Thursday, January 14, 2016

AMERICA: NO DAMNED AMERICA (Legal) NEED APPLY!!! - Obama's Dismal Labor Force Participation - MILLIONS OF JOBS FOR LOOTING ILLEGALS AND BILLIONS FOR WELFARE

Obama’s Legacy? Dismal and Declining Labor Force Participation


By Daniel Mitchell | January 14, 2016 | 10:35 AM EST
 
88.8K6
Shares


(AP File Photo/Matt Rourke)
I normally enjoy working for the Cato Institute since it’s a principled and effective organization.
But every so often, my job requires an unpleasant task, and watching the State-of-the-Union Address as part of Cato’s live-tweeting program counts as one my least enjoyable experiences since joining the team.

But let’s make lemonade out of lemons by looking at lessons that can be learned from Obama’s speech. The most jarring part of the evening was when Obama bragged about the American economy.
Since we’re suffering through the weakest recovery since the Great Depression, that was rather bizarre.

Moreover, being proud that we’re doing better than Europe is akin to getting a participation ribbon in a soccer league for kids.

And the chest thumping about the unemployment rate was very misplaced since that piece of data only looks good because so many Americans have given up on finding a job.

I’ve pontificated on that issue before and cited the Labor Department’s overall data, but let’s dig a little deeper to fully understand why Obama should have apologized rather than patted himself on the back.

Here’s the employment/population ratio for the prime, working-age population of those between 25 and 54 years of age.


As you can see, this ratio has improved a bit over the past five years, but it appears that there’s very little hope that the overall employment situation will ever recover to where it was before the recession.
At least not with current policies.
Here’s another way of looking at the same data. It’s labor force participation by age. The lines don’t seem that far apart, but a 3-4 percentage point decline across age groups adds up to millions of people no longer productively employed.

Last but not least, here’s another way of approaching this data.
We have a chart from the St. Louis Federal Reserve Bank showing the number of working-age people not in the labor force.

There are two takeaways from this chart.

First, it’s clear that the problem started well before Obama.

But it’s also clear that the problem has gotten much worse during his tenure.

The bottom line is that the expansion of redistribution programs has lured more and more people out of the labor force, particularly when matched by government policies that have hindered the private sector’s ability to create jobs.

Daniel J. Mitchell is a top expert on tax reform and supply-side tax policy at the Cato Institute. Mitchell is a strong advocate of a flat tax and international tax competition.

Sessions rips Obama's 'autopilot immigration flow': In a new immigration pitch, Alabama Sen. Jeff Sessions is urging the GOP to adopt reforms focused securing borders and stopping the administration's efforts that let companies favor cheaper immigrants over American employees. Sessions and Virginia Rep. Dave Brat, in a letter to Republicans, said that kind of a reform package will win over independent voters and disgruntled Democrats. We should correctly define the words 'immigration reform' to refer exclusively to the policies our voters – and all voters – can cheer and celebrate. Real 'immigration reform' protects American workers, families, and livelihoods. Defined this way, it is always the 'right time' to promote 'immigration reform,' the duo wrote in a letter hand-delivered to all House and Senate GOP offices.

Placating Americans with Fake Immigration Law Enforcement

How our leaders create fantasy 'solutions' for our immigration-related vulnerabilities.

 By Michael Cutler

 FrontPageMag.com, December 4, 2015

Therefore the Visa Waiver Program should have been terminated after the terror attacks of 9/11 yet it has continually been expanded.

It is clear that the overarching goal of a succession of administrations and many members of Congress, irrespective of political party affiliation, is to keep our borders open and take no meaningful action to stop that flow of aliens into the United States.
. . .
The obvious question is why the Visa Waiver Program is considered so sacrosanct that even though it defies the advice and findings of the 9/11 Commission no one has the moral fortitude to call for simply terminating this dangerous program.

The answer can be found in the incestuous relationship between the Chamber of Commerce and its subsidiary, the Corporation for Travel Promotion, now doing business as Brand USA.

