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Germany’s impact on the global economy

Marketplace Staff Aug 16, 2011

Germany’s impact on the global economy

Marketplace Staff Aug 16, 2011

JEREMY HOBSON: Now let’s get to the global economy. Germany said this morning its economy grew just .10 percent last quarter. That was far below expectations. Our regular Tuesday guest Juli Niemann is at an oil and gas conference this morning. We are pleased to be joined instead by Josh Brown who is a financial adviser at Fusion Analytics. He’s with us live from New York. Good morning.

JOSH BROWN: Hello, how are you?

HOBSON: Very good, Josh. Let me ask you this. One-tenth of 1 percent growth in Germany, France is growing at 0 percent, Japan ‘s shrinking, are we heading back into a global recession?

BROWN: You know, the odds continue to tick higher with every one of these major reports. Both in the U.S. and obviously globally, and you also have the specter of rates being raised in some of the strongest growth economies like Brazil and China. So, it’s really a tough situation. This German report is the worst since 2009.

HOBSON: And what would that mean? If we go back into a global recession, what does that mean for people in this country?

BROWN: I think it means a few things, but most importantly, people need to, number one to adjust their expectations, as it pertains to investments, they need to adjust what they’re expecting both from the equities markets, obviously no one expects much from bonds. I also think people should understand we can have a garden variety recession. A contraction is a natural part of the cycle, not every single one has to be like 2008.

HOBSON: All right, Josh, stand by for a second, I want to our Senior Business Correspondent Bob Moon – who’s got some maybe good news when it comes to the consumer. Bob, what do you have?

BOB MOON: Hey Jeremy, we Americans finally seem to be catching up on our late credit card payments. In fact the credit reporting agency TransUnion figures the delinquency rate has hit a 17-year low. I’ve spoken to some credit experts this morning and they say there’s not just one thing that’s helped accomplish this. It’s a combination of factors. We’ve cut back on the number of cards in our wallets, more often we’re paying as we go with debit cards, of course the banks have tightened their credit standards — they’ve reigned in the limits on existing cards so it’s not as easy to run up huge balances. You tend to need a very good credit score to get a new card, and they’ve long since written off the really delinquent accounts. Still, we do seem to be getting this house of cards in order.

HOBSON: Getting the house of cards back in order, Josh Brown, back to you. An interesting look at the American consumer there, what do you think when you hear something like that — some hope?

BROWN: You know, I wish I could concur and say I see a lot of hope. It’s an interesting data point, I’m not sure we can extrapolate it into meaning anything other than the fact that people are using more debit cards than ever before. And when people use debit cards, they tend not to make superfluous purchases. You’re seeing something more along the lines of not many cards being issued by banks, and so you’re seeing a little bit of preference for debit over credit with each passing month, so I think to just say it’s the lowest since 1994 in terms of delinquency is a little-bit one dimensional. I wish I could be positive on it, but there are too many other things that come into play there.

HOBSON: All right, we’ll take it. Josh Brown, financial adviser at Fusion Analytics, and our Senior Business Correspondent Bob Moon. Thanks to both of you.

BROWN: Thanks.

MOON: Thank you.

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