Cardinal Trading: Slowing growth in Europe, China and a cooling of the US economic recovery is fueling a flight to safety.
Cardinal Trading: Conflicting economic data emerging from the US, slowing growth in China and a Eurozone flirting with a deflationary spiral point to a tough time a head for the world’s economic fortunes.
Chief economist at Cardinal Trading, Johannes Feinberg warns, “Yet again the overhang of decades of debt accumulation both at sovereign state and private household levels threatens to choke off the establishment of a broad-based, sustainable global economic recovery”.
The International Monetary Fund (IMF) has called for the European Central Bank to initiate open-ended purchases of sovereign debt of Euro-area countries in order to spur growth but many commentators suggest that structural reforms of archaic labor laws that contribute to the high unemployment levels seen in several EU member nations like Greece and Spain.
“These reforms aren’t the kind that can be implemented quickly,” explained Feinberg. “It will require intense effort and determination to break down red tape and institutionalized resistance to change particularly in professions that have traditionally enjoyed a significant degree of protection from state bodies,” he continued.
Cardinal Trading says that it expects global governments and central banks to continue to provide stimulus regardless of the higher interest rate rhetoric emanating from countries like the US and Great Britain.
“Dramatic as it may sound, certain advanced nations are in the situation whereby their economies may never see a normalization in interest rates. The US economy, for example, is not going to start growing at a pace that will enable it to service the scale of debt it has at anything near historically normal rates of interest. They have no choice but to keep interest rates low,” concluded Feinberg
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