Roubini: Global recession is coming

by Chris Becker
Dr Dooom is calling it.

From CNBC:

The rivalry between the U.S. and China could be so disruptive that it’s starting to decouple the global economy and could eventually cause a recession, according to Nouriel Roubini, the economist famously called the housing bubble.

“The consequences of this trade and tech war and cold war [are] the beginning of de-globalizaion … and the decoupling of the global economy. We’ll have to redo the global tech supply chain. And eventually by next year, if this escalates, it will be a global recession,” said the head of Roubini Macro Associates in an interview with Bloomberg TV on Tuesday.

“My base case is … the trade and tech war between the U.S. and China is going to get worse. Manufacturing is already in a recession globally. It’s affecting services. …The tech sector is in a slowdown,” Roubini said.

“It has already been in the data — the collapse of capex. And once the capex is down, then the industrial production is down and the employment is down, and you have the beginning of a global recession that starts in tech, then in manufacturing, then in industry and then goes to services,” he said.

Manufacturing PMI’s are falling everywhere, including the canary – South Korea:

US:
source: tradingeconomics.com

China:
source: tradingeconomics.com

Australia:
source: tradingeconomics.com

Germany:
source: tradingeconomics.com

South Korea:
source: tradingeconomics.com

UK:
source: tradingeconomics.com

Luckily, stock prices are reflecting the caution…

Comments

    • SnappedUpSavvyMEMBER

      brighten up, this is Roubini, which now means there is a very good chance it will never happen, Ruesa actually has a much better strike rate, don’t know how it always happens, but straya always gets pegged by a rainbow at the last minute

      • Yes. All his energy and attention has been on eradicating Bitcoin. He’s forgotten the wider environment.

  1. Why would South Korea be the Canary? Is it because it’s the most vulnerable of the hi tech economies?

    • It just tends to lead because it makes… everything from high tech to cars to ships to industrial machinery.
      You want a Hyundai? Will that be PC memory, or an oil rig?

      For all we know, the real canary could be China, but China’s stats are bull5hit.

      On another note
      Copper prices don’t seem all that bad.

      • Yep. Sounds simplistic but South Korea export figures are actually a decent global indicator.

        Better than using sunspots, anyway…

  2. DominicMEMBER

    Dr Doom may be calling it now but he simply joins a large cohort who’ve been saying the same for some time. And he’s wrong about the causes. Trade or no trade war, it’s coming. Huge post-GFC stimulus has caused all major economies’ cycles to become synchronised and we are simply arriving at the end of the next debt cycle – together. There’s not much more to it than that.

    Total global debt at GFC: $140 trillion.
    Total global debt right now: $250 trillion

    Gunna be one for the ages.

  3. How is it different to the per capita recession that Australia has been having?

    Roubini has not thought too much about UBI:

    UBI may or may not be a solution. If folks need the dignity of work for self-esteem & want to eschew permanent welfare UBI may not work. Afterall many of those who voted for Trump signal they want work & not just welfare transfers.

    https://twitter.com/Nouriel/status/1056163456477523968

    AFR published a nonsensical article on it yesterday:

    Why universal basic income is a bad idea

    Yeah. Have a recession and not even do a trial to find out. Just declare it to be bad.

    Put simply, if every American (or Australian) receives an additional $1000 per month, the prices of nearly everything will inflate accordingly. Importantly, no real benefit is achieved for those economically suffering to begin with – it’s an illusion and one that would cost the US taxpayer more than $1 trillion dollars annually.

    https://www.afr.com/personal-finance/budgeting/why-universal-basic-income-is-a-bad-idea-20190628-p522ea

    What inflation? The RBA has cut the interest rate to 1%. 3G data is cheaper than ever – way cheaper than it was in 2004. And tax cuts for the rich cost nothing at all?

    • DominicMEMBER

      With the greatest respect, the one place (and possibly the only place) where we’ve seen consistent falls in prices is in technology … and possibly clothing and textiles. Outside of that the world has become increasingly more expensive over the years.

      Nobody needs an iPhone to survive (teenagers may disagree) but we do need food and we do need energy and healthcare and education and housing …

  4. HadronCollision

    Debt jubilee time
    Kill off all that toxic CDO etc bizzo
    Reset interest rates (waves at savers)

    • You must be new to this. You see that makes complete sense. And common sense is not what policy makers use.

