Is World Recession Coming?
Global economic indicators are taking yet another serious nosedive. The May jobs report in the United States is just another symptom.
The world is still reeling from the aftereffects of the Great Recession that emerged in the United States in 2008. The world has never fully recovered from that. Today, it appears poised at another tipping point back down into relapse.
Election year politics keeps the Obama Administration in denial that its economic policies are not working, thus it and Congress will not take decisive action. U.S. action is needed. It is needed not just to save the U.S. economy, but to help prevent a global economic downturn.
Is a double dip global recession inevitable?
Bad News is Everywhere
World economic news in the last couple weeks…
- Unemployment rate for May rose from 8.1% to 8.2%
- 150,000 new jobs were expected but only 69,000 jobs created
- March job creation revised downward from 115,000 jobs to 77,000
- April job creation revised downward from 154,000 jobs to 143,000
- DOW closes down 275 points Friday to go negative for 2012
- The S&P and NASDAQ are both off 10% for the year and into “correction” territory
- U.S. Treasury 10-year bond yields dipped to 1.47%, lowest ever recorded
The U.S. needs to create about 150,000 jobs/month just to keep up with working population growth.
Global economic news:
- Eurozone unemployment remains at 11%
- At least 8 of 17 eurozone countries are already in recession, including Spain and Italy
- England, not part of the eurozone, is in recession
- Spain bailout of Bankia is at €19 billion euros and climbing
- ECB rejects Spain plan for further Bankia bailouts using EU backed funds
- On Thursday it was revealed €100 billion euros in Spanish bank assets were withdrawn
- Spain bond yields rose to 6.58% Friday, another record high against Germany
- Italy’s deficit is at 8.9% of GDP when required by the EU to be 3%
- Italy’s debt-to-GDP ratio remains close to 120%
- A Greek sovereign debt default depends on an upcoming June 17th election
- The future of the eurozone as it exists today depends largely on that election
- In the meantime, billions of euros are taken out of Greek banks because of its debt crisis
- Dragged down by global conditions, Chinese and Asian economic growth continues to slow
- German 2-year bonds sold at 0% yield
- German and United Kingdom 10-year bond yields at lowest levels ever recorded
Italy and Spain are the 8th and 12th largest economies in the world. They are the 3rd and 4th largest economies in the eurozone. They overshadow economic events in Greece.
The eurozone (EU) is the largest economy in the world… bigger than the United States.
In turmoil understates the eurozone economy. It is much worse than that.
Franςois Hollande was elected as President of France last month. He philosophically disagrees with Germany’s Angela Merkel how to solve the eurozone economic crisis.
The breakup of the German/French alliance has thrown the eurozone into total economic chaos. The EC, ECB and lack of a true fiscal union in the eurozone has greatly fractured policy and put the euro and the EU itself into serious jeopardy.
Given it is a major trading partner to both, the eurozone is dragging down both the U.S. and Asian emerging economies… like China’s.
How Europe gets resolved will determine if the world falls into recession or not.
The United State can help prevent world recession.
But that requires the vision to look beyond petty US-centric, self-centered political interests. It also requires the United States to put money where its mouth is to support Europe. That will require extraordinary statesmanship, bravery and a political will that is unlikely in a presidential election year.
Therein lies the conundrum. If nations remain divided and things remain as they are right now then world recession is inevitable.