous year.
Still think it's most unlikely we move to Recession over the next year?
In the red area is roughly half of the World population. Still believe you should invest mostly in the UK?
China's sales prices have fallen for years. Still believe we will move back to inflation? So, why invest as if we will?
So, UK banks are OK now? They've increased their exposure to China by nearly 400% over the last 6 years... ...and China is moving from high growth to low growth. What crashed the global economy in 2008? Banks.
The above is Chinese rail goods' transportation growth or contraction history.
Finally, a curiosity (perhaps) from the stock markets:
Total Market Values
Amazon vs Walmart
2015: $270B v $230B
2010: $60B v $190B
2005: $26B v $205B
2000: $79B v $275B
NB. Amazon has NEVER made an annual profit... Markets do strange things.
Still comfortable to invest as you always have? Expecting Amazon share price to continue to soar?