The Chamber of Commerce has arguably been the strongest supporter of the Visa Waiver Program, which currently enables aliens from 38 countries to enter the United States without first obtaining a visa.

The U.S. State Department provides a thorough explanation of the Visa Waiver Program on its website.

Incredibly, the official State Department website also provides a link, “Discover America,” on that website which relates to the website of The Corporation for Travel Promotion, which is affiliated with the travel industries that are a part of the “Discover America Partnership.
 
much more here:

http://mexicanoccupation.blogspot.com/2015/12/amnesty-hoax-to-keep-wages-depressed.html

BUYING SECRETARY of STATE HILLARY CLINTON - BUT ONLY IF YOU COME WITH SPEECH BRIBES IN HAND - Nine times Clinton Foundation donors got special access at State

Nine times Clinton Foundation donors got special access at State: Nine examples of State Department access Hillary Clinton granted to her foundation's top donors.



That dream is slowly crashing and burning.  Even without a criminal referral or indictment, Hillary’s chances are fading fast.


Hillary’s long goodbye

I must be an awful human being, because I am reveling in the déjà vu Hillary Clinton must be experiencing, as her presidential campaign appears to be heading toward collapse.  And this time, the humiliation – and peril – is far greater than anything 2008 dealt her.  To state the obvious, her longstanding preference for pantsuits is one thing, but the orange jumpsuits of a federal penitentiary are quite something else.

I realize I am getting way ahead of myself here, that predictions are always risky – especially about the future, as Yogi Berra reminded us.  We don’t yet know if there will be a criminal referral from the FBI, though the D.C. rumor mill is operating at full steam, averring that 50 more FBI special agents have been added to the case, making the total team well into triple digits.  That the FBI would devote that level of resources to the case suggests that they are tying up any possible loose ends, to have an airtight cases presented to Loretta Lynch.  (More on this later.)

Potential legal peril aside for the moment, the humiliations she faces are daunting for a woman of her arrogance.  Her husband’s penchant for illicit sex with women far younger and more attractive is once again being thrown in her face, and this time the trusty old injured wife gambit not only doesn’t work, but is being used against her, painting her as an enabler of a sexual abuser.

Back in the impeachment days, she could count on the mainstream media to keep a lid on negative information and portray her husband’s accusers and investigators as a bunch of sex-obsessed prudes.  Not only have the internet and cable news forever destroyed the cofferdam around embarrassing news these days, but substantial chunks of the mainstream media no longer see themselves as guardians of the Clinton empire.  For one thing, a Democrat president is not being threatened with removal from office.  For another, she is not the only game in town.  Just as in 2008 they could abandon her for a younger member of a minority, one who was a far more skillful campaigner, now they have the elderly Bernie Sanders carrying the actual torch of socialism, and drawing enthusiastic crowds.

And then there is the small matter of all the knives in the hands of members of her own party that have been sheathed all these decades since she and Bill first entered the White House as tenants.  She has made a lot of enemies over the years, snubbing some, ignoring others, and behaving with the arrogance and self-centeredness that has been a visible part of her character ever since she entered pubic life.  There is a struggle underway for the future of the Democratic Party between the Obama faction and the Clinton faction.  When she appeared inevitable, an uneasy truce prevailed.  But if she may be tied up with a criminal defense case, that would solve a lot of problems for the Obama-ites.

That is something to ponder as we await a possible criminal referral to the Department of Justice and A.G. Lynch’s response.

Meanwhile, Joe Biden very publicly “regrets every day” his decision not to run for president.

If, as speculated, Elizabeth Warren were to align herself with a Biden candidacy, perhaps as the veep nominee, it would palliate the socialist Sanders supporters.

The old certitudes about the Clintons have crumbled.  Bill no longer is a vibrant, likable, vigorous exponent of hope; he is instead a hollow shell, a creepy degenerate who reminds us of our own mortality after heart bypass operations and drastic weight loss.

