Global Economies Continue to Weaken, IMF Slashes Growth - Nathan McDonald

January 21, 2016

We are facing slowing global growth, a growing crisis in China, a crashing oil market, and tensions are flaring. What's not to love? According to the mainstream media and Western Central Bankers, nothing! Everything is peachy, except a few tiny problems that should be of no concern to the man on the street. Yet, you and I know the reality is very, very different.

The fact is, things are getting worse at a rapid pace, not better. Even the jobs numbers which may be increasing in the United States are revealed to be a farce once you delve into them. High-quality, high-paying jobs are being replaced by multiple low-wage jobs, in which more hours are required to make old wages.

In addition to this, debt is once again rising at a time when food prices are soaring, especially in countries that are most affected by a crashing oil price, such as Canada. This is the worst of both worlds, and although I am not in the camp that believes oil prices are going to remain at these levels forever, the fact is, the damage is done and it's going to take years for the markets to fully recover and for the jobs come back.

The International Monetary Fund (IMF) is becoming increasingly worried as well, and highlight many of these points in their most recent report. Maurice Obstfeld, IMF Economic Counselor and Director of Research, had the following to say;

“This coming year is going to be a year of great challenges and policymakers should be thinking about short-term resilience and the ways they can bolster it, but also about the longer-term growth prospects.”

The report goes on to highlight many risks that the world faces going forward, some of which have been extensively talked about here on Sprott Money, such as a slowing emerging economy, a strong US dollar, and the crashing commodities markets. The report also warns of:

• A sharper-than-expected slowdown in China, which could bring more international spillovers through trade, commodity prices, and waning confidence.

• A further appreciation of the dollar and tighter global financing conditions which could raise vulnerabilities in emerging markets, possibly creating adverse effects on corporate balance sheets and raising funding challenges for those with high dollar exposures.

• A sudden bout of global risk aversion, which regardless of the trigger, could lead to further depreciations and possible financial strains in vulnerable emerging market economies.

• An escalation of ongoing geopolitical tensions in a number of regions, which could affect confidence and disrupt global trade, financial flows, and tourism. New economic or political shocks in countries currently in economic distress could also derail the projected pickup in activity.

Sadly, if you've been reading the Sprott Money Blog for any extended period of time, you are well aware of the fact that these are not the only risks that the global markets currently face.

The true state of the economy is not what you hear Central Bankers discussing, it is not the glossed-over image that you see on TV. The reality is, the world is sick and at the root of the problem is fiat money. So what is the salvation and eventual end game? Precious metals, the one true anchor of the financial world.