US Economy : Could the American economy tank in 2016?

 After all the talk about a “foreign policy election” in 2016, what about the economy? The Federal Reserve might have finally raised interest rates thanks to lower unemployment, but there’s no doubt much of the American public—including not a few supporters of a man called Trump—still feels the effects of the recession.

Not to mention global economic risks, ranging from China’s slowing growth to terrorism threats in the Middle East and beyond. Could the economy really tank in 2016?

We asked the country’s leading economic thinkers to peer into the (near) future and tell us what to expect in U.S. and global markets this year. What are the biggest opportunities for growth—and the biggest risks? What, if any, is the chance of another recession? And what should the 2016 presidential candidates do about it all? Here’s what the experts had to say.

The greatest challenge facing the U.S. is the pace of trend economic growth. During the postwar era, growth in per capita income permitted the standard of living to double in just more than 30 years—one person’s working career. Under the burden of a regulatory explosion, ballooning federal debt, poor business investment in the recovery, higher taxes and other sources of slower productivity growth, doubling the standard of living is now projected to take roughly 70 years.

The biggest threat in 2016 is not a recession—which can’t be ruled out, but is not likely; it is further damage to the American dream. The president will continue “executive action”; we just can’t be sure how much burdensome red tape will result. And there is the real damage that short-termism will rear its ugly head among the 2016 presidential candidates and produce promises of more spending (the Clinton campaign is already over $1 trillion), new entitlements and expensive mandates. That’s not the path to fixing the U.S. growth problem.

‘There’s a real possibility that 2016 will be difficult for most major economies outside the United States.’

So, best upside risk: greater consumer spending, kicked off by lower gas prices.

Biggest downside risk: even slower growth in the rest of the world. China could actually experience recession. Or one or two additional terrorism incidents in Europe or the United States could depress international travel and create widespread caution about the political and economic future, thus lowering spending and limiting global investment.

Read more: Could the American economy tank in 2016? – POLITICO

Is the EU imploding?The Europe Question In 2016 - by Nouriel Roubini

At the cusp of the new year, we face a world in which geopolitical and geo-economic risks are multiplying. Most of the Middle East is ablaze, stoking speculation that a long 

Sunni-Shia war (like Europe’s Thirty Years’ War between Catholics and Protestants) could be at hand. 

China’s rise is fueling a wide range of territorial disputes in Asia and challenging America’s strategic leadership in the region. And Russia’s invasion of Ukraine has apparently become a semi-frozen conflict, but one that could reignite at any time.

There is also the chance of another epidemic, as outbreaks of SARS, MERS, Ebola, and other infectious diseases have shown in recent years. Cyber-warfare is a looming threat as well, and non-state actors and groups are creating conflict and chaos from the Middle East to North and Sub-Saharan Africa. 

Last, but certainly not least, climate change is already causing significant damage, with extreme weather events becoming more frequent and lethal.

Yet it is Europe that may turn out to be the ground zero of geopolitics in 2016. For starters, a Greek exit from the eurozone may have been only postponed, not prevented, as pension and other structural reforms put the country on a collision course with its European creditors. “Grexit,” in turn, could be the beginning of the end of the monetary union, as investors would wonder which member – possibly even a core country (for example, Finland) – will be the next to leave.

If Grexit does occur, the United Kingdom’s exit from the EU may become more likely. Compared to a year ago, the probability of “Brexit” has increased, for several reasons. The recent terrorist attacks in Europe have made the UK even more isolationist, as has the migration crisis. Under Jeremy Corbyn’s leadership, Labour is more Euroskeptic. And Prime Minister David Cameron has painted himself into a corner by demanding EU reforms that even the Germans – who are sympathetic to the UK – cannot accept. To many in Britain, the EU looks like a sinking ship.

If Brexit were to occur, other dominos would fall. Scotland might decide to leave the UK, leading to the breakup of Britain. This could inspire other separatist movements – perhaps starting in Catalonia – to push even more forcefully for independence. And the EU’s Nordic members may decide that with the UK gone, they, too, would be better off leaving.

As for terrorism, the sheer number of homegrown jihadists means that the question for Europe is not whether another attack will occur, but when and where. And repeated attacks could sharply reduce business and consumer confidence and stall Europe’s fragile economic recovery.

Those who argue that the migration crisis also poses an existential threat to Europe are right. But the issue is not the million newcomers entering Europe in 2015. It is the 20 million more who are displaced, desperate, and seeking to escape violence, civil war, state failure, desertification, and economic collapse in large parts of the Middle East and Africa. If Europe is unable to find a coordinated solution to this problem and enforce a common external border, the Schengen Agreement will collapse and internal borders between the EU member states will reappear.

Note EU-Digest: Europeans must keep history in mind when looking at the future - united we stand - divided we fail - There is no alternative.

Read more: The Europe Question In 2016

Global Economy impacted by China troubles: U.S., Chinese Manufacturing Activity Tanks, And The World Is Getting Worried

Fears escalated MondayJanuary 4, 2016  that the global economy could struggle more than expected this year — a prospect that contributed to a plunge in financial markets.

The anxiety was heightened by reports that manufacturers extended their slumps last month in the United States and China, the world's two largest economies. Factory activity contracted for a second straight month in the United States and for a 10th straight month in China. In Canada, RBC's PMI showed manufacturing shrinking for the fifth straight month.

