Recession predictions

Wanderer78 wrote: »

im truly terrified of another financial sector hiccup

9 months into Covid, with record everything -ve, the Dow Jones is near its all-time high. The tech indicises are actually at all time highs.
All this whilst the arse is falling out of the industrial economy.

We have bigger problems than the banks...

Roger the cabin boy wrote:

We have bigger problems than the banks...

Oh watch this space, this has the potential to go horribly wrong, very quickly, financially, I suspect our banks are not as stable as we think! Its important to remember how complexly intertwined our global banking system has become, contagion is still globally possible, hopefully I'm completely wrong

brisan wrote: »

Well judging by the amount of posters who want to draw down a mortgage while on a government subsidy who think their jobs are 100% safe, and those who want to get a mortgage BEFORE they lose their job I think your fears may be realized.
Also I get the feeling the American stock market is artificially inflated and dependent on 3-4 big tech stocks
I can see a black Monday of 1987 coming again

ah shur asset price inflation has been the aim of the game for a long time now, sadly, i think my fears are gonna be confirmed, its very worrying stuff, i cant see the stress tests standing up to things

Geuze wrote: »

The sharp falls in crude oil prices in March 2020 were due to Saudi-Russian tensions within OPEC, about Russia's refusal to cut production.

Nothing specifically to do with COVID.

When oil hit negative territory in April 2020 it had nothing to do with Russian SAUDI tensions
Oil futures came up ,no one wanted the oil ,no one had any space to store it and the holders of the futures were obliged to buy and take delivery of the oil.
There is one story going around where a Russian billionaire hired oil tankers in the weeks beforehand and when oil hit negative he was paid money to take the oil and load it in the tankers .
He then sold when lock downs finished .
So a downturn in demand will drive energy prices down unless supply is cut as well
https://www.forbes.com/sites/salgilbertie/2020/04/23/will-oil-prices-go-negative-again/#1d024f4d7e9c

GDP contracted by 6.1% in Q2 2020
Personal Consumption of Goods and Services, a key measure of domestic economic activity, decreased by 19.6% in the quarter
Spending by Government on goods and services increased by 7.5%
Contraction of 38.3% in the economic activity of the Construction sector, while the multinational dominated Industry sector grew by 1.5% in Q2 2020
GNP contracted by 7.4% in the quarter
The Balance of Payments Current Account recorded a surplus of €11.7 billion in transactions with the rest of the world in Q2 2020

If I look at Figure 2 of today's GDP Q2 release, it seems that Q1 has been revised downwards from small positive growth to a contraction? See Figure 2.


Am I correct?


Where as the final Q1 release has positive growth.

https://www.cso.ie/en/releasesandpublications/er/na/quarterlynationalaccountsquarter12020final/

Mongfinder General wrote: »

BOP figure doesn't seem too bad?

the system as a whole must also be considered, i.e. globally, as our own financial sector doesn't exist in a vacuum, a similar set of conditions are currently unfolding within our global system, compared to 08, i.e. rising private debt, and rapid decline in the demand for new credit, along with the increasing possibility of defaults and non performing loans, this is exactly what occurred leading up to 08, but thankfully private debt in ireland has been dramatically falling in the last few years, so hopefully we arent as exposed, lets hope this one passes by, globally

Geuze wrote:

1% deflation

Its amazing this is the case, even with all the money creation occuring, economic systems are bizzare

The main factors contributing to the annual change were as follows:

Transport fell mainly due to a reduction in air fares and lower prices for diesel and petrol. This decrease was partially offset by an increase in the cost of motor cars and higher prices for services in respect of personal transport equipment.

Housing, Water, Electricity, Gas & Other Fuels decreased due to a reduction in the price of home heating oil, lower rents and a fall in the cost of electricity and gas. This reduction was partially offset by higher mortgage interest repayments.

Communications fell due to a reduction in the cost of telephone & telefax services and telephone & telefax equipment.

Food and Non-Alcoholic Beverages decreased due to lower prices across a range of products such as vegetables, sugar, jam, honey, chocolate & confectionery and mineral waters, soft drinks, fruit & vegetable juices.

Restaurants & Hotels increased primarily due to higher prices for alcoholic drinks and food consumed in licensed premises, restaurants, cafes etc. This increase was partially offset by a reduction in the cost of hotel accommodation.

Alcoholic Beverages & Tobacco rose mainly due to higher prices for tobacco products.

Recreation & Culture increased primarily due to higher prices for package holidays and an increase in the cost of recreational and sporting services.

Health rose mainly due to an increase in the cost of medical and dental services and higher prices for pharmaceutical products.

Its a wonder the UK isn't in recession too

Or maybe it is and i missed it

beggars_bush wrote: »

Its a wonder the UK isn't in recession too

Or maybe it is and i missed it

Difficult to miss a 20% fall in GDP, quarter over quarter.

Staggering.

https://ec.europa.eu/eurostat/documents/2995521/10545471/2-08092020-AP-EN.pdf/43764613-3547-2e40-7a24-d20c30a20f64

Much worse than any EU country.

