ECONOMIC ARMAGEDDON ~ George Galloway interviews Economist Jonathan Davis on world Economy

From BBC:

Asian stocks have fallen after fears about a global economic slowdown were fanned by weak US data.

South Korea's Kospi dropped 6.2%, Japan's Nikkei 225 fell 2.5% and Australia's ASX shed 3.5%.

Investors are worried global growth is slowing more than first thought, and are concerned that major economies are heading back into recession.

The falls follow steep losses in the US and Europe on Thursday, and mark a week of stock market declines.

Concerns over growth and debt have been building over recent weeks and financial markets have been seeing extreme volatility.

Many analysts are questioning if a bear market - one in which the long term trend is negative - has now developed and is here to stay.

"Bear markets tend to happen when sentiments are low and that comes from weakened demand and bad news flow," Chou Chong of Aberdeen Asset Management told the BBC.

"The Western regions are having to face a period of lower growth and dampened demand. That is putting pressure on market sentiment." he added.

A number of industry heavyweights such as computer firm Dell have cut their earnings outlooks in recent days. At the same time, investment banks including Morgan Stanley have been revisiting their growth forecasts for this year.

On Thursday, Morgan Stanley said that the US and Europe were "dangerously close to recession", despite efforts by policymakers to boost growth and calm markets.

"Investors fear that policymakers no longer have the tools to avoid a recession," Frederic Neumann at HSBC in Hong Kong told the BBC's Asia Business Report.

What sparked the sell-off in stocks was Thursday's release of data on the US economy.

Manufacturing activity in the US's mid-Atlantic region slumped to its lowest level since March 2009, according to data from the Philadelphia Federal Reserve Bank, which is seen as an early indicator of the state of manufacturing nationally.

At the same time, sales in the US housing market fell unexpectedly and unemployment claims rose sharply.

The numbers weighed on sentiment in both the US and Europe.

"The issue now is there is building evidence that the economies themselves are weakening," Mr Neuman said.

"We are shifting from a policy risk concern to a realisation that the economies are not as strong as we believed and that is something that the investors have only begun to wake up to right now."

Mr Chong of Aberdeen Asset Management warned that given the uncertainty surrounding the health of the developed economies, markets were likely to remain volatile.

"Until we do see the US and Europe find a long-term sustainable solution to their growth and debt problems, markets will react to any near-term noises," he said.

The Dow Jones index closed down 3.7% while European indexes lost between 4% and 6%.


George Galloway speaks to economist Jonathan Davis on the shakey world economy. A very lively conversation, Davis claims that Japan is in recession for 20 years amongst other things. He has claimed there are no savage cuts to the public sector. Davis supports hiking up the interest rates of borrowing set by the Bank of England.