By midafternoon, the Dow Jones industrial average had sunk more than 400 points — over 2 per cent — though the fall was also due in part to rising tensions in the Middle East. Chinese stocks fell 7 per cent Monday before trading was halted. The Toronto Stock Exchange's S&P/TSX composite index was down 82.80 points, taking the index to 12,927.15, after falling as much as 262 points earlier in the session.

Not all the news was bad. A cheaper euro has helped European manufacturing, which expanded at the fastest pace in 20 months in December, according to data firm Markit.

Still, China's persistent sluggishness may be causing broader damage than previously thought, analysts say. China's government is trying to shift its economy toward domestic consumption and away from a reliance on exports and investment in roads, factories and real estate.

Read more: U.S., Chinese Manufacturing Activity Tanks, And The World Is Getting Worried

Iran: Saudi Arabia severs Iran ties - intability on global oil market possible

Saudi Arabia on Sunday officially severed ties with Iran over the storming of the Saudi Embassy in Tehran, following the execution of Saudi Shiite cleric Nimr Al-Nimr. Foreign Minister Adel Al-Jubeir told a news conferenc.

 Iran’s diplomatic mission and related entities in Saudi Arabia had been given 48 hours to leave. He said Riyadh would not allow Tehran to undermine the Kingdom’s security.

He added that all Saudi diplomats and staff have arrived in the UAE from Iran and are on their way to the Kingdom.

He called Tehran a regional menace for its smuggling of arms and explosives and its previous harboring of Al-Qaeda militants.

In Tehran, angry crowds hurled Molotov cocktails and stormed the Embassy. Fires were seen burning inside the building.

Read more: Saudi Arabia severs Iran ties | Arab News

Netherlands Exonomy: Dutch retail chain V&D declared bankrupt

Vroom & Dreesman, the largest Dutch department store chain, has been declared bankrupt, it said in a statement published on its website on Thursday.

V&D, with 10,000 workers at 67 stores, has suffered in recent years as the Dutch economy stagnated and on-line stores won away customers. After weak sales in the Dutch holiday season, which falls in early December, it filed for protection from creditors on Dec. 22.

A statement on the company's website said it hopes to remain in business after a restructuring, and that it has been contacted by "dozens" of potential investors.

"Together with the curators and our employees, we're working hard on the best restructuring possible," it said.

The stores ran into liquidity problems in recent months and owner Sun Capital stopped providing emergency funding, V&D's Chief Executive John van der Ent said last week.

U.S. private equity firm Sun Capital Partners Inc bought the retailer in 2010.

Read more: Dutch retail chain V&D declared bankrupt | Reuters

The Netherlands: Drop in oil prices of 30% not reflected in Dutch gasoline prices at the pump

After the price for oil collapsed rather dramatically during the past year many people looked forward to lower feul prices at the pump.

Unfortunately the 30% drop in oil prices did not reflect in a similar drop at the pump this past year.

In the Netherlands one liter  of unleaded Euro95 today averages €1,54. A year ago the gasoline price for that same liter averaged €1,62.  A drop of only 5 % at the pump  and this while the oil price dropped 30%..

Obviously one has to also include such items as Government Taxes/VAT ,and  the oil companies profit margins.

Rgardless, however, based on all this factors, this can not amount to 25% of the 30% drop in oil prices.

Somewhere along the line the customer is being robbed and the finger seems to point to the oil companies who still seem to be making  record profits at the pump.

Almere-Digest.

Oil Price: Saudi Arabia Cuts Subsidies As Budget Deficit Soars - by Andy Tully

The price of crude oil has dropped so low that Saudi Arabia is facing a growing budget deficit, prompting the rich oil kingdom to make sharp cuts in its budget, levy new taxes and reduce government subsidies for water, electrical power and even gasoline.

This is an abrupt change in the country, OPEC’s largest oil producer, which has used its vast oil revenues to prop up the national economy to serve a population of about 30 million people. But even Saudi Arabia can’t sustain such practices when it runs a $98 billion deficit this year – about 15 percent of its gross domestic product.

As a result, Riyadh announced Monday it will cut government spending by 14 percent in the coming fiscal year as it sees no quick end to the depression in oil prices, especially now that Iran, expected to be free of Western sanctions in the near future, will return to the global oil market.

And without even waiting for 2016 to arrive, the government immediately raised the price of retail gasoline by 50 percent, from 0.60 of a riyal to 0.90 of a riyal per liter of premium gasoline – or from 16 cents to 24 cents. That may not seem a huge cost compared with even today’s lower gasoline prices in the West, but it’s crucial in a country that relies on cars because there is no public transportation.

Certainly the low price of oil isn’t the only reason Saudi Arabia is running a deficit. It’s also spending generously on military action in the Middle East. It is giving financial support to rebels opposed to Syrian President Bashar al-Assad, whom Riyadh wants out. And since last spring it has waged an air war in Yemen against Houthi rebels, who are supported by Iran, a religious rival of Saudi Arabia.

But the biggest reason for the deficit is the price of oil. In June 2014, the average global price for a barrel of crude was above $110. Increased production in non-OPEC countries began to create a supply imbalance, putting downward pressure on oil prices. Now a barrel of oil costs less than $40.

Read more: Saudi Arabia Cuts Subsidies As Budget Deficit Soars | OilPrice.com