Okay children hold on tight, for the global economic rollercoaster will soon go off a cliff.
Here’s why.
There’s been a sharp slowdown in manufacturing in all the major economies, and it’s tied to slackening exports.
Most of the economies of the Eurozone are contracting. Germany is just a hairsbreadth away from joining the rest. The United States had zero jobs growth in August. Japan, reeling from the tsunami and nuclear disaster, is facing continued slow growth. The Canadian economy shrank 0.4 per cent in the last quarter.
Of the BRIC economies, Brazil and Russia are heavily dependent on commodity exports, which will plunge with the continued drop in manufacturing. The good news/bad news is that oil and gold prices will drop like stones.
China’s dependence on export-led growth will boomerang into an export-led depression. Signs of sharp contraction are already evident: car sales have slipped dramatically in the last few months and are projected to fall 45 per cent by 2013.
Analysts say the cause of this synchronous global slowdown is the end of the growth generated by the enormous economic stimulus packages after the 2008 crisis. As all countries are in debt up to their eyeballs, there’s no hope of anything like the last round of deficit financing. It remains to be seen if other major economies will follow the United States in its stimulus package disguised as a jobs programme.
Overall, we are looking at a scenario last seen when falling exports triggered the Great Depression of the 1930s. The sequence has a fatal internal logic: as export markets fall, corporations cut back on production, throwing millions of people out of work, thereby shrinking domestic demand and setting off further cuts in manufacturing and employment in a continuing vicious cycle.
Of course, if there is a default by any of Europe’s heavily indebted countries the crisis could develop far more rapidly. IMF Managing Director Christine Lagarde warned last week that the European financial system is on the verge of collapse. To avoid it, European countries will have to inject capital into their ever more shaky banks, but that seems unlikely.
What about India?
The funny thing is, while the exports of the rest of the world have been taking a nosedive, Indian exporters have been racking up staggering rates of growth ranging up to 84 per cent. There is widespread suspicion that this does not reflect real exports, only black money flooding back to take advantage of the only major economy that shows continued signs of vitality.
Can nothing be done to forestall the coming gut wrenching period?
A great deal, especially by community activists; but the corporate Powers-that-be will probably not allow things to get out of their control. Traditionally, they have maintained control by starting up conflicts to disrupt cooperative efforts at change. In Europe during the 1930s, that involved funding the rise of fascist parties under Hitler and Mussolini. It is sobering to remember that the world economy fully recovered from the Great Depression only because of the massive military expenditures of World War II.
Here’s why.
There’s been a sharp slowdown in manufacturing in all the major economies, and it’s tied to slackening exports.
Most of the economies of the Eurozone are contracting. Germany is just a hairsbreadth away from joining the rest. The United States had zero jobs growth in August. Japan, reeling from the tsunami and nuclear disaster, is facing continued slow growth. The Canadian economy shrank 0.4 per cent in the last quarter.
Of the BRIC economies, Brazil and Russia are heavily dependent on commodity exports, which will plunge with the continued drop in manufacturing. The good news/bad news is that oil and gold prices will drop like stones.
China’s dependence on export-led growth will boomerang into an export-led depression. Signs of sharp contraction are already evident: car sales have slipped dramatically in the last few months and are projected to fall 45 per cent by 2013.
Analysts say the cause of this synchronous global slowdown is the end of the growth generated by the enormous economic stimulus packages after the 2008 crisis. As all countries are in debt up to their eyeballs, there’s no hope of anything like the last round of deficit financing. It remains to be seen if other major economies will follow the United States in its stimulus package disguised as a jobs programme.
Overall, we are looking at a scenario last seen when falling exports triggered the Great Depression of the 1930s. The sequence has a fatal internal logic: as export markets fall, corporations cut back on production, throwing millions of people out of work, thereby shrinking domestic demand and setting off further cuts in manufacturing and employment in a continuing vicious cycle.
Of course, if there is a default by any of Europe’s heavily indebted countries the crisis could develop far more rapidly. IMF Managing Director Christine Lagarde warned last week that the European financial system is on the verge of collapse. To avoid it, European countries will have to inject capital into their ever more shaky banks, but that seems unlikely.
What about India?
The funny thing is, while the exports of the rest of the world have been taking a nosedive, Indian exporters have been racking up staggering rates of growth ranging up to 84 per cent. There is widespread suspicion that this does not reflect real exports, only black money flooding back to take advantage of the only major economy that shows continued signs of vitality.
Can nothing be done to forestall the coming gut wrenching period?
A great deal, especially by community activists; but the corporate Powers-that-be will probably not allow things to get out of their control. Traditionally, they have maintained control by starting up conflicts to disrupt cooperative efforts at change. In Europe during the 1930s, that involved funding the rise of fascist parties under Hitler and Mussolini. It is sobering to remember that the world economy fully recovered from the Great Depression only because of the massive military expenditures of World War II.
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