Die Weltwirtschaft in der Gefahrenzone

In the US, private capital growth is already pulling the economy down. Germany could follow soon. It is too early to give the all-clear.
There was a lot of talk in 2019 about the dangers of a recession. At the turn of the year, however, many economists and investors seem to assume that the uncertainty caused by world politics (trade dispute, Brexit) and thus the worries about the crisis will wane somewhat. After all, there have been no major exaggerations in global capital accumulation so far. And if there was no room for private credit excesses, there could be no serious reason for an economic crisis. This widespread view at the turn of the year doesn't have to be that wrong.

But we will see here in just two charts what has been this year and what will be next year - at least in the first months of 2020. One for Germany and one for the USA. In fact, something like a bottom formation (i.e. no upturn yet) could currently begin, or else: the downturn is just starting. As the headline says, I tend to be more pessimistic (viewed through the glasses of economic rate dynamics). But this is just one point of view, mine in this blog, which has been negative for a good four years now.

Psychology shakes up cyclical trends

If we recognize tactics correctly in football, we can often explain victory or defeat in the game. But then there are always individual strengths, fighting spirit, attitudes, luck or coincidences that all mix things up. Economists also talk about coincidences when they analyze economies. But then also gladly of expectations, uncertainty, herd instinct, shocks or panic: Such psychological (market) phenomena, however, often only reinforce fundamental, cyclical tendencies.

Something else is also typical of the shaky economic cycle since the financial crisis: Whenever crisis tendencies are even latent, a decisive kick can turn the development in a positive direction. Of course, this also includes the central banks (which at least have a psychological impact on the markets with their bond purchases). While many people in northern Europe bitterly complain about low and negative interest rates, the majority in Europe and the United States can at least be pleased that there have been no recent crises in the labor market.

But first, my favorite graphic of the year. It comes from a lecture by Hyun Song Shin, BIS chief economist, it shows the most important centers of the value chains in the world and how they have shifted since 2000. Since we simply do not have the data for China to properly consider the rate dynamics, which is the focus of this blog, we will have to concentrate on the United States and Germany, where this is better possible.