Mongfinder General wrote: »

I've noticed a few articles circulating suggesting pay cuts for those working from home - and not just new hires. If you've got a building worth €100m in the IFSC you're going to want to make sure it's value on the balance sheet is protected.

gives more spending power into the economy, makes sense!

Mongfinder General wrote: »

True - I think that there is major concern in London. There's a real push to get people back to work there. I don't think I'd like to get on a tube any time soon.

jesus no, i wouldnt go anywhere near it

https://www.rte.ie/news/business/2020/0916/1165510-oced-on-world-economic-growth/

OECD projections

2020 recession at -4.5% rather than -6% earlier

2021 recovery slower than expected


"The US, the world's biggest economy, would fare better than the global average, with a projected contraction of 3.8% this year.

Germany would perform better than the euro zone as a whole, with its economy set to shrink by 5.4%, compared with a contraction of 7.9% for the single currency area.

The French economy was set to shrink by 9.5%, Italy's by 10.5% and Britain's by 10.1%, the OECD predicted."



Why is the 2020 recession in the UK much worse than in the USA or Germany?

UK economy weighted towards services??

ExMachina1000 wrote: »

Government will this week begin to encourage bosses to bring their staff back to offices. It's part of the government's living with covid plan. Many will be back in the office within weeks.

And yet The Taoisech has said the exact opposite

https://www.gov.ie/en/publication/18e18-level-2/#work

brisan wrote: »

And yet The Taoisech has said the exact opposite

https://www.gov.ie/en/publication/18e18-level-2/#work

But people's opinions are more important than facts.

Geuze wrote: »

The UK runs a CA deficit, so that means they import capital from the rest of the world.

They are a net borrower.

https://www.ons.gov.uk/economy/nationalaccounts/balanceofpayments#:~:text=The%20UK%20current%20account%20deficit,remains%20high%20by%20historical%20standards.


https://www.ons.gov.uk/economy/nationalaccounts/balanceofpayments/bulletins/unitedkingdombalanceofpaymentsthepinkbook/2019

thank you. i wonder has their own austerity measures have a more negative effect, compared to others

^^^ah shur with the banking moratorium coming to an end, expect big trouble for the private sector, including the banks, the government should be stepping in to back all of this up, or we re gonna end up in big trouble!

Timing belt wrote:

Banks should be sufficiently capitalised to be able to take the hit otherwise they would have failed all the stress tests.

I'm not convinced this will be the case, I suspect the stress tests were conducted using different economic forecasts, possibly not as severe as this down turn could be, and it's important to realise, most economic advisor's are still from the neoclassical school of thought, and its prediction models are notoriously poor at predicting. Hopefully I'm completely wrong, as we do not need another financial crisis, it could be completely devastating, globally, it's also extremely important to realise, our own banks maybe sufficiently funded, but international banks may not be. Some commentators believing, some major international banks, could effectively fall over with even a slight gust. I'm not convinced anyone truly knows what could or couldn't happen, we simply don't know for sure, such is the complexity of these systems and processes, they only thing I'm sure of is, our track record of such predictions, particularly from mainstream, is beyond woeful. there's something seriously wrong with neoclassical and it's models, yet we still persist with this school of thought, it has not accepted it's failures from the past, and we largely have not accepted it's failures, this could be disastrous for us all

Timing belt wrote:

Yes they will feel it and it will hurt but none will go under because of it.

We simply don't know this, nobody knows for sure, nobody seen lehmans coming, but some realised something major was coming, but they were ignored and even ridiculed, they still are largely ignored....

Timing belt wrote:

Banking regulation have taken big steps forward since the 2008 banking crisis one example would be the majority of banks issuing "Bail in" Bonds that investors have bought that would convert to Equity and recapitalise the bank in the event of a situation where it goes under.

I'd have to disagree here, regulations didn't go far enough, regulations such as the reinstatement of the Glass–Steagall act should have also been done, to increase the safety of our global financial systems. The world of neoclassical still also doesn't accept critical facts such as bank creation of money in the form of credit, which played a critical role in the last crash. It's also important to realise, some commentators believe that depositors are now less protected under new bail in rules, which in the event of a banking crash, there's an increased chance of deposits being bailed in, in order to save the bank, we simply don't know until this occurs, if it even does.

Timing belt wrote:

Yes there will be a big recession and we have not seen any real impact as it time to flow through the pipes. My prediction is that we will start to see the real impact come dec/Jan/Feb.

I'd have to agree with this though unfortunately.

Great addition on funds though, that's really interesting

Wanderer78 wrote: »

I'm not convinced this will be the case, I suspect the stress tests were conducted using different economic forecasts, possibly not as severe as this down turn could be, and it's important to realise, most economic advisor's are still from the neoclassical school of thought, and its prediction models are notoriously poor at predicting. Hopefully I'm completely wrong, as we do not need another financial crisis, it could be completely devastating, globally, it's also extremely important to realise, our own banks maybe sufficiently funded, but international banks may not be. Some commentators believing, some major international banks, could effectively fall over with even a slight gust. I'm not convinced anyone truly knows what could or couldn't happen, we simply don't know for sure, such is the complexity of these systems and processes, they only thing I'm sure of is, our track record of such predictions, particularly from mainstream, is beyond woeful. there's something seriously wrong with neoclassical and it's models, yet we still persist with this school of thought, it has not accepted it's failures from the past, and we largely have not accepted it's failures, this could be disastrous for us all



We simply don't know this, nobody knows for sure, nobody seen lehmans coming, but some realised something major was coming, but they were ignored and even ridiculed, they still are largely ignored....

