Few people remember that the start of the Great Recession, and the lead-up to the 2008 credit crisis, began a year before when several economic indicators marked a tremendous slowdown and popping of artificial bubble throughout the world. In fact, 2007 was when we saw the height of the last stock market boom, and where the Dow lost over 1000 points before the great crash occurred in October of 2008, leading to a 777 point drop in a single day.
But while the stock markets today are the primary benefactors of central bank cheap lending policies and near zero interest rates, equities were not the only indicators forecasting an oncoming crash. And one of those alternative indicators was the amount of global trade taking place, which for the first time since the middle of 2009 reached an apex and began to slump.
Just like it did at the very end of 2007.
As Wolf Street’s Wolf Richter adds, this isn’t stagnation or sluggish growth. This is the steepest and longest decline in world trade since the Financial Crisis. Unless a miracle happened in June, and miracles are becoming exceedingly scarce in this sector, world trade will have experienced its first back-to-back quarterly contraction since 2009.
Both of the measures above track import and export volumes. As volumes have been skidding, new shipping capacity has been bursting on the scene in what has become a brutal fight for market share [read… Container Carriers Wage Price War to Form Global Shipping Oligopoly].
Hence pricing per unit, in US dollars, has plunged 14% since May 2014, and nearly 20% since the peak in March 2011. For the months of March, April, and May, the unit price index has hit levels not seen since mid-2009. – Zerohedge
Yet what makes this cycle much more disturbing is that many of the monetary problems global Quantitative Easing was supposed to fix, only lead governments to double their national debts, and banks to hold onto excess cash versus allowing it to work in the general economy. Thus the results have been new bubbles in equities, bonds, and derivatives, and continued declines in real jobs, wages, and small business creation.
(Last record high in October 2007, leading to crash one year later)
The central banks will not acknowledge a recession until it is well under way, decrying instead false and manipulated data to justify that their policies are working when in reality they are not. And as markets such as those in China, France, and ones who rely upon global trade to sustain their growth, the sad fact of the matter is that we are now in a new recession, and are repeating the events that took place in 2007 when it took a major collapse a year later before those in power actually decided to do something about it after the fact.
Kenneth Schortgen Jr is a writer for Secretsofthefed.com, Examiner.com, Roguemoney.net, and To the Death Media, and hosts the popular web blog, The Daily Economist. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.