"Slowing growth as well as deficit and debt problems in the Eurozone, U.S., China and the emerging nations increases the odds of a deflationary global recession and a renewed down leg in the ongoing secular bear market.
The Eurozone crisis is worsening as economic growth is being hit by front-loaded austerity measures that are exacerbating budget deficits and reducing tax revenues. The southern-tier nations, particularly Spain and Italy, cannot get credit as interest rate spreads have widened to unsustainable levels. Funds have been flowing out of the disadvantaged nations and appear on the verge of a full-fledged run if financial aid in some form is not provided in the very short term.
As we write, the EU is meeting in emergency session to take up measures to shore up the finances of Spain and Italy with the hope that they can buy enough time to start planning on longer-term solutions. For the last two years the EU has enacted one emergency bailout after another only to have to come back and try again within a short period of time. Most likely, they will come up with another short-term plan this time as well, although how much time it will buy is questionable.
The U.S economy has been slowing in the last two or three months. Either downside surprises or actual declines have been reported in key economic indicators relating to consumer spending, new orders, production and employment. A number of major companies have either revised down their second quarter earnings estimates or reduced their guidance for the second half. As a result, second quarter earnings estimates for the S&P 500 have been declining and full-year estimates probably will drop as well. When we further consider the dysfunction in Congress, the "fiscal cliff", the prospective end of operation twist, the elections and the prospect of renewed fighting over the debt ceiling, the threats to an already fragile recovery are high..."
at http://www.creditwritedowns.com/2012/06/global-slowdown-will-accelerate.html
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