Citigroup (NYSE:C) Michael Hart stated what everyone is thinking, and that is we’re approaching a perfect storm which could bring about a ‘double-dip’ recession.
Hart said, “The eurozone sovereign crisis, a worldwide regulatory crackdown, fears of an economic slowdown in emerging markets and the possibility of a ‘double-dip’ provide the makings of a perfect storm.”
I would add that the situation in emerging markets, specifically China, isn’t only fear, as it looks like it’s not a matter of cutting back on imports, but how much they’re going to cut back.
This doesn’t mean something outrageous in the slowing China demand, but why you consider the size of their economy, if they do slash imports even from between 1 to 2 percent, it’s an enormous number. And if you add that together with the other elements, and you indeed have the potential for a brewing economic perfect storm.
The fall of the first bank in Spain, the 146-year-old CajaSur, which the is Bank of Spain has taken them over, is considered only the first of many sure to collapse, and Spain is a considered an important market, one that is much larger than Greece.
It also looks like the banking regulations put forth by the politicians may be overkill, as they public outcry, much of which was generated from the anti-business mainstream media, could end up with politicians trying to please them to garner votes too much, and could devastate the industry. Even those that have encouraged reform are starting to be alarmed at the amount of regulation and how it could significantly and negatively impact the revenue and earnings of the banks.
Speaking of banks, they’re not lending in the U.S., and businesses aren’t borrowing. The reason for that is they continue to not trust the so-called recovery, and they understand that there isn’t any sustainability to it, as the government has been largely the biggest customer, throwing money around in hopes consumers will start to take up the slack, which they haven’t.
Unemployment in the U.S. lingers around 10 percent, China and other Asian nations are going to slow down imports, regulations could paralyze the banking industry and businesses aren’t borrowing.
This is a perfect economic storm, and even if countries try to stop it be printing and throwing more money at it, it’s not going to work. If the trillions around the world didn’t do it, throwing trillion more will be a futile strategy as well.