Is a Recession Imminent?

Definition of a Recession:

The textbook definition of a recession is two quarters of negative GDP growth. Some examples of recessions include the great depression of the 1930’s, the dotcom crash of 2000 and the great recession of 2008.

Causes of a Recession:

Recessions are caused by several factors. These include:
Hyper Inflation
Deflation
Prolonged Fall in Exchange Rates
Credit Crunches
Collapsing Consumer Confidence
Collapsing Asset Prices
Collapsing Global Trade
Bust following Excessive Speculation – e.g., Property Market in Japan -1989

Evidence so far:

1) Collapsing Commodity Prices:
Recessions caused by deflation see massive collapses in asset prices. There has been a well over 50% plunge in the prices of industrial commodities such as copper and oil:

            

              

            2) Collapse in Global Trade:

Freight rates as measured by the Baltic dry index have collapsed over 95% from their highs set in 2008. While temporary dislocations can cause the index to fluctuate quite a bit, the well over 95% collapse in the index is an indication that all is not well with the global economy as far as trading activity is concerned.

                                                        source: INVESTMENTTOOLS

            3) Collapsing Stock Markets:

Stock Markets across the world have been collapsing despite record low interest rates globally.

Emerging markets are down significantly from their recent highs:

            China Stock Market - Shanghai Composite Index
         

             The US S&P 500 is all set to break down from a massive multi year megaphone top:
           Macrotrends
         

         4) Dollar Strength:The Dollar  strengthened against virtually every other currency during the             recession of 2008 and is about to do it yet again post the termination of QE from the FED:

5) Excessive Speculation & Risk Taking:

We are all familiar with the excessive speculation in the housing market that led to the great recession of 2008 following the collapse of Bear Sterns and Lehman Brothers. Fast forward to 2016 and the risk exposures at some big banks are reaching alarming levels as is the case with Deutsche Bank:Is Deutsche Bank AG (USA) The Next Lehman?

Additionally speculation has erupted in alternate asset classes like bitcoin which are commanding ridiculous valuations much like other asset bubbles that occurred prior to earlier recessions in 2000 and 2008 :

6) The velocity of Money is below Great depression levels:

As forecaster Martin Armstrong points out the velocity of money is currently below that observed in the great depression of the 1930’s. This implies that despite multiple rounds of quantitative easing by global central banks the attempt to circulate money throughout the global economy has failed and money has reached only a few pockets. The velocity of money typically declines during recessions and is probably forecasting one ahead:

VELOCITY of Money Below Great Depression Levels | Armstrong Economics

7) Kondratieff Winter Wave Suggests a Collapse Ahead:

Finally looking at long term economic cycles we are entering a traditionally weak period for risk assets which tend to make lows every 8 years or so marked by economic troughs. We recently had major economic downswings in 1992, 2000 and 2008 and are due one in 2016. Other than this we have entered a kondratieff winter wave in 2000 and are set to emerge out of it only in 2020. The last few years of the winter wave could produced the most pronounced down swing in economic activity much like the last winter wave that was characterized by the Great Depression of the 1930’s:

            

              8) Finally a massive amount of curve flattening has happened globally and to the US yield                      curve which is often a precursor to an inverted yield curve and ultimately a recession:

Conclusion:

In conclusion several hall marks of a recession such as collapsing commodities, stock markets and collapsing currencies have already started to play out as we enter 2016 and deflationary forces seem to be taking control. Flight to quality in safe haven assets such as the Dollar and Yen suggest risk appetite is rapidly declining. The massive fall in shipping activity is also providing evidence that a massive slow down is at hand. Excessive speculation as evidenced by the risk exposures of prominent global financial institutions is also a major concern. Additionally the velocity of money has collapsed suggesting that the circulation of money through the economy is simply not occurring despite record low interest rates. Economic cycles also are suggesting that the upcoming recession could last at least till 2020 and the final effects of this major down cycle are yet to be felt and a massive amount of curve flattening further confirms that a recession is on its way.