CNN Money Writes: Financial risks recede in 2014

Eurasia, which advises businesses on political and economic concerns, released its annual list of potential risks to global economic stability in 2014 — and impending financial doom is not among them.

“That’s over,” the Eurasia analysts wrote in the report. “In 2014, big-picture economics are stable if not yet comforting.”

Europe has emerged from recession and Japan’s economy is shaking off decades of stagnation. The recovery in the United States is expected to accelerate this year even as the Federal Reserve gradually reduces its stimulus policies. China’s new government is implementing reforms to make the world’s second-largest economy more stable.

The relatively calm outlook comes after a period of heightened financial risks. Investors and economists have been on alert for another meltdown since 2008. But none of the dire predictions came to pass. The euro is still around. China has not crash landed. And the U.S. didn’t fall off the fiscal cliff.

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I am sure you have heard of the “Calm Before The Storm”. The report above pertains to exactly that. Just because the “storm” hasn’t arrived yet, doesn’t mean that it never will. Let’s take a look at the reality.

Has Europe emerged from a recession?

Is there any evidence to support this statement? Of course not. As far as I am concerned only German economy is doing good. The rest of EU members are not doing so well. While the Socialist Party in France is working overtime trying to destroy their economy, countries like Spain, Italy and Greece are going through downright depression with 20%+ unemployment and an insolvent banking systems. Maybe the EU emerged from a recession right into a depression.

Japan’s economy is shaking off decades of stagnation?

It might seem that way at the initial glace, yet the reality is different. The perceived improvement in Japan has nothing to do with real economy or any sort or real economic growth and everything to do with currency debasement and massive credit/stimulus expansion. As always, short term gains will eventually turn into a long term pain.

As for the US and China, all of the fundamental issues remain there. Just because the calendar year turned 2014 doesn’t mean that all structural issues got better or vanished into thin air. If anything, things are getting worst. The only reason things haven’t blown up, just yet, is because both Governments pumped a huge amount of liquidity into the system to paper over issues. Eventually, this will force the markets to correct themselves with greater intensity in the future.

Bottom line is, the report above is garbage. Don’t believe it for a second. This is the calm before what might be “The Perfect Storm”.

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