I am convinced that the greatest prize of all for Hillary was not Air Force One or the other perks; it was going to be the ability to put Bill in his place.  After Hillarycare crashed and burned, she was removed from the co-presidency she believed she had won, fair and square.  And it had to rankle.  There must have been a moment when he reminded her that his name, and his name alone, appeared on the ballot, and that his decision was final.

Oh, how she must have looked forward to pulling rank on the first gentleman!

That dream is slowly crashing and burning.  Even without a criminal referral or indictment, Hillary’s chances are fading fast.  Sanders looks as though he may sweep Iowa and New Hampshire.  Once that happens, it is 2008 all over again.  The Democrat establishment may not want Sanders on the ticket, but they are fully capable of drafting Biden, Warren, Booker, or another Dem, and then changing the convention rules to nominate whomever they want.  But I doubt that will be necessary.  The gears of the FBI are turning faster and faster.  Policy requires that if a politician be accused of wrongdoing, it be done as long before an election as possible.

Time is not on Hillary’s side.

Read more: http://www.americanthinker.com/blog/2016/01/hillarys_long_goodbye.html#ixzz3xFVCi5oA

Follow us: @AmericanThinker on Twitter | AmericanThinker on Facebook


Wave of selling hits US markets

Wave of selling hits US markets

By Nick Beams
14 January 2016
US stocks markets tumbled Wednesday as oil prices continued to fall and voices in the finance industry, together with economic commentators, warned of the potential for a major crisis.

The sell-off was across the board, the Dow falling by 365 points, 2.21 percent, the S&P 500 by 2.50 percent and the Nasdaq down by 3.4 percent. The day opened with an uptick but large-volume selling soon set in, the prevailing sentiment being that it was necessary to get out without waiting to see what would happen during the rest of the day.

Commentators said the sell-off was not just about oil, which has been touching levels as low as $30 per barrel, but the fall in prices for all industrial raw materials induced by the slowdown in China.
The sharp downturn has come in the wake of a series of assessments by banking officials that the conditions for a new financial crisis are fast developing.

On Tuesday economists at the Royal Bank of Scotland issued an assessment that said investors faced a “cataclysmic year” in which stocks could fall by 20 percent and oil could go as low as $16 per barrel.

In a note to clients, the RBS said: “Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small.” It warned that the present situation recalled 2008 when the collapse of Lehman Brothers set off a global crisis. This time the trigger could be China.

The bank’s credit chief Andrew Roberts said China had set off a “major correction and it is going to snowball” with equities and credit becoming “very dangerous.” He warned that the London market was particularly vulnerable to a negative shock because of the large number of commodity companies in the UK. The prices of all industrial raw materials, not just oil, are moving sharply down, reaching lows not seen since the immediate aftermath of the financial crisis.

“All those people who are long [buyers of] oil and mining companies thinking that the dividends are safe are going to discover than they’re not at all safe,” Roberts said.

RBS’s prediction of a sharply lower oil price was matched by Morgan Stanley which said it could go to $20 per barrel. Standard Charter forecast an even bigger fall, to $10. “Given that no fundamental relationship is driving the oil market toward any equilibrium, prices are being moved almost entirely by financial flows caused by fluctuations in other asset prices, including the US dollar and equity markets. We think prices could fall as low as $10 per barrel.”

The Standard Chartered analysis points to the development of a vicious circle: a falling oil price sends down equity markets and then financial flow-on effects from the decline in stock prices lead to a further drop in the price of oil.

Following the RBS call to “sell everything,” the Guardian sought responses from a series of economists. While none went as far as the RBS, there was a distinct lack of confidence in their replies.

Erik Britton, director of Fathom Consulting, did not dispute that China would have a “hard landing.” He said it was headed for just 2 percent growth in gross domestic product, markedly less than the official government prediction of 6.5 percent for this year.

Jonathan Porter, the director of the National Institute for Economic and Social Research, said he was “worried” by current events “but not yet panicked.”

“But if the current concerns turn into a systematic meltdown on financial markets, then all bets are off,” he added.

