While LEAP/E2020 publishes the present GEAB issue, continuing its work of anticipation of a global systemic crisis, the International Monetary Fund (IMF) publishes two reports which confirm the forecasts released by LEAP/E2020 throughout the year.
In these two reports, the IMF draws a disturbing picture of the risks weighing over the global economy. It analyses and comments at length the following trends: US real-estate bubble collapse, US economy recession, US Federal Reserve’s dilemma regarding interest rates developments, long-term fall of the dollar, long-term rise of oil prices. These are precisely the economic and financial indicators used by LEAP/E2020 to develop its forecast of a crisis.
Collapse of US real-estate bubble
«The housing bubble really starts to burst… Some of the predictions made by LEAP/E2020 have already become true, including the bursting of the housing bubble in the US (new home sales were down 5% in January 2006 compared to January 2005, the first time in 5 years this has happened; and the inventory of homes available for sale represents a 6-month supply since 1998). The end of the housing bubble will progressively impact US household consumption, which is highly dependent on growing mortgage-mortgage based household debt. In parallel, the slowdown in the housing sector will directly affect employment, since this sector alone has accounted for 40% of private jobs created over the past five years in the United States.» (GlobalEurope Anticipation Bulletin N°3, 15/03/2006)
«IMF services estimate that the possibility of a more abrupt slowdown in the housing market could result in 1 more percentage point withdrawn from GDP growth compared to the baseline scenario. After experiencing rises steeper than those recorded in the US, the fall of house prices in countries such as Australia or the UK could until today be absorbed and caused only minor and short-term economic slowdowns. It is however to be feared that a more abrupt adjustment of the housing sector could start weighing more heavily on the US economy.» (Translated from: Perspectives de l’Economie Mondiale, FMI, 13/09/2006) …
Read more in the GEAB No 7 / 16.09.2006