Recently, Citigroup’s chief global economist, William Buiter, highlighted the escalating risk of a global recession. His forecast has gained significant attention, especially given the current volatility in financial and commodity markets. He estimates a 40% likelihood that global real GDP growth will decline consistently, potentially dipping below 2% by mid-2016. He anticipates economic performance may hit its lowest point in 2017, followed by a recovery starting in late 2017 or early 2018.
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● Russia’s military presence in Syria is increasing | NY Times
● Reasons against a Fed rate hike this week | Bloomberg
● Analysts predict that China’s currency will continue to decline | CNN
Tomorrow’s report on US industrial production for August is expected to show no change compared to the previous month. This outlook is based on the average forecast of several econometric estimates, contrasting with a solid 0.6% rise recorded in July.
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Forecasts suggest a 0.2% increase in US retail sales for August when compared to the previous month. This figure reflects a slowdown in growth following July’s notable 0.6% rise.
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This year has seen significant challenges for emerging-market stocks, but last week provided some relief, as the Vanguard FTSE Emerging Markets ETF (VWO) surged by 3.9% through September 11—the best weekly performance based solely on price returns among standard benchmarks. However, it may not be the best time to reinvest in these struggling markets just yet.
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● A potential Fed rate hike this week might be more symbolic | LA Times
● Economic concerns affect China’s stock market performance in Monday’s session | Reuters
● Are China and other emerging markets facing a banking crisis? | Bloomberg
The upcoming conclusion of the Federal Reserve’s policy meeting on September 17 may result in an interest rate increase, although such a move seems uncertain given global market instability and mixed economic data from the US. Meanwhile, some skeptics are speculating if conditions are suitable for further monetary easing. The Fed’s previous bond-buying program, QE3, concluded last October. Reviving it as QE4 seems unlikely this week, yet the possibility has caught the attention of some analysts. For a clearer perspective, we can examine trending data through Google Trends.
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● Wealth, Poverty and Politics: An International Perspective
By Thomas Sowell
Review via The Washington Post
Sowell asserts that the primary reason some individuals remain in poverty is not due to discrimination or exploitation by the wealthy, but rather their lack of productivity. He argues that the real mystery lies in understanding why this occurs. Geography may also play a role; he points out that civilizations that isolate themselves often fall behind in development.
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Beginning today, The Capital Spectator introduces a subscriber-only research service focused on monitoring US business cycle risk—The Business Cycle Risk Report. Readers will recognize this data from the monthly updates, such as the August review. While these monthly reports will still be available on CapitalSpectator.com, there will now be a premium service that provides real-time updates. For more details, including subscription options and a sample issue just published, please visit the “Premium Research” tab above or follow this link.
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Prominent voices are urging the Federal Reserve to postpone any decision regarding interest rate hikes beyond their upcoming policy meeting next week. However, the prospect of maintaining current liquidity conditions is still uncertain. One reason supporting the possibility of a rate increase this month is that the inflation-adjusted money supply has contracted year-over-year for three consecutive months, marking the first such decline in three years. Concurrently, the effective Fed funds rate continues to rise. Though these indicators are not definitive, they lean towards a hawkish stance when it comes to the upcoming meeting.
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In summary, the economic landscape appears complex, with various factors influencing global markets. As analysts continue to assess the potential for recession and the Federal Reserve’s actions, staying informed will be crucial for making informed decisions.