Chris Williamson, the chief economist at the financial data provider Markit, said the worry was that the RBS warning could become a self-fulfilling prophecy and if a financial market rout led to a new recession, “policymakers are seriously lacking in tools to fight the new downturn.”

The RBS assessment was echoed by comments on Wednesday from Albert Edwards, strategist at the Societe Generale bank, who has long held the belief that equity markets are considerably over-valued. He said the West was about to be hit by a wave of deflation from emerging market economies and central banks were not aware of what was about to hit them.

He told an investment conference in London that developments in the global economy would “push the US back into recession. The financial crisis will reawaken. It will be every bit as bad as in 2008–09 and it will turn very ugly indeed.”

The US economy was in much worse shape than the Fed realised, with the US corporate sector being “crushed” by the appreciation in the value of the dollar. “We have seen massive credit expansion in the US. This is not for real economic activity; it is borrowing to finance share buybacks,” he said.
In an assessment of the significance of the fall in the markets, which in the US have experienced their worst new year opening in history, an article in the Financial Times on Monday pointed to longer-term trends. In the wake of the financial crisis, “aggressive easing” by the Fed and other central banks, coupled with a “mammoth spending binge” by China, had suppressed market volatility for an extended period and created a tide that lifted global assets prices.

“Now that liquidity is draining away and the bill for China’s spending—in the shape of overcapacity in some industries and high levels of indebtedness—is coming due,” the article noted.

“The worrying signal from the current turmoil is that the investor herd truly has become fearful and thinks the financial system is broken. Namely, that quantitative easing has merely papered over the cracks of global economic imbalances, borrowed hefty investment gains from the future and left taxpayers and company bondholders with a massive rise in outstanding debt.”

International Monetary Fund managing director Christine Lagarde also pointed to longer-term trends in a speech delivered in Paris on Tuesday. She said emerging market economies were facing a “new reality” in which their growth rates would be significantly slowed.

“Growth rates are down, and cyclical and structural forces have undermined the traditional growth paradigm,” she said.

That paradigm was based on boosting exports and attracting capital inflows. On current forecasts, she said emerging economies would move towards advanced economy incomes at less than two-thirds the pace predicted by the IMF a decade ago. “This is cause for concern,” she said.

The World Bank last week warned that these economies faced difficulties in 2016 after growing last year at their slowest pace since the financial crisis of 2008.

Lagarde said the shift by the Fed towards ending its easy monetary policies, together with the continuation of these policies by other central banks, had the potential to trigger exchange rate ructions.

“This volatility could be induced not only by the divergence in monetary policies in major advanced economies, but also by uncertainty about their overall prospects and policy action.”
In an indication of the deepening recessionary trends in the global economy, she noted that oil and metal prices were down by two-thirds from their peak and were likely “to stay low for a sustained period,” placing several developing economies “under severe stress.”
That stress is already in evidence with major economic contractions in Brazil and Russia, but it is not confined there. The economic outlook for two developed commodity-exporting countries, Australia and Canada, is also worsening.
Former US treasury secretary Lawrence Summers added his voice to those warning about the state of the global economy in a comment published in the Financial Times on Monday. He said that while markets do sometimes send out false alarms, economic and financial authorities should take notice because “the conventional wisdom never recognises gathering storms.”
“Because of China’s scale, its potential volatility and the limited room for conventional monetary manoeuvres, the global risk to domestic economic performance in the US, Europe and many emerging markets is as great as at any time I can remember,” he wrote.
It is impossible to predict exactly how the present turmoil will play out. But two certainties have been established.
Firstly, that the 2008 financial crisis was only the beginning of a breakdown of the global capitalist economy, for which the ruling elites have no economic solution. In fact, their actions have only created further wealth for the ultra-rich, increasing social inequality, while setting up the conditions for another financial meltdown.
And finally, that the renewed turbulence is going to produce even deeper attacks on the working class which, on top on those already being implemented, will bring an upsurge in social and political struggles.

