This cheery update came via reader Michael. Note the Goldman report, which says half the world is in or close to being in contraction mode, includes the US in that camp. Further note that the “two quarters of negative growth” is not a hard and fast rule; the NBER, which is in charge of making the recession determination, can consider other factors in its call (it does need to consist of a slowdown of economic activity of some duration).
From the Telegraph:
Half the world economy, including the UK, is in recession or on the brink, according to research from Goldman Sachs.
The investment bank has warned that the world’s major economies, including the US, Japan, the eurozone and the UK, are “either in recession or face significant recession in the months ahead”.
It also raised fears that the slump could have a profound knock-on effect for China, whose thirst for raw materials and consumer products has been propping up many economies.
The bank’s international economist Binit Patel warned: “Given its importance to world growth in recent years, a world recession would in all likelihood involve a hard landing in China.”
America, the world’s largest economy, has so far avoided recession – news that has helped the dollar’s recent recovery. However, Goldman warned that the country is now facing a major downturn as the effect of the credit crisis takes its toll, having been delayed for some months by a series of tax cuts and interest rate reduction….
Martin Feldstein, the Harvard University economist and former head of the National Bureau for Economic Research – which determines whether a recession is in place – said he was “much more pessimistic than a year ago”.
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The Economist research unit issued a report about a year ago with 3 different cases. It’s looking like we are heading for the 10% case… the “oh crap!” worldwide hard landing case.
The other half not in headed into recession will be the backward third world countries that don’t have synthetic derivatives and lobby groups.
“third world countries that don’t have […] lobby groups.” Example?
In the US the GDP and inflation numbers have been massaged into complete fictions. If one uses anything like real numbers, the US has been in a recession since last year.
Lets not use real numbers, OK!
The US Govt. fudges the inflation and GDP numbers as anyone paying a bill or driving a car can attest to. This Govt is in denial.
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