Monkey see, monkey do in the Year of the Monkey?

It is beginning to seem increasingly likely that the global economy may plunge into recession towards the end of this year. Last month the European Central Bank cut interest rate to minus 0.3% and promised to continue its bond buying program to March 2017 or beyond. Then a few days back the Bank of Japan reduced interest rate to minus 0.1% while continuing its $666 billion bond buying program. Negative interest rates are meant to discourage savers from saving money, so that increased spending will stimulate production and create jobs, and force banks to lend money by making it expensive for them to park funds with the central bank. Critics say that it is just another way to devalue the currency by forcing foreign funds to look for returns elsewhere. However, while the yen fell on the news the Euro gained 2% against the dollar. No one is sure as to what is going on in China. What everyone is sure of is that the Chinese stock market has been falling despite government support. Part of the problem is that companies with political connections list on the stock market so the government is forced to prop it up. The Peoples Bank has poured $52 billion into banks to increase liquidity before the Chinese New Year holidays. It will be the year of the Monkey and an improvement in global economy is predicted. China is worried about the flight of capital as people fear that the yuan will continue to drop in value against the dollar. Foreign reserves have fallen by $700 billion and an article has warned George Soros, famous for making $1 billion in 3 days by short selling the pound in 1992, not to attempt the same with the yuan. Which may turn out to be a red rag to a bull. Oil prices have collapsed which is disastrous for economies like Russia and Venezuela and is even forcing Saudi Arabia to increase the price of fuel for its own citizens and to sell shares in Aramco. Sanctions on Iran being lifted will depress oil prices still further as Iran tries to catch up for all the wasted years. Whether the increased economic pressure on Arab oil producers leads to greater disturbance in the middle east remains to be seen. The US economy grew by just 0.7% in the last quarter of last year despite very low fuel prices, which is good for consumers. The strong dollar is hurting exports. Apparently," the bond market has been screaming recession for weeks ". High yield bonds or junk bonds are in meltdown which is another sign that the US economy could weaken. The Swiss government proposes to pay every adult 425 pounds and every child 100 pounds to end poverty. No 'targeted subsidy' here. Switzerland already has a negative interest rate and this maybe a way of increasing spending and creating inflation. A global scenario of monkey see, monkey do. It is the Year of the Monkey after all.