Major Contractions Coming to an Economy Near You

All the king's horses and all the king's men – and all the financial stimulus by governments around the globe -- appear to be falling short of the hoped-for results, namely, robust economic growth.

At least all the IMF's researchers can read the global economic handwriting on the wall. Their latest review of the global economy has prompted a revision.

The IMF expects global economic growth of 3.1 percent in 2013 and 3.8 percent in 2014, 0.2 percentage points lower each year than its estimates three months ago.

WashingtonPost, July 9

This downward revision of world economic growth is no surprise to deflationists. Internal Chinese demand is also waning.

Speaking of China, a July 10 Wall Street Journal report notes that "China posted a surprise drop in exports in June amid slack global demand, revealing further weakness in a driver of growth for the world's second-largest economy."

Meanwhile, on July 9, IBM was downgraded to neutral from buy by a major Wall Street firm due to Big Blue's expected weakness in emerging markets.

Indeed. The struggling residents of Italy,Europe's third-largest economy, will likely not argue the point about an "ongoing depression." Italy's credit rating was downgraded on July 9 by Standard & Poor's from BBB+ to BBB, and the credit ratings agency expects Italy's economy to contract by 1.9% in 2013.

All those European Union summits may have been a brief boon to the caterers of those gatherings, but everyday Italians are still waiting on results. They will likely have to wait much longer because the global economic trend of contraction is only in its early stages.

Why do economic problems in Europe matter? Deflation research shows that almost across the board, Europe is ahead of the United States in terms of the manifestations of the next phase of the bear market. In addition, this deflationary trend will also render ineffective the massive stimulus programs that both Japan and the U.S. have in place to try to bolster their economies. All the world's central bankers may not be able to put Humpty Dumpty back together again.

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