Investors, Sit Up and Listen!Following on from my previous post I feel the need to briefly discuss major global concerns that investors should be aware of and have an opinion on right now. I would encourage any readers to voice their opinions in the comments box below.
Christine Lagarde is the Managing Director of the IMF (International Monetary Fund). This basically means that she knows a thing or two about the Global Economy. Christine recently sited three major concerns for the global outlook at the moment.
Major Economic ConcernsChristine highlighted the following three issues:
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2. The second major concern that she highlighted was the ever growing credit crisis in Europe and falling confidence. Please read my previous article on the Eurozone Crisis for more information. Essentially, a core part of Western Civilization is no longer the centre of growth and innovation in the world. The tide has shifted and the power comes from the East.
1. The biggest major concern in the world economy at the moment is the US fiscal Cliff. To put it simply, America is spending so much money (vastly more than they receive in taxes) that their level of debt is reaching alarming levels. Automatic tax rises and spending cuts come into action at the beginning of the coming year if nothing is done. Clearly action needs to be taken, and with the oncoming election in November the outlook for the future of the American Economy may all swing on the outcome of that election. Republicans want to avoid tax rises and to cut spending, whereas Democrats want spending cuts and tax rises. Regardless of the outcome, if America isn't careful they could see a vast slowdown in the rate of economic growth. This has implications for the whole world, particularly for us in England since America is our biggest export market.
A Further Investor Concern
- If there are any further problems in the Middle East, such as a war between Israel and Iran, this will have huge implications for the price of a barrel of oil. We could see oil rise to $150 a barrel or more! This affects costs in almost every industry all over the world.
- Food prices has been soaring over the past few decades as the population of the world has boomed. The next 50 years could see even greater price rises, unless there are huge innovations in food production. This is unlikely to happen.
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