The OECD fears a new financial crisis
The organisation does however expect the eurozone to grow by 1.4% in 2015 and 2% in 2016, up on earlier estimates. Fearing a drop in interests of which “the extent of the decline appears to be flashing a warning signal”, the OECD is worried markets may be blinded, dazzled by the influx of huge cash assets.

The OECD is decisively more optimistic for the eurozone in its growth prospects published Wednesday but is gravely concerned about the region’s very low inflation and financial overheating across the globe. It expects the eurozone to grow by 1.4% in 2015 and 2% in 2016, namely each 0.3% points up on earlier forecasts made in November. The Organisation for Economic Co-Operation and Development, that sees the eurozone as having a “chance to escape from stagnation”, attributes this revision largely to the “bold” actions of the European Central Bank (ECB). “Dropping oil prices and the ECB’s quantative easing policy are the main reasons for these higher projections,” write the OECD’s economists in their interim economic assessment.

The OECD has changed its tune since its November forecasts. At the time, it saw the eurozone gloom as one of the major threats to the global economy. While it praises the ECB’s monetary initiatives, the Paris-based organisation, a forum of 24 developed countries, is less convinced by leaders and feels that eurozone budgetary policy could be “more encouraging for demand”.

The FED’s role

The OECD also revealed is forecasts for India, where it expects to see a 7.7% growth in 2015 followed by 8.0% in 2016 – higher than China –, and for Japan with 1% in 2015 and 1.4% in 2016. It maintains its forecasts for the United States (3.1% growth this year, then 3.0% next year) and deems that “faced with lower oil prices and the strengthening of the dollar, it would be reasonable for the Federal Reserve to put off revealing its rates, so as to further support private demand”. In a few hours the FED is to give a highly anticipated announcement on what it intends to do in the upcoming months.

The OECD’s forecasts for China have changed little where it expects to see 7% growth this year and 6.9% in 2016. The organisation also points out that lower oil prices have not been to everyone’s favour. It has revised down its forecasts for two exporters: it predicts Brazil will see a recession this year ( 0.5%) and 1.2% growth in 2016, while Canada’s growth should increase by 2.2% in 2015 (0.4% points down on its November forecast) and 2.1% in 2016 (-0.3 points). Overall, the OECD expects there to only be a “modest” acceleration of the global economy and “storm clouds” may gather.

Economic background

“The current economic environment is highly unusual, with inflation at negative rates in many countries and nominal interest rates around historic lows across much of the world. To a degree, these two interrelated phenomena are welcome,” but at the same time “they give rise to growing concern”, reports the OECD. The organisation feels the dangers associated with excessively low inflation are “growing”. If prices do not pick up, particularly in Europe, the economy runs the risk of becoming paralysed by “deflation”, namely a prolonged period of deteriorating prices and salaries.

Furthermore, in terms of interests rates “the extent of the decline appears to be flashing a warning signal”, the OECD senses, fearing a blinding of markets dazzled by huge liquid assets heading their way. “Mispricing of risk was at the heart of the previous financial crisis, and such mispricing may be in evidence again”, cautions the OECD. The IMF also regularly shows concern for perhaps imprudent risk-taking by many investors on the markets and the “very high valuation of certain assets”, which could trigger severe corrections. But up until now its chief Christine Lagarde has refused to talk in terms of a “bubble”.

Source: Le Point

Economists’ scenarios forewarn of major changes

The great acceleration has begun. Economists are anticipating a major upheaval. It’s time to take stock of the key events because they all have serious implications and consequences.

Those who expected to see events accelerate from January will not have been disappointed. Under normal circumstances, major events take place several weeks, even months, apart. But the succession of major events has dramatically accelerated with ten occurring in the past two months.

Russia has pulled out of petrodollar recycling.

The country’s oil trade volumes will no longer be denominated in dollars but in roubles. Expect to see roubles transformed into renminbis under Russia’s bilateral trade with China. Russia’s action is another nail in the petrodollar’s coffin.

Switzerland has scrapped its peg to the euro. For over three years, the Swiss National Bank capped its euro reserves, which stood around 800 billion euros. The situation had finally become unbearable. Switzerland has maintained a position to sell on the dollar while going short gold, and finally decided to turn the situation on its head. The Swiss seem to have opened their doors to hell for the gold market, and have perhaps found themselves crushed under a margin call as lent physical gold dwindles.

