Economic “Contagion” Threatens “Impending Crisis”: Exposure to Falling Oil Prices Driving Global Defaults and Slowdown

Tuesday, February 24, 2015
By Paul Martin

Mac Slavo
February 24th, 2015

On the surface, the United States is currently one of the stronger global economies.

But lurking beneath that may be an ‘impending crisis’ that threatens to drag everyone down with it.

That’s according to the Financial Times, who say that falling oil prices combined with a strong dollar (hence reduced trade in exports) and a likely increase in U.S. interest rates could contribute to the “familiar pattern” of economic slowdown. As Satyajit Das writes, “bankruptcies, defaults, banking problems and reduction in credit availability drive contagion.”

Weak growth, high debt levels, disinflation or deflation, policy driven destructive competitive devaluations, inflated financial risk taking and mispricing compounds the problems. The impending crisis may develop as follows.First, US equity prices come under pressure from a stronger dollar.


Decreased funding availability and higher interest costs create a toxic spiral of reduced borrowing, production, cash flow and earnings.

Finally, a combination of low growth, low inflation and political considerations destabilise sovereign debt markets, especially in Europe.

The Rest…HERE

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