2. • Severe economic and financial crises in period
2007-9
• Renewed weakness in the global economy
from mid-2010 onwards
– Falling GDP and industrial production growth
– Continuing high unemployment
– Loss of confidence in countries with excessive
debts – the Eurozone crisis
– Considerable volatility in global financial markets
The Global Economic
Problems
3. (Data Source: Economist, Calculated by author)
Weakening industrial production and
real GDP growth in advanced countries,
2008 (Jan) – present (Jun 2013)
4. (Data Source: Economist, Calculated by the author)
Weakening industrial production and
real GDP growth in developing countries,
2008 (Jan) – present (Jun 2013)
5. (Data Source: Economist, Calculated by the author)
Unemployment still high in
advanced countries,
2008 (Jan) – present (Jun 2013)
6. • Reductions in interest rates and printing of
money (to aid banking system)
• Budget deficits (also to bail out banks)
• Bail-outs of banks and some non-financial
corporations (1)
Major policy responses to
2007-9 crisis and ensuring
global economic turmoil
7. • Government monetary and fiscal
irresponsibility in the advanced countries
coupled with exchange rate manipulation by
the Chinese.
• Speculative excesses by the financial sector in
the advanced countries coupled with
mercantilist policies of the Chinese and other
Asian economies.
Standard explanations for
the global economic problems
8.
9. • Shift in balance of global economic power away
from the U.S. and towards Europe and Developing
countries.
• Workings of cycles, especially the long cycle – end
of phase in which financial sector becomes too big
• Fall or stagnation in real wage levels in the U.S.
(and other advanced countries) hidden by an
excessive expansion of credit (1)
• Misguided policies and data manipulation in the
advanced countries have aggravated problems.
Real causes
16. Long
cycle
phases
upswing
downswing
Long Cycle Phases
• Major tech, innovations lead to rise in profits,
investment and output
• Prices rise towards end of phase
(technological and production capacity limits
are reached)
•Primary commodity prices peak by the middle
of the upswing
• Profits, investment and output growth fall
• Unemployment rises and real wages and
prices fall…debt rises
• Primary commodity prices bottom and then
start to rise
•Shift in global economic power accelerates
17. (Source: Goldstein 1988 (modified))
Long Cycle Dating
Trough Peak Trough Duration Hegemonic
Power
Technology
1790 1814 1848 58 Britain Canals
1848 1872 1893 45 Britain Railways, Steam (steam
engine)
1893 1917 1940 47 Britain Steel, Combustion
engine, Electricity,
Chemicals, Telephone
1940 1975 2000 60 United
States
Electronics, Plastics,
Aerospace, Nuclear
energy
2000 2030 2050 50 United
States
Computers,
Biotechnology, Robotics
18. Long Cycle Interest Rates,
US 20 yr bonds, 1954 – 2012
* 1987-92 data is estimate (Data Source: US Federal Reserve St.Louis)
20. Short-term prospects
• Should be another global recession, led by
recession in the US by 2014 at the latest
• Return to easy monetary policies in the
advanced countries
• Continuing tightening of fiscal policies in
advanced countries
23. Longer-term prognosis
• Stagnation in the advanced countries (1)
– Continuing migration of production to developing countries
– Continuing high unemployment
– Continuing high government debt and budget deficits
– Inflation problems
• More rapid growth in the developing countries (2)
– Continuing growth of Asia – possible formation of a
monetary union
– Rise of Latin America and Africa
26. Palm oil,
2000 (Jan) – 2013 (Aug)
(Source: International Monetary Fund, Chart by author)
27. Rubber,
2000 (Jan) – 2013 (Aug)
(Source: International Monetary Fund, Chart by author)
Notes de l'éditeur
Source: EconomistOwn composite, US, EU and Japan
Source: EconomistOwn composite, BRICs
Source: EconomistOwn composite in US, Japan and Euro area* Changed from annual to monthly basis
1. Most of the advanced country deficits funded bank bail-outs. Most of the developing country deficits funded infrastructure development and lending to productive enterprises.
Also note shifts in global economic power and economic thinking.
End of periodAnnual, Nov for 2012 only
As a result, core inflation – defined as yoy growth in the Personal Consumption Expenditure (PCE) deflator excluding food and energy – has now dropped under 1.1%, to the lowest reading in its entire 53-year record. (ECRI, June 3, 2013)
Replace to http://www.theatlantic.com/business/archive/2012/11/the-long-story-of-us-debt-from-1790-to-2011-in-1-little-chart/265185/?Can be changed to other chart(Source: http://www.moneyweek.com/investments/stock-markets/the-most-important-driver-of-stock-market-returns-14646)
Palm oil, Malaysia Palm Oil Futures (first contract forward) 4-5 percent FFA, US$ per metric ton
Rubber, Singapore Commodity Exchange, No. 3 Rubber Smoked Sheets, 1st contract, US cents per pound
