We are still in the grip of the Great Recession. Economic growth remains anemic and below its trend rate in most parts of the world. What’s more, this state of subdued economic activity has been with us for more than seven years. True to form, central bankers have steadfastly denied any culpability for creating the bubbles that so spectacularly burst during the panic of 2008-09.
In this low interest rate environment, the search for yield is sending investors of all stripes to far flung places and uncharted territories looking for a decent return. These days, a “decent” return implies the investor has uncovered some form of magical alchemy that has enabled him or her to not only beat the market, but to serve as an early funding source of the next big thing.
Manny Mencia, senior vice president for international trade and development at Enterprise Florida, is the guiding force behind one of America’s leading trade, export development, and foreign direct investment organizations. Mencia attributes much of Florida’s international success over the past two decades to the state’s decision to privatize its economic development activities.
For the first time in recorded history, many European countries, plus Japan, have experienced negative interest rates. Government bond yields on short-term debt, as well as debt up to 10-year maturity, have turned negative in many countries, including Austria, Denmark, France, Germany, Finland, Switzerland, Sweden and Japan. More than 25 percent of European sovereign bonds sell with negative yields.
A snap election held in late January produced a decisive victory for Syriza. This leftist party pledged to force the IMF, the EU, and the European Central Bank — the so-called “troika” — to renegotiate the terms of agreements made by previous governments to obtain emergency loans totaling $280 billion, and gave its blessing to the write-off of about one-half of the country’s near $400 billion public debt.
A number of pundits continue to say how well the economy is doing, that inflation and unemployment are under control, that jobs are being created at a rapid and consistent pace, and that our economy is growing at rates not seen in more than a decade. Depending on your statistics and perspective, that may seem true.
The recently released report from the McKinsey Global Institute on world debt is an important and sobering look at how little the world appears to have learned from the global recession, and just how dangerous levels of sovereign and consumer debt have become in the interim. If you thought debt levels were alarming in 2008, consider where they are today.
Federal Reserve, the world’s most powerful central bank, has used unconventional monetary policy since 2008 to suppress interest rates, encourage risk taking, support asset prices, fund government debt, and allocate credit. In doing so, the Fed has created one asset bubble after another, harmed savers, incentivized big government, and misallocated credit.
The collapse of the price of oil, turmoil in the global economy, and ongoing upheaval in the Middle East are sending mixed signals for what lies ahead for the U.S. economy, and by extension, the real estate market, even though the U.S. is one of the few countries to enjoy a genuinely optimistic outlook for 2015.
For the first time since the 1997 Asian Financial Crisis, China may fail to meet its real GDP growth target for a given year, which in 2014 was set at 7.5 percent. If the growth figure comes in at 7.3 percent, as expected, Beijing is likely to lower the target for 2015 to 7 percent. That is a far cry from the double-digit growth experienced for more than three decades following the 1978 opening to the outside world.
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