Trying to hold firm amid sinking global markets
Things will come to a head if banks sit on loans for oil exploration that go bad.
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IF you look only at the global economy, and what leading forecasters think it will do in 2016, things look to be in a reasonably solid state. The world economy will grow 3.4 per cent this year, economists at the International Monetary Fund projected this week, up from 3.1 per cent in 2015. Private sector forecasters mostly have similar expectations.
If you look only at global financial markets, it's "Aaack, Run for the Hills! The Sky is Falling!" That is to say, global stock, bond and especially commodity markets have, in the first three weeks of the year, swung in ways that suggest this is a perilous time. Their volatility and direction are consistent with the prospect of a new crisis or global recession. (The Standard & Poor's stock index closed down 1.2 per cent on Wednesday after dropping more than 3 per cent earlier in the day.) The price of oil is where the most action is, with West Texas Intermediate trading below US$27 a barrel on Wednesday, down from around US$37 at the end of December, US$60 in June and US$100 in mid-2014.
The broad S&P is down more than 9 per cent so far in 2016, and stock indexes in many emerging economies are down even more. Bond and currency markets point to economic troubles in oil-producing nations. (Considering a trip to Quebec? Good move. The Canadian dollar is down 19 per cent against the US dollar since May.) What makes these falling prices unnerving is that it is hard to tell a simple story about what is driving them.
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