The Dow Jones Industrial collapse is a harbinger of a terrible crisis in the U.S.

Dow Jones Industrial Average Turns U.S. stock market to a standstill

In brief: After a sharp decline in Dow Jones Industrial Average analysts and experts talk about the early start of the second wave of financial crisis in the U.S..

The collapse of the Dow Jones Industrial Average becoming the new omen of an early start of the next wave of financial crisis in the U.S.. Dow Jones Industrial approaching the mark of 9,895.47 points. Losses for the Dow Index reached -243.05 (-2.40%). Facts speak louder than all that the U.S. economy in the way of the second bottom, of course it is up to him have not yet got. Of course, the various signals may be false, and perhaps this time everything will be different. But reality says otherwise.

It becomes obvious how were important budgetary and monetary injections with the onset of the financial crisis. Given that in 2009 the budget deficit in the U.S. reached 11% of GDP, for the first quarter of 2010 has been achieved to curb the growth of U.S. GDP. According to the final assessment, the U.S. GDP in the I quarter has grown by 2,7%. In the April report, the U.S. government reported a growth rate at 3,2%. Economists and analysts polled by Dow Jones Newswires, predicted that the final evaluation will coincide with the second estimate, published a month ago, and has made 3,0%. Published data suggest that the recovery of the U.S. economy is modest. Evaluation of the growth in consumer spending was reduced to 3,0% from 3,5%. According to analysts, moderate economic growth will continue in the II quarter, but it is possible that the recovery will be fragile, as evidenced by weak economic data in May. For example, retail sales declined and the pace of job growth has been low. Sales of new houses in the U.S. in May decreased by 32,7% – up to 300 thousand is a record decline – the index reached the lowest value since the beginning of the introduction of payments in 1963. This was on Wednesday informed the U.S. Department of Commerce. According to specified data, in April, has sold 446 thousand of new buildings, not 504 thousand, as previously reported. Before the report was released, according to which the sale on the secondary housing market in the U.S. in May fell by 2,2% – to $ 5.66 million on an annualized basis. Last week, the Fed once again left a range of interest rates on federal funds without a change in the level 0,0-0,25%. The decision was made based on a two-day meeting of the Committee on Open Market. In addition, the Fed lowered its assessment of the U.S. economy, which suggests that interest rates will likely remain at record low level until next year. The statement said that a key interest rate will remain near zero for a “prolonged period of time”. These figures pale in comparison to how fast were being restored after the previous economic crises.

Zero interest rates and easing of monetary policy by lowering the federal funds rate worked out his own. Current incentive programs coming to an end, thus, the net effect of a new plan expenditure was about to disappear. It is already painfully acknowledged at the residential not chattel, where the termination of tax incentives to buyers number of transactions dropped sharply so that this and assume no one could. Furthermore, it became apparent that the company no longer seek to fill their reserves. And this is important. Last year, two-thirds of the economy’s growth was due to the replenishment of reserves. For comparison, the real final sales reached their lowest post-crisis level in the past 50 years, said analyst David Rosenberg Gluskin Sheff. Research Federal Reserve Banks indicate slowing of business activity for the period of stagnation in the labor market.

Not surprisingly, the U.S. state bonds with longer maturities have fallen in price to dangerously low levels. The same thing happened in Japan at an early stage of the lost decade. How sadly looks like the picture in the U.S., overseas all is even worse. Due to the adoption of anti-crisis programs in Europe reduced the volume of U.S. exports to that region. Furthermore: Europe will send its exports to America to pull itself out of crisis. Meanwhile, China’s economy is growing concern. If the bubble in Chinese real estate market will explode, the government is most likely to rush to pump up the U.S. with their goods to alleviate the pain from the fall. Efforts by the Chinese authorities to curb the risks of a sharp surge in debt local governments can affect the growth of the third economy in the world, according to investment bank China International Capital Corp. An official report last week showed that the authorities could take “on effective measures”, including the highly controlled process of granting new loans, say economists. The effect of this can be a “limitation of sources of financing investment projects and the impact on economic growth in the future.” The Chinese authorities are actively fighting the risks caused by the credit boom, which enabled the country to cope with the consequences of global recessions. The agency Fitch Ratings said that the deteriorating financial positions of banks because of the deterioration in asset quality may limit vozmozhnsti countries to respond to any economic global crises.

According to calculations by John Hussman of Hussman Funds, the American economy “either already entered the second stage of the crisis, or soon will. Given the growing popular protest against the continuation of fiscal stimulus, as some American officials fear trigger a debt crisis in the country, and the most active electorate opposed to inflation of government, to rescue the U.S. economy out of trouble to the Fed. The head of credit department Royal Bank of Scotland, Andrew Roberts expects that the Fed will start printing money. In practice, this often leads to disastrous results. The book by Kenneth Rogoff and Carmen Reinhart, “At this time everything will be different, which is an anthology of the debt crisis, explains that the bank defaults, usually followed by the government defaults, and after them – the emergency measures of monetary policy, which erupt in an uncontrolled inflation . Paul Krugman warns that if governments will sit idly by, the global economy will survive the third severe depression over the past half century. But at the same time, if they overdo it, the cornerstone of modern economies – the right of states to issue money – will be destroyed. The former chief economist of the International Monetary Fund (IMF), Simon Johnson, speaking at a scientific meeting at Beijing University, said that the abnormal development of the U.S. financial sector is not only a cause of the current international financial crisis, but also may cause a new crisis.

Anrey Torbinski
2010-06-29 19:16, Economics.

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One comment к “The Dow Jones Industrial collapse is a harbinger of a terrible crisis in the U.S.”

  1. Bob Says:

    The world is quickly moving away from the dollar. GOLD will soon become the reserve currency. US will then be doomed.

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