Goldman Sachs: Half The World’s Economy Threatened By Recession
Talk about an attention-grabber. Yesterday, Bloomberg’s Simon Kennedy wrote:
Goldman Sachs Group Inc. said countries that account for half of the world’s economy face a recession a year after the credit crisis began.
The U.S., Japan, the 15-nation euro area and the U.K. are “either in recession or face significant recession risks in the months ahead,” Goldman’s London-based international economist Binit Patel said in a report to clients today…
“Continued robust, albeit slowing, growth in China and the rest of the emerging markets” will deliver world growth of 3.6 percent next year after 3.9 percent in 2008, said Patel, who estimates emerging markets account for the other 50 percent of the world economy.
Bloomberg’s Kennedy added:
A year since the U.S. housing slump sparked about $500 billion in credit market losses for banks globally, the world’s largest economies are all stumbling as rising borrowing costs combine with record commodity prices to sap growth. The U.S. is close to a recession and France, Germany and Japan all contracted in the second quarter.
“And The Winners Are…”
Source:
“Goldman Sachs Says Half of the World Economy Faces Recession”
Simon Kennedy
Bloomberg, August 21, 2008
August 25th, 2008 at 3:01 pm
Well, so much for the ‘Decoupling Theory.’ The rule - “When America sneezes, the rest of the world catches a cold” - still holds true.
Case in point: While flying back from Russia last month, the first leg of the return trip (from Kaliningrad to Copenhagen) was on Baltic Air - a Latvian airline. In reading the in-flight magazine I discerned that the Latvian economy is really getting hammered these days thanks to the combination of high fuel prices, massive inflation, the drop in inflow from western European real estate speculators, and a decline in other business from the western European countries.
It seems the cheap labor in the Baltic countries has evaporated thanks to recent inflation, so firms are pulling their manufacturing and moving it to cheaper shores (China, Vietnam, etc.).
What else do these countries have, to keep their economies going? Looks like this ‘Growth Model’ which so many economies are built upon, leaves everyone hanging when growth slows. Sustainability is definitely the way to go.
-Mammoth
August 25th, 2008 at 5:03 pm
Thanks for the comment Mammoth.
“Well, so much for the ‘Decoupling Theory.’ The rule - ‘When America sneezes, the rest of the world catches a cold’ - still holds true.
I actually buy into the decoupling theory. However, global economies aren’t at the point yet where theory meets practice. Therefore, when America sneezes (as it’s doing right now), everyone better reach for a hanky…
September 2nd, 2008 at 3:21 pm
Britain in recession 2008! Europe, part of the western hemisphere and part of SE Asia in recession 2009! Fully blown world in recession 2010! This seems a fairly confident and predictable outcome considering that our banks, who have caused the worst economic crisis in modern times, now have no real money of their own in reserve. The reason why they cannot lend anymore at the level they could and why the world is heading for the socio-economic turmoil that is clearly upon the horizon now. Many of our banks will undoubtedly go to the wall according to the edicts of capitalism and the market forces dictum. With share losses of western banks, insurance groups and investment institutions of US$2.7 TRILLION over just the last 18 months and bank losses in excess of well over US$1 TRILLION predicted when this is all over, the forecast becomes more-or-less a certainty. Indeed, who would have thought that Europe’s once largest bank UBS (and one of the largest in the world) would have been worth a mere 25% of what it was only a mere 15 months ago. But adding to this many are now worth less than 60% of what they were. Unfortunately the unseen suffering around the world that these great bank losses will cause to all people should be the main point of our anxiety. For in this respect millions will die through a global recession that had nothing at all to do with them. Let us hope that when we are all over this terrible malaise in a decade from now, that governments around the world will make perfectly sure that our banks can never crucify us ever again. Do we really learn is the question?
Dr David Hill
World Innovation Foundation Charity (WIFC)
Bern, Switzerland
September 3rd, 2008 at 8:17 am
Thanks for the comments Dr. Hill.
“Britain in recession 2008! Europe, part of the western hemisphere and part of SE Asia in recession 2009! Fully blown world in recession 2010!”
Over at FinancialSense.com, they’re using a financial crisis “window” of 2009-2012 for the United States (which, by the way, I happen to buy into at the present time):
http://www.boom2bust.com/2008/07/24/the-next-great-depression/
“For in this respect millions will die through a global recession that had nothing at all to do with them.”
A horrible thought, yet the potential is there.
“Let us hope that when we are all over this terrible malaise in a decade from now, that governments around the world will make perfectly sure that our banks can never crucify us ever again. Do we really learn is the question?”
While caution is excercised for a short period of time, the human race is notorious for repeating the same mistakes over time.
Maybe a little bit more emphasis on history in the schools might help…