New Year 2008 may destroy USA's struggling economy
A forecast made by Denmark-based Saxo Bank, chaos will take a grip on
the world in 2008. Oil prices will skyrocket to 175 dollars per
barrel, the Chinese market will collapse by 40 percent, whereas the
U.S. will suffer a 25-percent setback. All this will happen because of
the mortgage crisis in the USA which already slows down the U.S. economy.
High oil prices can bring only good to Russia, though. On the other
hand, even if the above-mentioned forecast comes true, Russia will
face serious problems in its economy too. It is worthy of note that
the majority of Saxo Bank's previous forecasts for 2007 have proved to
be true to fact.
On New Year's Eve most people recollect the outgoing year and hope for
the best. However, Saxo Bank experts seem to be an exception from this
nice tradition. David Karsbol, the head of market strategy for the
bank, said that the forecast had not been made to intimidate people.
"It gives a reason to think about the future of the market," he said.
Saxo Bank experts believe that oil prices will hit the level of 175
dollars per barrel in 2008, whereas grain prices will double. The U.S.
and the Chinese markets will collapse by 25 and 40 percent
respectively by the end of the summer of 2008. Every third of ten U.S.
large building companies will go bankrupt. The British economy will
also start declining.
The bank has its forecast on the new U.S. president too. The bank
predicts that Ron Paul, the Texan Republican, will take the office in
On the other hand, if the U.S. economy slows downs its development as
predicted, it would mean the decrease of the oil consumption and the
Oil prices much depend on the political constituent. If the USA
launches a military action against Iran, oil prices will most likely
jump up to 250 dollars per barrel according to a recent forecast by
Standard & Poor's.
The dark forecast from Saxo Bank does not mention Russia. There was no
report issued in 2007 outlining apocalyptic perspectives for the
Russian economy. The ongoing economic rise and the stable ruble
protect Russia from financial shocks.
Most likely, Russia's economy will not be subjected to considerable
changes or fluctuations during the forthcoming year either.
Nevertheless, Russia is a part of the global financial system, which
means that the country will obviously suffer from a possible economic
collapse that may occur in another part of the world.
Russian specialists say, though, that the nation's economy will
continue to endure unpleasant surprises due to the growing inflation
rate. They say that prices in Russia will grow by ten percent in 2008
against seven percent as predicted by governmental officials.
The Conference Board, an international organization that provides
trusted insights for businesses worldwide, said that its index of
leading indicators reflecting the state of the U.S. economy reduced by
0.4 percent in November and reached the minimum level since July of
2005. Seven of ten indicators (stock prices, the index of consumer
expectations, etc) show that the economic setback may begin already in
the spring of 2008.
The U.S. Treasury put forward an initiative to reduce the income tax
against the background of the credit crisis. The U.S. economy will
only gain profit from it because the nation experiences difficulties
of cooperation with other countries which use less burdensome tax
systems. U.S. Treasury Secretary Henry Paulson stated that it could be
possible to replace the income tax with the entrepreneur tax which
would be similar to the currently used value added tax (VAT).
U.S. President George W. Bush has not lost his optimism about his
nation's economy despite the gloomy forecasts. The U.S. sub-prime
mortgage crisis of 2007 may be replaced by the credit card crisis in
2008, as Americans have been falling behind in paying their bills,
with credit defaults climbing by double digits. The value of U.S.
credit card accounts that were 30 days overdue rose 26 per cent in
October to $17 billion.
Companies like GE Money Bank and HSBC said they've seen a 50 per cent
increase in accounts that were 90 days past due. Experts said that
could lead to more problems for an already struggling economy.
Translated by Dmitry Sudakov
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