    • DominicMEMBER

      It’s a nice thought but will never happen as one man’s liability is another man’s asset.

      In other words if you attempted to eradicate all the world’s debt i.e. $250 trillion you’d simultaneously wipe out most the financial system, destroy pension funds, insurance companies would be insolvent and a huge amount of what people currently count as ‘wealth’ would disappear.

      Dropping a hundred nuclear bombs on the world’s hundred largest cities would probably be less devastating.

      • If murdering a couple hundred million people is less disruptive than facing the debt, we’re truly fuxed.

        Ww3 it is.

    • Way too early for that – it must collapse first. Disagree with Dom here, after the collapse a lot of the assets are worthless, debt that can’t be repaid won’t be etc. That is the time for the DJ.

    • Mining BoganMEMBER

      Interfering with an auction fine be up to $97k.

      I’d suggest that a vendor bid is interfering with an auction. The gubmint could make a fortune by stopping that rubbish.

      • True, but the state gubmints would lose a fortune in duties if the inflationary vendor bid was taken away.

      • I find it interesting that when a vendor misses out there is howls for reform! Reform is needed they yell. Not a peep about under quoting, dummy bidding, money wasted by buyers doing inspections on properties they have no hope of winning, vendor bidding, undisclosed reserves which are often higher than the quoted guide price range.

      • This article is propaganda when you consider that actually, bidding (and winning) is not legally binding at all. Until you sign the sale contract, all they can do is get cross with you when you say you changed your mind and wander off.

    • Ronin8317MEMBER

      It is not against the law to run away after winning a real estate auction.

      • Watched a mate do it about 10 years ago. The agents running around asking if anyone saw where he went or knew who he was had to be the funniest thing I’ve ever seen. There were about ten of us who knew him and were talking to him throughout the auction, yet we all denied any knowledge. He calmly jumped into his car and drove off when the auctioneer went in to consult with the vendor. Difference was he was the lead bidder but the hammer hadn’t fallen at that stage.

    • Sounds like a fun game to play.

      Pick up a bunch of business cards from random RE places during the week, then drop them after you make a winning bid as you’re running away.

      • Mining BoganMEMBER

        They will make special bidding areas to keep people in check. Like a members only type arrangement. Red carpet, Samoan bouncers lifting the velvet rope for entry, “not in those shoes” dress standards…unless you’re female.

        It’ll be as classy as The Ivy and just as expensive.

    • Hilarious. I have seen similar once several years ago. Leading bidder ran away. Final result was also a sale to the other bidder very low. Makes me think there is a strategy here, if only I could figure it out.

      • freddy lasthope

        Yeah, that was the vendor doing the runner after multiple vendor bids. His technique needs work. First rule of being a phoney bidder: try not to win the auction.

    • innocent bystander

      don’t you have to be a registered bidder over there?
      (ok, could use false credentials I guess)

    • Looks like the only non-Chinese at the auction were the auctioneer and the bloke who ran away.

  5. Oz property is a safe haven so it’s a good time to buy an investment property at the nitty of the cycle before o/s buyers flood back.

  6. Ask the finance company to quote me on my Golf GTI as I wanted to keep it.. 2017, leather, sunroof, auto, 63000km, and was quoted $44.5k.
    I am sure I can buy it for less at the auction.

    • C.M.BurnsMEMBER

      63k kms in less than 18 months. how, or more accurately where do you drive your car ?

      • from Middleton Grange to CBD or wife to Chullora (if I work from home) and son after hours and all weekend. It is used mate. The kid does ~150km on the weekend. Being on lase all petrol and service is covered so we don’t touch other cars if the golf is available.

      • that is what I am going to do. will buy it back from the auction for around $32k. but the idiots could have saved money if they did direct deal with me. now they have to pay the auction guys handling plus fixing wheels and a scratch at the back.

    • reusachtigeMEMBER

      63k already?!? Sounds like a sh1tbox quite frankly. Cashed up wog bogan crap. LOLOLOL

  7. – I am convinced that the world (as a whole) is already in (a) recession. The only question is how deep/shallow is the current recession.