Tags: Stockman | economy | central | bank

Stockman: 'We're in Crack-Up Phase' for Global Economy

By    |   Friday, 20 February 2015 06:41 PM

David Stockman, White House budget director under Ronald Reagan, is looking at the global economy, and the picture he sees isn't pretty.

"We're in the crack-up phase," he told Peak Prosperity website. Four main factors threaten the world economy and financial markets, Stockman says.
  • "You're going to see increasing desperation and extreme central bank financial repression, because they have gotten themselves painted so deep into the corner that they're lost and desperate." Central banks from Japan to Sweden have opened their cash spigots.
  • "Increasing market disorder and volatility. In the last three months, the stock market has behaved like a drunken sailor." The CBOE Volatility Index has soared has high as 25.2 and dropped as low as 11.53 during that period.
  • "Investment is now coming home to roost. It will be driving a huge deflation of commodity and industrial prices worldwide," he noted.
  • "Demand has run smack up against peak debt." Global debt now totals $200 trillion, Stockman notes.
As for the U.S. economy, Lance Roberts, a partner at STA Wealth Management, sees signs of trouble in the 0.8 percent drop in January retail sales.

"The current level of retail sales is suggesting that the economic environment is significantly weaker than headlines would suggest," he wrote in a commentary. "It also suggests that a 5.7 percent unemployment rate is likely not reality."

The economy grew 2.4 percent last year, the highest rate since 2010. "While I am not suggesting that the economy is on the verge of an immediate recession, I am suggesting that the 'conundrum' between lower gasoline prices and retail sales is not really one at all," Roberts noted.

"The real story behind the weakness in retail sales suggests that something is amiss within the broader economic backdrop. When combined with the deterioration in earnings, the risk of a 'gotcha' moment in the market has risen markedly."

Average hourly wages rose only 1.7 percent last year, the lowest 12-month increase since October 2012.

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Finance
David Stockman, White House budget director under Ronald Reagan, is looking at the global economy, and the picture he sees isn't pretty.
Stockman, economy, central, bank
326
2015-41-20
Friday, 20 February 2015 06:41 PM
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