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.

Photo: New Year 2008 may destroy USA’s struggling 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 2008.

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 price.

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.

Source: agencies

Translated by Dmitry Sudakov
Pravda.ru