Yes I agree, if the stress test models predictions are flawed and don't take into account such a severe stress then banks will be under capitalised and will be in trouble. That all comes down to how good the regulator is and how strong the stress tests are. If we are to believe that banks are stress tested appropriately then things should be ok as the banks should have sufficient capital and liquidity buffers in place to deal with the stress.

Things are different this time around as to when lehmans went under as back then it was a liquidity crisis where banks stopped lending to each other on the inter-bank market. Now days there is a limited inter-bank market as the central banks have stepped in and replaced much of this and will inject the necessary liquidity into the market to keep the cogs turning. (This may have other impacts on the currency, sovereign debts markets) In addition to this banks now have got liquidity asset buffers that they didn't have in place back then so I see it as a very different situation.

Yes people were "ignored and even ridiculed" and that will happen again as people always think they know better than everyone else and unfortunately it is not possible to predict the future accurately so there will always be areas that have been over looked. The funds industry is one where I think there is a risk of this happening as there is light regulation and most of the risks are managed via in-house risk models where there is a high chance that certain risks have been over-looked or played down. The Banking Sector has had a lot of focus on it and hopefully have done enough to protect the banks from another crisis. But then again saying all that you need to look and see who has lent to the funds industry!!!

Wanderer78 wrote: »

I'd have to disagree here, regulations didn't go far enough, regulations such as the reinstatement of the Glass–Steagall act should have also been done, to increase the safety of our global financial systems. The world of neoclassical still also doesn't accept critical facts such as bank creation of money in the form of credit, which played a critical role in the last crash. It's also important to realise, some commentators believe that depositors are now less protected under new bail in rules, which in the event of a banking crash, there's an increased chance of deposits being bailed in, in order to save the bank, we simply don't know until this occurs, if it even does.

Yes more could have been done on the regulation front and yes you are right that they should have reinstated the Glass-Steagall act. If you look at the UK they introduced some similar along the lines of ring-fenced banks which is similar to the Glass-Steagall act bu not all countries have done so and because of this we have a situation where normal customer depsoits are providing the underlying capital to fund the debt issued to more risk sectors. If you look at my example of the funds industry you will more than likely find that any lending to these institutions will be funded via normal retail customer deposits and therefore there is a risk that exists that would not have had the Glass-Steagall act been adopted everywhere.

As for your point about Deposit guarantee schemes these are only as good as the paper they are written on and there existence is only there to provide a consumer confidence to prevent a run on the banks. I think most of these schemes will have serious flaws in them if a situation ever arose where they were enacted. It is all about consumer confidence similar to why people are happy to rely on Coins and Notes.

It is highly unlikely that customer funds would be bailed in to rescue a bank as new regulation has resulted in a increase in banks issuance of AT1(CoCo) bonds that will convert to equity if capital triggers are met. And in the event of a resolution of a bank there will be "Bail in" bonds that will convert to equity in the event of the resolution of a bank and as such provides protection to customer deposits.

I'm not saying that it is not possible for a bank to go under but I believe that a lot has been done on the regulatory front to make it a controlled explosion this time around and therefore it is a different situation to the 2008 financial crisis.

Roger the cabin boy wrote: »

Stocks are trending down, redundancies are creeping up (see Premier inns reducing workforce by 20% today). Banks beginning to close (Ulster)

Here we go?

sadly, yup, this could be a scary one, batten down the hatches!

wassie wrote: »

The stock market is not the economy and is not always a reliable indicator of such. I think the US market over last 6 months is evidence of this.

Banks are not beginning to close. A commercial decision whether to wind down Ulster Bank is expected to be made at the end of next month. Not surprising given it has under performed since its was bailed out by RBS.

Is the economy going to struggle - in certain sectors yes, but not for the reasons outlined above.

Obviously the tourism/hospitality/airline industry are going to struggle but what other sectors do you see struggling?

wassie wrote: »

The stock market is not the economy and is not always a reliable indicator of such. I think the US market over last 6 months is evidence of this.

Banks are not beginning to close. A commercial decision whether to wind down Ulster Bank is expected to be made at the end of next month. Not surprising given it has under performed since its was bailed out by RBS.

Is the economy going to struggle - in certain sectors yes, but not for the reasons outlined above.

Deutsche Bank to close 20% of domestic branches

theguzman wrote: »

Anybody who thinks the banks are fine this time around are absolutely kidding themselves. We have seen nothing yet of what is to come.

Do you expect GDP to fall in 2021?


This is what the ECB expect for the EU:

https://www.ecb.europa.eu/pub/projections/html/index.en.html

2020 = -8%
2021 = +5%


This is what the OECD expect:

http://www.oecd.org/economic-outlook/

http://www.oecd.org/economic-outlook/#gdp-projections

Euro area
2020 = -7.9%
2021 = +5.1%