SEN. JEFF SESSIONS - THE SABOTAGE of AMERICA'S HOMELAND SECURITY and BORDERS BY BARACK OBAMA - LA RAZA SUPREMACIST - Sessions rips Obama's 'autopilot immigration flow'

Sessions rips Obama's 'autopilot immigration flow': In a new immigration pitch, Alabama Sen. Jeff Sessions is urging the GOP to adopt reforms focused securing borders and stopping the administration's efforts that let companies favor cheaper immigrants over American employees. Sessions and Virginia Rep. Dave Brat, in a letter to Republicans, said that kind of a reform package will win over independent voters and disgruntled Democrats. We should correctly define the words 'immigration reform' to refer exclusively to the policies our voters – and all voters – can cheer and celebrate. Real 'immigration reform' protects American workers, families, and livelihoods. Defined this way, it is always the 'right time' to promote 'immigration reform,' the duo wrote in a letter hand-delivered to all House and Senate GOP offices.

Placating Americans with Fake Immigration Law EnforcementHow our leaders create fantasy 'solutions' for our immigration-related vulnerabilities.

 By Michael Cutler

 FrontPageMag.com, December 4, 2015

Therefore the Visa Waiver Program should have been terminated after the terror attacks of 9/11 yet it has continually been expanded.

It is clear that the overarching goal of a succession of administrations and many members of Congress, irrespective of political party affiliation, is to keep our borders open and take no meaningful action to stop that flow of aliens into the United States.
. . .
The obvious question is why the Visa Waiver Program is considered so sacrosanct that even though it defies the advice and findings of the 9/11 Commission no one has the moral fortitude to call for simply terminating this dangerous program.

The answer can be found in the incestuous relationship between the Chamber of Commerce and its subsidiary, the Corporation for Travel Promotion, now doing business as Brand USA.

The Chamber of Commerce has arguably been the strongest supporter of the Visa Waiver Program, which currently enables aliens from 38 countries to enter the United States without first obtaining a visa.

The U.S. State Department provides a thorough explanation of the Visa Waiver Program on its website.

Incredibly, the official State Department website also provides a link, “Discover America,” on that website which relates to the website of The Corporation for Travel Promotion, which is affiliated with the travel industries that are a part of the “Discover America Partnership.
 
much more here:

http://mexicanoccupation.blogspot.com/2015/12/amnesty-hoax-to-keep-wages-depressed.html

 

Obama’s Legacy? Dismal and Declining Labor Force Participation

By Daniel Mitchell | January 14, 2016 | 10:35 AM EST
 
88.8K6
Shares
(AP File Photo/Matt Rourke)
I normally enjoy working for the Cato Institute since it’s a principled and effective organization.
But every so often, my job requires an unpleasant task, and watching the State-of-the-Union Address as part of Cato’s live-tweeting program counts as one my least enjoyable experiences since joining the team.

But let’s make lemonade out of lemons by looking at lessons that can be learned from Obama’s speech. The most jarring part of the evening was when Obama bragged about the American economy.
Since we’re suffering through the weakest recovery since the Great Depression, that was rather bizarre.

Moreover, being proud that we’re doing better than Europe is akin to getting a participation ribbon in a soccer league for kids.

And the chest thumping about the unemployment rate was very misplaced since that piece of data only looks good because so many Americans have given up on finding a job.

I’ve pontificated on that issue before and cited the Labor Department’s overall data, but let’s dig a little deeper to fully understand why Obama should have apologized rather than patted himself on the back.

Here’s the employment/population ratio for the prime, working-age population of those between 25 and 54 years of age.


As you can see, this ratio has improved a bit over the past five years, but it appears that there’s very little hope that the overall employment situation will ever recover to where it was before the recession.
At least not with current policies.
Here’s another way of looking at the same data. It’s labor force participation by age. The lines don’t seem that far apart, but a 3-4 percentage point decline across age groups adds up to millions of people no longer productively employed.

Last but not least, here’s another way of approaching this data.
We have a chart from the St. Louis Federal Reserve Bank showing the number of working-age people not in the labor force.

