How close is the global recession and the Romanian one?

The global crisis at the end of the last decade has been "resolved" through an unprecedented stimulation of lending, but the turnaround of the real economy, whose sustainable character is still making its presence felt, did not live up to expectations.

Now it may be too late to pass this threshold, according to a recent UBS analysis, posted by Zerohedge.

The analysts of the Swiss bank have recently updated the evolution of a less tracked indicator of the impact of lending on the economy, known as the loan impulse.

The notion was introduced by analyst Michael Biggs, of Deutsche Bank, in 2009, and starts off with the premise that internal demand depends on the rise of new loans and not just on the total increase of the total loan balance, in other words the demand depends on the "acceleration" of credit, not its "speed".

The UBS economists have analyzed the main global economies, including emerging ones, whose combined GDP represents 77% of the world's GDP, and found that "the loan impulse collapsed all of a sudden", as its dynamic has been determined by China, over the last 18 months.

From a peak of almost 4% of the GDP in January 2016, loan impulse has seen a decline of almost 6 percentage points by the end of last month, similar to the drop seen during the global crisis. Back then the loan impulse was approximately -6% of the global GDP, and the recent UBS data shows -2% of the global GDP.

Just as the growth of this indicator was caused partly by China, especially in 2015, its decline has the same "source". The impulse of credit in China fell to almost -3% of the country's GDP, after being almost in freefall since the beginning of the year.

Last month, Steen Jakobsen, the chief-economist of Saxo Bank, wrote that "the slowdown of the lending impulse, caused by China, is crucial for the future of the global markets".

Based on some internal studies, Jakobsen also says that "there is a delay of approximately 9 months between lending and the real economy, meaning that the current economic data has been created nine months ago".

The latest developments of the impulse of lending presented by UBS have caused the chief economist of Saxo to say that "the likelihood of a recession in the next 18 months is 60%", but "the appearance of a recession is likely by the end of the month".

But the evolution of lending in China is not the only problem. That same indicator, the credit impulse, entered negative territory in the US as well, and UBS analysts think that the "blame" lies mostly on commercial and industrial credit.

Estimated exclusively only on the basis of industrial and commercial credit data from the Federal Reserve, the impulse of lending in the USA fell to -0.45% of the GDP by the end of Q1 2017, a value comparable only to those of the Great Recession period.

"According to our estimates, the impulse of credit entered negative territory at the end of last year", two Morgan Stanley analysts recently told The Telegraph, and "such a deceleration of lending to companies has not been noticed since the end of the last decade, during the major financial crisis".

"History shows a drop in lending leads to recessions, and in the United States concern should be even greater, as the corporate sector has a high degree of indebtedness and can react extremely negatively even to limited interest hikes", Morgan Stanley analysts show.

Prior to the last monetary policy of the Federal Reserve, of June 14th, 2017, market expectations indicated a 0.25% percentage points hike of the interest rate, to 1.25%.

Aside from slowdown of lending in the United States, following the hike of the policy rate, the phenomenon shouldn't happen globally, as the major central banks have used their "printing presses" to inject in the market the equivalent of 1.5 trillion dollars.

According to data from Bank of America, posted by Zerohedge, the combined balance sheets of central banks have recently reached 15.1 trillion dollars, up from 14.6 trillion at the end of April 2017. Could this be the end of the economic miracle "generated" by the money creation of the major central banks?

Where is Romania in terms of the credit impulse indicator? Data from the NBR, concerning the non-governmental lending, and from the National Statistics Institute, concerning the GDP, show a positive figure, of approximately 2% of the GDP, but is mostly due to the mortgages taken out by households, meaning the First Home program.

And since the positive dynamic of the GDP in the last few years has been supported particularly by consumption driven, our economy us in a particularly precarious position. It would have been there already without the absurdity of the political scene, where it seems all the actors have gone mental.

In a recent report concerning the state of the economy, analyst Florin Cîţu estimates that inflation rate will reach 4% in 2018, amid a budget imbalance of over 4% and a current account deficit of over 5, above the alert ratio for foreign imbalances.

Under those circumstances, the policy rate should increase to 4.5%, up from 1.75% in 2017.

Even though the scenario of Florin Cîţu involves a monetary "brake" pushed in a state of panic, it does not represent a plausible reaction from the National Bank of Romania.

Why? Because on a European level as well, pressure is expected to take place for the ultra-lax monetary policy to be maintained.

In a Berlin conference, Jens Weidmann, the president of the Bundesbank, said that "the ECB is facing the risk of pressures to maintain the ultra-lax monetary policy in order to support the national budgets", as Reuters writes, which also stresses that "the ECB has become the biggest creditor of the Eurozone governments".

But don't the European treaties state that such a thing isn't allowed? Yes, but nothing matters anymore when the economic reality has to be suppressed at any cost.

The NBR will act the same way when it comes to the policy rate, because doubling it will not only wreck the First Home program, but also the budget of the country, which has been for so many decades in the hands of irresponsible incompetents.

Yes, the global recession is very close, and just as always, we are unprepared, but ready to accept the unfounded excuses of the authorities, concerning the determining influence of foreign factors.

Where will you be during the recession that we will celebrate the 100th anniversary of Romania's great unification?