This will be pretty short, but Japan has announced that the economy there actually shrank in the second quarter. The Japanese government originally announced the economy grew. What's more is that this was twice as bad as the forecast was. This comes at a time when the U.S. economy is slowing down and produced only 120,000 jobs over the past three months (including a loss of 4,000 jobs in August.)
That Japan is now receding implies at least one major issue that contradicts what globalizers so frequently argue: if the U.S. economy goes into recession, the rest of the world will carry the torch for global economic growth. So far, one major player (the world's second largest economy) has struck out. In terms of other developed nations, this basically leaves Europe, Canada, and Australia. Yet, some European nations (like Germany, for instance) have reported slower than expected growth. This says that a global recession may actually be taking root, and the basis for that already assumes the U.S. would go into recession either way.
The dollar also continues to weaken, especially against the yen. As some have already said earlier, the dollar is at a 16-year low, despite that there haven't been any cuts in interest rates for over a year now. The Nikkei 225 fell a dramatic 450 points in the first hour today. I don't imagine the U.S. stock market will handle this news from Japan well either, especially since news here at home is bad (Countrywide announced it would cut 12,000 jobs—20% of its entire workforce—over the next three months.) The significance of the Countrywide payroll cuts implies a couple of things. For one, this crisis is NOT even close to over as job cuts continue to arrive at a rapid pace. Also, Countrywide is the largest mortgage lender in the United States, which, backdropped against a dark cloud of other troubled lending companies, is pretty ominous. The news that is coming in is hardly "mixed" anymore, they are strongly pointing to one, very negative trend. If August retail sales come in worse than expected in Friday's report, you can bet your life it will clinch the demands for a Fed rate cut.
UPDATE 1 a.m.
Chief Investment Strategist Michael Mertz of Oppenheimer believes there is a serious risk of a "long-lasting recession." This is a complete reversal from his thoughts back in February when he said in an interview about the housing slump,
"No, I don't, but it looks like it won't really upend the economy. I think it's going to be a little worse than expected, more durable, but it doesn't look like it brings about a recession."
http://www.pbs.org/...
What he said today was far more ghastly. Mertz seems to believe there will be a 1,600 point drop in the DJIA in two months. Whether that means in a single day or throughout two months is not made clear.
Following Friday's announcement of the August shortfall in job numbers — which sent the Dow skidding nearly 250 points — "there is now a 90% chance we could go into a recession, not for just a few months, but into a long-lasting recession," Mr. Metz says.
http://www.nysun.com/...