Tags: Insana | interest | rate | recession

Ron Insana: Interest Rate Plunge Represents 'Red Flag Warning of Global Recession Risk'

By    |   Wednesday, 14 January 2015 09:26 AM

While global stock markets have declined only mildly this year, the plunge of interest rates and some commodities is a cause for concern, says CNBC commentator Ron Insana.

"While the collapse in oil prices is quite widely acknowledged and felt, the collapse in global interest rates and, coincidentally, a meaningful drop in the price of copper, should serve as a red flag warning about the risk of global recession," he writes in a commentary for CNBC.

The U.S. 10-year Treasury yield dipped below 1.80 percent Wednesday morning.

The U.S. economy may be exempt from the weakness at this point, with growth averaging 4.8 percent in the second and third quarters of 2014 and many economists forecasting an expansion of about 3 percent this year, Insana says.

"However, interest rates have collapsed around the globe, yield curves are flattening from New Zealand to New York, a reliable historical indicator of slowing growth, six to nine months down the road," he notes

"Clearly the U.S. is much better suited to withstand a global slowdown. However, much of the rest of the world is already on the precipice of both recession and deflation," Insana adds.

"It pays to heed the message of the markets. One can only hope that someone out there is not simply cheering a stock-market rally but instead actively fretting — if not acting on — this frightful set of developments in non-equity markets."

In a similar vein, Mohamed El-Erian, chief economic adviser at Allianz Investors, warns that investors around the world are making assumptions about markets and economies that may be overly optimistic.

"I am taken aback by the extent to which the world has collectively placed a huge bet on three fundamental outcomes: a shift toward materially higher and more inclusive global growth, the avoidance of policy mistakes and the prevention of market accidents," he writes in an article for Project Syndicate.

"Though all three outcomes are undoubtedly desirable, the unfortunate reality is that they are far from certain, and bets on them without some hedging could prove exceedingly risky for current and future generations."

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While global stock markets have declined only mildly this year, the plunge of interest rates and some commodities is a cause for concern, says CNBC commentator Ron Insana.
Insana, interest, rate, recession
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2015-26-14
Wednesday, 14 January 2015 09:26 AM
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