By This Metric, We Are Already In A Global Recession," HSBC Warns

Tyler Durden's picture

One of the things you might have noticed if you follow trends in global growth and trade, is that the entire world seems to be decelerating in tandem with China’s hard landing (which most recently manifested itself in another negative imports print). 

For evidence of this, one might look to the WTO, whose chief economist Robert Koopman recently opined that “it’s almost like the timing belt on the global growth engine is a bit off or the cylinders are not firing.” And then there’s the OECD, which recently slashed its global growth forecasts. The ADB joined the party as well, citing China, soft commodity prices, and a strong dollar on the way to cutting its regional outlook. Even Citi has jumped on the bandwagon with Willem Buiter calling for better than even odds of a worldwide downturn.

Indeed, virtually anyone you talk to will tell you that the world looks to have entered a new era post-crisis that’s defined by a less robust global economy. Those paying attention will also tell you that this dynamic may well end up being structural and endemic rather than transitory. 

Earlier today, we noted that Credit Suisse’s latest global wealth outlook shows that dollar strength led to the first decline in total global wealth (which fell by $12.4 trillion to $250.1 trillion) since 2007-2008. 

Interestingly, a new chart from HSBC shows that when you combine the concepts outlined above, you learn that when denominated in USD, the world is already in an output recession. 

Some color from HSBC:

We are already in a global USD recession

Global trade is also declining at an alarming pace. According to the latest data available in June the year on year change is -8.4%. To find periods of equivalent declines we only really find recessionary periods. This is an interesting point. On one metric we are already in a recession. As can be seen in Chart 3 on the following page, global GDP expressed in US dollars is already negative to the tune of USD1,37trn or -3.4%. That is, we are already in a dollar recession. 

We arrived at these numbers by converting global GDP into USD terms and then looking at the change in GDP. True, this highlights to a large extent the impact of a stronger dollar – which may be unfair, but the US dollar is still the world’s reference currency. However, it highlights that from a US perspective the global growth outlook is rather challenging. Italsohighlightshow damaging a very strong dollar can be for global growth.

In particular it highlights the limited effect of global QE efforts. Over the last year, the ECB and BoJ have added about USD850bn to their reserves. The relative increase in ECB and BoJ stimulus may have exaggerated the decline in global growth due to the shift in exchange rates. However, these lower exchange rates have so far not produced sufficiently large export growth numbers to offset the wider growth story. Also, it illustrates that the EM implication of global USD growth is only marginally negative despite significant declines in real exchange rates. The key takeaway here though as far as we are concerned is that QE policies have not generated more value than they have destroyed. It is also worth noting that this dollar recession is worse than the 2001 recession by some margin. 

So amusingly, the US got everyone on the money printing bandwagon, none of it had the intended effect of giving the lackluster post-crisis "recovery" the defibrillator shock it needed, and because the rest of the world is now still in easing mode, there's a policy divergence that's contributing to dollar strength which is in turn serving as a drag on the same global economy all of the easing failed to boost.

This is the same dollar strenth, by the way, that threatens to send EM into an outright crisis and which has the Fed so boxed in that they literally just froze last month.

Once again, thank you Ben Bernanke, for being courageous enough to send us down this path.

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WTFRLY's picture

Good, start the war already and stop teasing us.

Hippocratic Oaf's picture

Must...hold....on....until.....election......it's.....Bush's.....fault.........

Government needs you to pay taxes's picture

Bernanke deserves the time to give one more speech, before his feet swing below the gibbet.

venturen's picture

we need a new term for outright stealing by financial theives. I vote for Cronyism. Recession is for the remainder...but Goldman won't be cutting bonuses anytime soon, lobbyists won't see a pay cut, and the Clinton Fund won't see a drop pin bribes!

Wahooo's picture

I used to call it Government. But that term has positive connotations historically.

CheapBastard's picture

It's a deepening recession/depression for the middle classes worldwide but a luxurious free lunch for the upper 1% and the lower FSA.

Osmium's picture

Saw on the Tee Vee where 9.5 million people in the US are receiving their medications for free.  They went on to say how I could receive my medications for free. First, I don't take any medications, and second I'm one of the poor bastards paying for those 9.5 million that get free meds.

Really wanted to kick in the Tee Vee.

Toxicosis's picture

I fully agree, makes me want most of those freebee moochers to breathe in osmium tetraoxide just for fun.

oldtech's picture

those fricking 3%,...  

Tallest Skil's picture

>>we need a new term for outright stealing by financial theives.

 

How about "License To Kill", referring to what any citizen can do to them when they're caught doing it.

Cosmicserpent's picture

Since Goldman is always the lead crook, I prefer the term 'Goldmembered'.   In a really egregious case say for example, 'Bear Stearns really got Goldmembered up the ass'.

KnuckleDragger-X's picture

Things are going swimmingly. I just hope you can swim.......

Redart's picture

damn I was short but now I dont know what to do

adeptish's picture

HSBC will be just fine though, lots of drug money out there that needs laundering.

yogibear's picture

Wall Street  will  demand more helicopter money from the Federal Reserve and they will get it.

Expect even more.

It's the Zimbabwe economic plan.

Print until everyone wakes up from their party stupor and realizes what's going on.

Soul Glow's picture

Ok so let's say the Fed QE4EVER and stocks bounce back to DJ 18k, then what....the dollar already has zero value since it is issued on a fiat - by decree - money standard.

The fiat system has no backing and no real obligation.  The market isn't real.

Are you getting this?!?!?!

shovelhead's picture

But...but...I wrote a paper on this QE thing a long time ago...

...let me look around for it here...I got an "A" on it...I think.

Soul Glow's picture

WTF?  Bad news is good news so why isn't Yellen making this market go higher?!

 

 

;)

whidbey-2's picture

This is useful but not manageable either.  The President is confused by reports like this.  Where to next? Great Brit is in recession today; just a report.  This report on the whole damned world is one step too far....and it does not comport with US elections.  Let us just  keep this to ourselves..... lest we confuse the US voters. Congress will fix things ,Janet says.  Thanks so much.

nopat's picture

So what am I looking at here?  Changes in USD/X?  Great work HSBC.  Really knocked it out of the park with this one.

Steak's picture

The room speaks highly of you, it is heartening that the chorus of perverts and degerates at least can recognize quality when they see it

Government needs you to pay taxes's picture

Just as the whole world's economy burns, make sure to light up your local 1%er heliport.

orangegeek's picture
By This Metric, We Are Already In A Global Recession," HSBC Warns

 

No we're not.  There, all fixed.

 

ONWARD!!!!

brushhog's picture

"When denominated in US dollars the world is already in recession"

The dollar just strengthened so of course, in comparison,  other data denominated in other currencies went down proportionately.

madcows's picture

ha.  you beat me to it.

madcows's picture

Well, if you put the world's economies in terms of the US dollar, then of course you'll see a decline.  The dollar has strengthened enormously versus the world's currencies.  Of course, you don't need to do that to know that global trade is slowing and everything is papered over with central banks taking turns doing QE's.  again, you don't need to mislead with the dollar, the story is scary enough that you don't need to do a government style misrepresentation of the facts.

moratar's picture

If you look at last 55 years of USD_I than you can see the trend. Twice there was nice spike up, just before huge decline in USD. It looks like the spike is up atm. Any moment now huge decline should come. Each time USD_I looses more and more. This tim USD_I drop will be like one never seen in history.

Aussie Battler's picture

These economic war criminals, Bernanke probably the chief, need to be brought to justice! This guy needs to be in jail!!