There are two takeaways from this chart.

First, it’s clear that the problem started well before Obama.

But it’s also clear that the problem has gotten much worse during his tenure.

The bottom line is that the expansion of redistribution programs has lured more and more people out of the labor force, particularly when matched by government policies that have hindered the private sector’s ability to create jobs.

Daniel J. Mitchell is a top expert on tax reform and supply-side tax policy at the Cato Institute. Mitchell is a strong advocate of a flat tax and international tax competition.

 

WAS THE FALL OF HILLARY CLINTON REALLY CAUSED BY BILLARY CLINTON? Or by all the bribes the two sucked in from banksters, Muslim dictators and criminal billionaires?

I must be an awful human being, because I am reveling in the déjà vu Hillary Clinton must be experiencing, as her presidential campaign appears to be heading toward collapse.  And this time, the humiliation – and peril &ndash...


Nine times Clinton Foundation donors got special access at State: Nine examples of State Department access Hillary Clinton granted to her foundation's top donors.


That dream is slowly crashing and burning.  Even without a criminal referral or indictment, Hillary’s chances are fading fast.


Hillary’s long goodbye

I must be an awful human being, because I am reveling in the déjà vu Hillary Clinton must be experiencing, as her presidential campaign appears to be heading toward collapse.  And this time, the humiliation – and peril – is far greater than anything 2008 dealt her.  To state the obvious, her longstanding preference for pantsuits is one thing, but the orange jumpsuits of a federal penitentiary are quite something else.

I realize I am getting way ahead of myself here, that predictions are always risky – especially about the future, as Yogi Berra reminded us.  We don’t yet know if there will be a criminal referral from the FBI, though the D.C. rumor mill is operating at full steam, averring that 50 more FBI special agents have been added to the case, making the total team well into triple digits.  That the FBI would devote that level of resources to the case suggests that they are tying up any possible loose ends, to have an airtight cases presented to Loretta Lynch.  (More on this later.)

Potential legal peril aside for the moment, the humiliations she faces are daunting for a woman of her arrogance.  Her husband’s penchant for illicit sex with women far younger and more attractive is once again being thrown in her face, and this time the trusty old injured wife gambit not only doesn’t work, but is being used against her, painting her as an enabler of a sexual abuser.

Back in the impeachment days, she could count on the mainstream media to keep a lid on negative information and portray her husband’s accusers and investigators as a bunch of sex-obsessed prudes.  Not only have the internet and cable news forever destroyed the cofferdam around embarrassing news these days, but substantial chunks of the mainstream media no longer see themselves as guardians of the Clinton empire.  For one thing, a Democrat president is not being threatened with removal from office.  For another, she is not the only game in town.  Just as in 2008 they could abandon her for a younger member of a minority, one who was a far more skillful campaigner, now they have the elderly Bernie Sanders carrying the actual torch of socialism, and drawing enthusiastic crowds.

And then there is the small matter of all the knives in the hands of members of her own party that have been sheathed all these decades since she and Bill first entered the White House as tenants.  She has made a lot of enemies over the years, snubbing some, ignoring others, and behaving with the arrogance and self-centeredness that has been a visible part of her character ever since she entered pubic life.  There is a struggle underway for the future of the Democratic Party between the Obama faction and the Clinton faction.  When she appeared inevitable, an uneasy truce prevailed.  But if she may be tied up with a criminal defense case, that would solve a lot of problems for the Obama-ites.

That is something to ponder as we await a possible criminal referral to the Department of Justice and A.G. Lynch’s response.

Meanwhile, Joe Biden very publicly “regrets every day” his decision not to run for president.

If, as speculated, Elizabeth Warren were to align herself with a Biden candidacy, perhaps as the veep nominee, it would palliate the socialist Sanders supporters.

The old certitudes about the Clintons have crumbled.  Bill no longer is a vibrant, likable, vigorous exponent of hope; he is instead a hollow shell, a creepy degenerate who reminds us of our own mortality after heart bypass operations and drastic weight loss.

