Some key terms for the uneducated:
Global equity- The large number of available mutual funds and exchange traded funds -- ETFs -- leads to the division of funds into different categories based on the types of investments a particular fund owns. The two broad categories are stock and bond funds. The term "global equity" typically describes a sub-category of funds on the stock funds side of the ledger.
Financial crash- A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated with a panic or a run on the banks, in which investors sell off assets or withdraw money from savings accounts with the expectation that the value of those assets will drop if they remain at a financial institution.
Macroeconomics- the branch of economics concerned with large-scale or general economic factors, such as interest rates and national productivity.
Fears that the global economy could be heading for a repeat of the 2008 financial crash have sent shockwaves through financial markets – prompting a rush to safe havens by investors.
Oil prices fell to a fresh 12-year low on Wednesday and metal prices tumbled in response to warnings that China’s slowdown could derail the global recovery at a time when central banks, which came to the rescue in the credit crunch, have only limited firepower.
As world and business leaders gathered for the annual World Economic Forum in Davos, Switzerland, the FTSE 100 was gripped by panic selling, especially of mining and oil companies that have been hit hard by the global slowdown in manufacturing and trade. Earlier this week, China recorded the slowest rate of economic growth for 25 years.
The index dropped more than 200 points to finish the day down more than 20% from its peak of 7,122, reached in April last year. Such a 20% decline marks the beginning of a bear market.
In New York, shares on the Dow Jones Industrial Average closed 249 points down (1.56%), recovering from a 550-point-drop earlier in the day, while Brent crude dropped to $27.78 a barrel – down by about 70% from its summer 2014 level of $115 a barrel.
Stock markets in Russia, Brazil and Saudi Arabia also dived as concerns mounted that countries already badly hit by the fall in oil prices could be forced to dip further into reserves to prevent an economic crisis. Global equities have had their worst start to a year on record.
William White, a former chief economist of the Bank for International Settlements (BIS), the central bankers club, who now chairs the OECD’s review committee warned that central bankers had “used up all their ammunition”.
"The situation is worse than it was in 2007. Our macroeconomic ammunition to fight downturns is essentially all used up. Debts have continued to build up over the last eight years and they have reached such levels in every part of the world that they have become a potent cause for mischief,” he said on the eve of the event.
The BIS was one of the few organisations to warn during 2006 and 2007 about the unstable levels of bank lending that eventually led to the Lehman Brothers crash.
Concerns that the global recovery could be derailed began last summer when a devaluation of the Chinese currency sparked a meltdown on the Shanghai stock exchange. A series of economic downgrades to the Chinese and US economies since then, coupled with a rise in US interest rates, have fuelled investors’ misgivings about optimistic forecasts for a recovery in economic fortunes.
Adding to the concerns of a sharp downgrade in global growth this year, a survey for the consultants PwC before the Davos meeting revealed that two-thirds of chief executives saw more threats facing their businesses than three years ago. And the head of the Swiss banking giant UBS, Axel Weber, turned the screw by warning that the world was stuck in an era of low growth.
Source:
http://www.theguardian.com/business/201 ... are_btn_fb
What do you think of the report? Is this the United States going to have another repression or is it another bad day on the stockmarket? Personally, I don't know what to believe, I thought the United States had recovered and it was on the way to a boom in the country but the United States seems to be collapsing slowly. Also, if it is collapsing, who is to blame?
