It has been a rough month.
War in the Middle East, tensions in Russia and the Ukraine, riots in Ferguson and sanctions and boycotts flying in every direction.
If you examine and monitor all the different trends happening in these situations, the risk of these markets falling into recession is incredibly high.
Double Dip Recession?
If the worst comes to pass and the world economies stutter again, it likely won’t be for the same reasons we dipped into recession in 2008.
Yes, Italy isrecession but that’s more like a hangover of the 2008 crisis than a result of the political turmoil. The real issue revolves around political upheaval in emerging economies. There are massive economies that weren’t major contenders a few short decades. ago. China and India now have as much power as anyone else, but are less predictable politically than America, Europe and the West. They also have a combined population that makes up 36.4% of the world.
It’s always about the Oil
When you break it down, this is a fight over oil. As oil continues to go for 120 US a barrel, and the oil rich nations are pumping out a billion a day, we’re talking about a great deal of wealth. Essentially it’s the same amount of finite resources, but new players on the field who want access to it.
Now we have these new players on the market who have muscled in and, like everyone else on the planet, they want access to the oil. The Africans are trying to use force to grab it, the Mid East is trying to use Religion, and the US and the West are trying to figure out where they stand and what they should do.
Perhaps most alarming out of all of this is the prediction of the= Reserve bank of India Governor.
This institution is one of the few that predicted the 2008 crisis. He has now said that the asset classes are overvalued at the moment, and the risk of the economy falling into a second recession is very high.
Archana: The political atmosphere based on Iraq, Ukraine and Russia has made the economy incredibly violate right now. The risk of these markets falling into a recession is very high. We continuously monitor all of the different trends here at P4Capital, and the economy isn’t looking very positive.
Jim: Italy is like a hangover of what happened in 2008. What is actually going on right is the political upheaval in emerging economies. So all that stuff that has been going on for 40 years since the oil embargo in the mid 1970s in the Middle East is bascially a fight over who owns the oil. Today that revolves around three main factors: the old world powers, strife and aggression, and the new players trying to find their way in all of this. Of course, there are different segments along the way but this really comes down to emerging economies wanting the oil.
Devon: What many fail to realize is that every day on the other side of the planet there is war whether it’s civil, revolutionary, religious, cyber or insurgency. As we have become and continue to be a more globalized world in commerce and in livelihood, we must look to what impacts these have on our international relations. The last time nations were allowed to fall or be forced into recession, the seeds of war were sewn into the fabric of history-the proof of this was World War 2. It is fundamental to the world we live in that we actively look at what changes we can make and how these changes impact those around us so that we may continue the landscape of global commerce successfully
Jeremy: The world is a complex place, and I think it’s impossible to predict when a recession will occur. That being said, recessions are cyclical in nature- so are we heading for another one- yes. When will that be- I don’t know.Over the past 8 years, I’ve noticed a strong positive co-relation between the price of gas at the pump (which is obviously dependent on the price of oil) and the health of the financial markets as exhibited by how willing our clients are to spend money on hiring new people. Higher Oil prices = A robustly functioning economy which encourages job growth. Declining gas prices seem to indicate the opposite, which could be a leading indicator for a looming recession as average gas prices in Toronto have declined by 9% since June 24th.
What do you think?
Join the conversation! Tweet your responses to @planet4it or comment below in the comment section! The best answers will be featured on our Website!