I am convinced that the greatest prize of all for Hillary was not Air Force One or the other perks; it was going to be the ability to put Bill in his place.  After Hillarycare crashed and burned, she was removed from the co-presidency she believed she had won, fair and square.  And it had to rankle.  There must have been a moment when he reminded her that his name, and his name alone, appeared on the ballot, and that his decision was final.

Oh, how she must have looked forward to pulling rank on the first gentleman!

That dream is slowly crashing and burning.  Even without a criminal referral or indictment, Hillary’s chances are fading fast.  Sanders looks as though he may sweep Iowa and New Hampshire.  Once that happens, it is 2008 all over again.  The Democrat establishment may not want Sanders on the ticket, but they are fully capable of drafting Biden, Warren, Booker, or another Dem, and then changing the convention rules to nominate whomever they want.  But I doubt that will be necessary.  The gears of the FBI are turning faster and faster.  Policy requires that if a politician be accused of wrongdoing, it be done as long before an election as possible.

Time is not on Hillary’s side.

Read more: http://www.americanthinker.com/blog/2016/01/hillarys_long_goodbye.html#ixzz3xFVCi5oA

Follow us: @AmericanThinker on Twitter | AmericanThinker on Facebook


Wave of selling hits US markets

Wave of selling hits US markets

By Nick Beams
14 January 2016
US stocks markets tumbled Wednesday as oil prices continued to fall and voices in the finance industry, together with economic commentators, warned of the potential for a major crisis.

The sell-off was across the board, the Dow falling by 365 points, 2.21 percent, the S&P 500 by 2.50 percent and the Nasdaq down by 3.4 percent. The day opened with an uptick but large-volume selling soon set in, the prevailing sentiment being that it was necessary to get out without waiting to see what would happen during the rest of the day.

Commentators said the sell-off was not just about oil, which has been touching levels as low as $30 per barrel, but the fall in prices for all industrial raw materials induced by the slowdown in China.
The sharp downturn has come in the wake of a series of assessments by banking officials that the conditions for a new financial crisis are fast developing.

On Tuesday economists at the Royal Bank of Scotland issued an assessment that said investors faced a “cataclysmic year” in which stocks could fall by 20 percent and oil could go as low as $16 per barrel.

In a note to clients, the RBS said: “Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small.” It warned that the present situation recalled 2008 when the collapse of Lehman Brothers set off a global crisis. This time the trigger could be China.

The bank’s credit chief Andrew Roberts said China had set off a “major correction and it is going to snowball” with equities and credit becoming “very dangerous.” He warned that the London market was particularly vulnerable to a negative shock because of the large number of commodity companies in the UK. The prices of all industrial raw materials, not just oil, are moving sharply down, reaching lows not seen since the immediate aftermath of the financial crisis.

“All those people who are long [buyers of] oil and mining companies thinking that the dividends are safe are going to discover than they’re not at all safe,” Roberts said.

RBS’s prediction of a sharply lower oil price was matched by Morgan Stanley which said it could go to $20 per barrel. Standard Charter forecast an even bigger fall, to $10. “Given that no fundamental relationship is driving the oil market toward any equilibrium, prices are being moved almost entirely by financial flows caused by fluctuations in other asset prices, including the US dollar and equity markets. We think prices could fall as low as $10 per barrel.”

The Standard Chartered analysis points to the development of a vicious circle: a falling oil price sends down equity markets and then financial flow-on effects from the decline in stock prices lead to a further drop in the price of oil.

Following the RBS call to “sell everything,” the Guardian sought responses from a series of economists. While none went as far as the RBS, there was a distinct lack of confidence in their replies.

Erik Britton, director of Fathom Consulting, did not dispute that China would have a “hard landing.” He said it was headed for just 2 percent growth in gross domestic product, markedly less than the official government prediction of 6.5 percent for this year.

Jonathan Porter, the director of the National Institute for Economic and Social Research, said he was “worried” by current events “but not yet panicked.”

“But if the current concerns turn into a systematic meltdown on financial markets, then all bets are off,” he added.