The Greeks have prepared to leave the European Union and default on their debt. The Syriza party won the elections in a swing to the left. This will lead to major disruptions. They may print money to reimburse their external debt, which would be ironic justice. Get prepared to see repercussions in Greece and across Europe even as the Russians dangle the carrot of a pipeline under the Greeks’ noses. This pipeline will inject significant revenue into Greece. It’s certain that the country will leave the European Union. It will soon begin exporting food products to Russia redressing its economy in the process.

The European Central Bank announced its latest QE programme. The bank is set to launch a wave of asset and bond purchases in the hope these avoid becoming sterile and corrosive under co-operative gestures with member countries. Details aside, the Germans are delighted to criticise Draghi’s measures. The ECB and Bundesbank are at loggerheads. I’m sure that Germany will also leave the European Union, the euro and finally NATO. Opposition to Draghi’s decision will create a crisis within the European Union.

King Abdullah’s death has lead to the beginning of a transition period for the royal family. The king was replaced by the senile former Prince Salman who will struggle to rule. The battle for his succession has already begun. Rival tribes are quarrelling to see who will weld the power after several decades of exclusion.  Events on the Saudi borders will multiply and intensify with heavy consequences. Pressure for reform will be stronger than ever.

German offered Russia a free-trade deal that will overshadow the transatlantic pact controlled by the United States. During the Economic Summit in Davos, the German chancellor offered Russia a free-trade deal and implicitly rejected the Transatlantic Trade and Investment Partnership with the United States. The most ironic part is that Merkel’s proposal is similar to the one established by Russia and China over the past two years, known as the Eurasian free-trade zone. German is clearly seeking to exit the European Union.

German finance police BaFin could not provide proof of manipulation of the gold market. According to the Deutsche Bank. This decision is a step backwards for the camp fighting corruption in bond and foreign exchange markets and banking accountability. There were be many implications that will open the way to fairer markets. Market manipulation seems to never end. There are two camps in Germany. Politicians are dominated by the banking elite, though voices are being heard from ministries. Industrial chiefs lead trade while tyring to avoid heavy economic damage. The American alliance is no longer working in Germany’s favour. The industrial camp will prevail, but only after a long battle set to present a certain number of unknown variables.

Switzerland has established a trading centre for the renminbi in Zurich. An interesting battle is about to rear its head as London, Zurich and Frankfort fight to control the financial flow of the renminbi. While London holds the advantage of tradition and Zurich has the advantage of prestige, Germany was chosen by the Kremlin and Beijing to act as the cradle for ties between Europe and Asia. Russia and China’s industrial relations will stretch across to Germany together with growth in trade and investment.

Details on the extension of the Gazprom pipeline through Turkey have emerged. The pipeline is to cross the Black Sea and volumes have been indicated on the plans. Gazprom suddenly decided to exclude Ukraine in the construction of its pipeline, which will no longer run through Eastern Europe where American government bribery, threats and corrupted businesses are determined to block its projects. The pipeline will now cross Turkey and a plant will be built on the Greek border. The project, dubbed the Turkish Stream, will take 18 months to complete by which time European nationalities will have had to find a way to connect to these pipelines and avoid the imminent disaster of their destructive alliance with the United States.

The American economy recorded lower orders. The list of layoffs and project cancellations in the United States, Canada, England and Europe was six pages long in January presenting a procession of bankruptcies and monetary and economic policy failures. The American economy is under the grip of a recession lasting several years. QE is worsening the economic downturn. A certain number of corporations have resorted to mass layoffs, the most recent being IBM. Large banks and major business with ties to the energy sector dominate these headlines.

As well as the events listed above, America’s oil and schist gas sector closed its doors without being able to point the finger at any one event. The schist debt will implode at any moment.

It is interesting to note that none of these events concern the BRICS. Their movement will reinforce the transition of the paradigm and force the return of a gold standard. Since American and British bankers control the financial sector , Forex currencies, government bonds and banking systems, the East will do all it can to bring back the gold standard.

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