This time last year I wrote about the economy and with the start of a new decade, I thought we should see how things were progressing. So welcome to 2010.
That font of all (questionable) knowledge, Wikipedia, says that the phrase 'May you live in interesting times' is reputed to be the English translation of an ancient Chinese proverb and curse.
Supposedly it was the first of three curses of increasing severity, the other two being:
* May you come to the attention of those in authority.
* May you find what you are looking for.
Recently I have read many reports about economic recovery, both locally and across the globe. One of the more bullish commentators on the South African economy, Riaan le Roux, chief economist at Old Mutual Investment Group’s Economic Research Unit of Old Mutual, predicts that there is a good chance that South Africa could end 2010 with annual GDP growth of over 3% y/y.
On the other hand there are many indicators that are less then encouraging.
US housing
In the USA it is estimated that some 23% of all mortgages are ‘under water’ (amount owed by the borrower on the house is greater than the asset value of the house). RealtyTrac, an online foreclosure marketplace, recently reported that in 2009 a record 2,82 million residential properties had foreclosure filings against them. Let me restate that – 2 820 000 home owners were in danger of having their houses repossessed for default on mortgages.
Sadly there are many more option adjustable rate mortgages (ARMs) that are due to reset in the months ahead. According to statistics published by Amherst Securities Group LP, the subprime problems are behind us but option ARM resets will steadily increase, with the total loan balance ultimately peaking at about US$14 billion in September 2011. This phase of the symptoms of reckless lending and borrowing will only work itself out of the system by around September 2012.
With so many households carrying so much debt there can be little hope of a consumer-driven recovery any time soon.
PIGS will not fly
Across the other side of the Atlantic many economies are in untenable positions. An upcoming referendum in Iceland will almost certainly see that country renege on agreements to repay US$5 billion owed to the UK and the Netherlands. The consequences of that for Iceland and its residents will be dire.
The economies of Portugal, Italy, Ireland, Greece and Spain are also in serious trouble – and their membership of the European Monetary Union restricts their ability to manoeuvre.
Talk in some circles is that this will lead to the ultimate breakdown of the EU.
Withdrawal of stimulus
Even when governments print money that they do not have, politely referred to as Quantitative Easing, there comes a point where the game is up and the printing presses must be turned off. When that happens in economies with high levels of debt and depressed economic activity a slowdown in economic activity appears inevitable.
Economies around the world seem to be reaching the point where the presses are slowing down, or at least there is talk about doing so. A school of thought, to which I subscribe, is of the opinion that this will result in a ‘double-dip’ recession.
All this points to a rather pedestrian economic recovery at best until sometime after 2012.
Strategic response
No business can afford to be out of sight of their clients for such an extended period of time and yet still remain competitive vis-à-vis those companies that continue to expose their products and services to relevant readership through print and on-line.
The Motion Control team looks forward to helping its readership to keep up-to-date with local and international industry news and developments in 2010 and to keeping its advertisers’ names, products and service offerings in front of those qualified readers through the media of print and online, Motion Control and Motion Control Buyers’ Guide.
Andrew Ashton
Editor: Motion Control
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