SOURCE: Jerome Levy Forecasting Center

July 28, 2015 10:00 ET

Levy Says Neither Greece nor China Changes Global Picture

U.S. Economy to Continue to Grow Modestly Until Global Expansion Breaks Down

MOUNT KISCO, NY--(Marketwired - July 28, 2015) - Economist David Levy, writing in the just-published July issue of The Levy Forecast®, said neither Greece's capitulation to its creditors' demands nor China's actions to prop up its stock market changed the likelihood of increased global economic problems in the months ahead.

Rather, Levy, chairman of the independent Jerome Levy Forecasting Center (www.levyforecast.com), offered investors a few points to keep in mind in the current period, one he characterized in the following way: "Looking around the world, the private sector of one economy after another is burdened with oversized balance sheets -- excessive debt, lofty asset values, stingy operating returns and excess capacity."

1. The Greek problem is a threat to the eurozone only because the eurozone as a whole has excessive debt, overcapacity, over-valued assets, and an oversized financial sector.
"Even if the Greek crisis is subdued for the time being, the euro area is rife with financial vulnerabilities like so much dry kindling ready to ignite with the help of any one of the many potential sparks to come."

2. China's equities bubble is only one of many excesses that make up a Chinese bubble economy, along with severely overextended export capacity, real estate markets, bank debt and shadow banking debt.
"Each of these markets is a threat to financial stability and together, they are virtually a guarantee that sooner or later, China will undergo a crisis, profound retrenchment and enduring adjustment problems."

3. The outlook for the emerging market (EM) sector is "deeply troubling." EM exports, their manufacturing sectors, and their capital-goods demand all continued to contract in the second quarter.

Levy's conclusion: "The greatest danger in today's financial arrangements is that the excesses are both national and global. They are interconnected by a complex web of causality. No single part may seem to be a large threat to national or global stability, but as part of a broad global balance sheet correction, each part looks much more ominous."

About The Jerome Levy Forecasting Center
The Jerome Levy Forecasting Center LLC -- the world leader in applying the macroeconomic profits perspective to economic analysis and forecasting -- conducts cutting edge economic research and offers consulting services to its clients. The goal of the Levy Forecasting Center is to improve its clients' business and investment performance by providing them with powerful insights into economic risks and opportunities -- insights that are difficult or even impossible to achieve with conventional approaches to macroeconomic analysis. Additional information may be found at www.levyforecast.com.

Note: The full Levy Forecast, the nation's oldest publication devoted to economic analysis, is available to the press in PDF format by contacting Andrew Edson & Associates, Inc. -- Andrew@edsonpr.com or 516 850 3195.

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