Bubbles, profits and debt – look out!

5 06 2015

How a non economist like me can see this happen when, people who are supposed to be ‘in the know’ can’t, is truly puzzling.

As less and less money can be made by depositing in banks, investing in gold, oil, coal, iron ore, you name it, more and more people are investing in the stock market which is the only place left to make a killing. For now. Because the companies whose shares are being bought are only worth the profits they can make from lending out at low interest, selling gold, oil, coal, etc etc, making the shares way overpriced with respect to the no longer profitable companies…..

That a major correction is overdue is an understatement.

Michael Roberts Blog

Stock markets in the major economies continue to hit new highs. At the same time, economic growth in the major economies is either slowing down or already at a relatively low level. The UN now forecasts that the global economy, including fast-growing India and high rate China, will expand in real terms (after inflation) by just 2.8% this year. Thus the UN joins the IMF and the World Bank in reducing its growth forecast for this year to around 3% for the world.

And in its semi-annual economic outlook released this week (http://www.oecd.org/economy/strengthening-investment-key-to-improving-world-economy.htm), the OECD has also reduced its forecast for global economic growth.  It warned that weak investment and disappointing productivity growth risk keeping the world economy stuck in a “low-level” equilibrium. The OECD now expects the global economy to expand this year by 3.1%, a sharp downgrade from last November’s forecast of 3.7%. The revision follows…

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