Central banks around the world are busy printing paper money in an effort to devalue their currencies and keep up with their government obligations. But the fact of the matter is that there is weakening demand in the global economy ; paper money printing will not grow an economy if consumer and business demand is falling! Let’s look at the chart for the Baltic Dry Index (BDI) below. This chart is flashing a warning sign. But analysts and economists are paying little attention to it. This chart is a picture of demand for goods in the global economy—bleak at the very best. Today, the BDI is close to the level it was at when the global economy was hit by the financial crisis of 2008! Chart courtesy of www.StockCharts.com But this isn’t the only signal that we are back in a recessionary period; major economic hubs in the global economy are in serious trouble. Take Germany, for instance. It was considered the strongest nation in the troubled eurozone. According to Germany’s Federal Statistics Office, exports from the country plummeted two percent in the last quarter of 2012 after nine consecutive months of expansion. (Source: Deutsche Welle, February 22, 2013.) Canada is facing challenges with exports in the global economy as well. The Governor of the Bank of Canada, Mark Carney, said this week, “We’ve dampened our forecast of exports because we’re seeing a competitiveness challenge—a productivity issue. Even with that, the export performance has been lower on average than we have expected.” (Source: “Growth in fourth quarter may be softer than expected; exports weak: Carney,” Global News, February 26, 2013.) China, the manufacturing powerhouse of the global economy, is also witnessing an economic slowdown. China exports a significant portion of its products to the global economy. According to the HSBC Flash China Purchasing Managers’ Index (PMI), Chinese factory growth just declined to its lowest level in four months. The PMI had a reading of 52.3 in January, and by February, the PMI reading fell to 50.4. (Source: Reuters, February 25, 2013.) Any PMI reading below 50 indicates a contraction in manufacturing. Other exports-focused countries in the global economy, such as India, Russia, and Brazil, are showing warnings signs of economic contraction. The key stock indices in those countries have declined since the beginning of the year. Dear reader, central banks in the global economy have been printing paper money in order to boost their countries’ exports. I believe these central banks are missing the most important part of the economic growth equation—demand. Devaluing currencies to spur economic growth will not help if demand is slowing. The eurozone crisis hasn’t taken a rest, and consumers in the ... Read More