Chris Williamson, the chief economist at the financial data provider Markit, said the worry was that the RBS warning could become a self-fulfilling prophecy and if a financial market rout led to a new recession, “policymakers are seriously lacking in tools to fight the new downturn.”

The RBS assessment was echoed by comments on Wednesday from Albert Edwards, strategist at the Societe Generale bank, who has long held the belief that equity markets are considerably over-valued. He said the West was about to be hit by a wave of deflation from emerging market economies and central banks were not aware of what was about to hit them.

He told an investment conference in London that developments in the global economy would “push the US back into recession. The financial crisis will reawaken. It will be every bit as bad as in 2008–09 and it will turn very ugly indeed.”

The US economy was in much worse shape than the Fed realised, with the US corporate sector being “crushed” by the appreciation in the value of the dollar. “We have seen massive credit expansion in the US. This is not for real economic activity; it is borrowing to finance share buybacks,” he said.
In an assessment of the significance of the fall in the markets, which in the US have experienced their worst new year opening in history, an article in the Financial Times on Monday pointed to longer-term trends. In the wake of the financial crisis, “aggressive easing” by the Fed and other central banks, coupled with a “mammoth spending binge” by China, had suppressed market volatility for an extended period and created a tide that lifted global assets prices.

“Now that liquidity is draining away and the bill for China’s spending—in the shape of overcapacity in some industries and high levels of indebtedness—is coming due,” the article noted.

“The worrying signal from the current turmoil is that the investor herd truly has become fearful and thinks the financial system is broken. Namely, that quantitative easing has merely papered over the cracks of global economic imbalances, borrowed hefty investment gains from the future and left taxpayers and company bondholders with a massive rise in outstanding debt.”

International Monetary Fund managing director Christine Lagarde also pointed to longer-term trends in a speech delivered in Paris on Tuesday. She said emerging market economies were facing a “new reality” in which their growth rates would be significantly slowed.

“Growth rates are down, and cyclical and structural forces have undermined the traditional growth paradigm,” she said.

That paradigm was based on boosting exports and attracting capital inflows. On current forecasts, she said emerging economies would move towards advanced economy incomes at less than two-thirds the pace predicted by the IMF a decade ago. “This is cause for concern,” she said.

The World Bank last week warned that these economies faced difficulties in 2016 after growing last year at their slowest pace since the financial crisis of 2008.

Lagarde said the shift by the Fed towards ending its easy monetary policies, together with the continuation of these policies by other central banks, had the potential to trigger exchange rate ructions.

“This volatility could be induced not only by the divergence in monetary policies in major advanced economies, but also by uncertainty about their overall prospects and policy action.”
In an indication of the deepening recessionary trends in the global economy, she noted that oil and metal prices were down by two-thirds from their peak and were likely “to stay low for a sustained period,” placing several developing economies “under severe stress.”
That stress is already in evidence with major economic contractions in Brazil and Russia, but it is not confined there. The economic outlook for two developed commodity-exporting countries, Australia and Canada, is also worsening.
Former US treasury secretary Lawrence Summers added his voice to those warning about the state of the global economy in a comment published in the Financial Times on Monday. He said that while markets do sometimes send out false alarms, economic and financial authorities should take notice because “the conventional wisdom never recognises gathering storms.”
“Because of China’s scale, its potential volatility and the limited room for conventional monetary manoeuvres, the global risk to domestic economic performance in the US, Europe and many emerging markets is as great as at any time I can remember,” he wrote.
It is impossible to predict exactly how the present turmoil will play out. But two certainties have been established.
Firstly, that the 2008 financial crisis was only the beginning of a breakdown of the global capitalist economy, for which the ruling elites have no economic solution. In fact, their actions have only created further wealth for the ultra-rich, increasing social inequality, while setting up the conditions for another financial meltdown.
And finally, that the renewed turbulence is going to produce even deeper attacks on the working class which, on top on those already being implemented, will bring an upsurge in social and political struggles.