The global economy is slowing rapidly. Let's take a look at some striking examples.



Germany, France, Spain, Italy



Bloomberg is reporting German, French Economies Shrink as Spending, Investment Falter.



Germany and France, the euro area's two largest economies, contracted in the second quarter as faltering sales undermined investment by companies and soaring costs eroded consumer spending power.

German gross domestic product fell a seasonally adjusted 0.5 percent from the first quarter.

French GDP declined 0.3 percent, reversing a 0.4 percent gain in the previous three-month period.

Spain's economy grew at the slowest pace since a 1993 recession in the second quarter as the country's once-booming construction industry slumped.

Italy's economy, the third-biggest in the euro region, unexpectedly shrank in the April-June period, edging closer to a fourth recession in a decade.

An index measuring the economic climate in the euro region dropped to the lowest since 1993, the Munich-based Ifo institute said yesterday. Measures of both current conditions and expectations declined, according to institute's quarterly World Economic Survey.

Japan Economy Shrinks 2.4%

Japan's economy contracted last quarter, bringing the country to the brink of its first recession in six years, as exports fell and consumers spent less.

Gross domestic product shrank an annualized 2.4 percent in the three months ended June 30 after expanding 3.2 percent in the first quarter, the Cabinet Office said today in Tokyo. The Nikkei 225 Stock Average fell the most in a month.

Exports fell the most since the 2001-2002 recession, robbing Japan of the engine that drove its longest postwar expansion, while record fuel and food prices deterred spending at home.



Sharp Slowdown In Australia

The RBA predicts that Australia's annual rate of jobs growth, at present 2.3%, will slow to three-quarters of 1% almost straight away. The forecast implies a jump in unemployment from 4.3% to 6% by the end of next year.

Westpac chief economist Bill Evans said the Reserve Bank seemed to be "shocked" by the severity of the slowdown that it had helped engineer.

Associate Professor Steve Keen from the University of Western Sydney says Brace yourselves for recession in this interview with Phillip Lasker.



New Zealand Recession Fears

Alan Bollard, governor of the Reserve Bank of New Zealand, cut the rate from 8.25 per cent to 8 per cent - still the highest in the industrialised world after Iceland - despite rising inflation, forecast to peak at 5 per cent by September.

Economists said the New Zealand authorities were acting aggressively and taking a gamble in looking through the worsening inflation picture and cutting rates to prevent the economy weakening further.

The move surprised many as it contradicts the Reserve Bank's mandate, which states that achieving and maintaining price stability are the sole objectives of monetary policy. The central bank's stated inflation target band is 1 to 3 per cent.

Economic Chill In The U.K.

The U.K. pound traded near its lowest level in 22 months against the dollar after the Bank of England cut its economic-growth forecast yesterday, signaling it may reduce interest rates.

Bank of England Governor Mervyn King said yesterday he saw a "chill in the economic air" after unemployment climbed in July by the most in almost 16 years. The pound has lost 5.8 percent against the dollar in the past 10 days, more than any other major currency except the South African rand and Australian dollar. The pound fell yesterday by the most in nine months.

"The central bank has effectively opened the door for an interest-rate cut, possibly as soon as next month," Lee Ferridge, a foreign-exchange strategist in London at State Street Global Markets, a unit of the world's largest money manager for institutions, wrote in an e-mailed note to clients today. "Sterling has obviously reacted significantly to this."

Perfectly Obvious

Sterling has obviously reacted significantly to this.

Currency Intervention vs. Fundamentals

I use the term "ignited" the rally. I agree the dollar was oversold, and a rally can occur at any time. But usually a market doesn't rally unless there is some news event or some fundamental change that causes the market to reverse course.

The Fundamental Change

"But usually a market doesn't rally ..."

But usually a market doesn't have a sustainable rally unless there is some news event or some fundamental change that causes the market to reverse course.

fundamental change

There has not been any news exceptionally favorable to the dollar. .... So what happened to cause the dollar to rally over the past three weeks? In a word, intervention.

fundamental change

cause

British Pound vs. US Dollar

Euro vs. US Dollar

Fundamentals Now Perfectly Clear In Hindsight

The Implications Looking Ahead

ignited

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