Are We Facing a Global Slowdown?

For a long time, greedy and conflicted industry executives, toothless regulators and clueless policymakers accepted and promoted Wall Street's self-serving delusion that the banking system and the economy could only benefit from financial globalization and a widespread dispersion of risk.

Of course, this fantasy proved to be a nightmare when history's biggest credit bubble burst. The so-called experts failed to take into account that when financial systems are closely connected, it pretty much ensures that major shocks that might once have remained fairly contained would instead reverberate far and wide.

Other allegedly knowledgeable individuals, including TV pundits and most strategists at major investment banks, made similarly asinine arguments about the impact that a contracting U.S. economy would have on growth in the rest of the world. In their view, other developed and developing nations would carry on booming as before, regardless of what happened here.

Again, the "smart money" failed to realize that instead of being "decoupled" - the trendy buzzword of the overpaid analytical set - the economies of most, if not all, countries were strongly linked because of the powerful and long-running tide of globalization, among other things. Hence, a downturn in America, which accounts for a quarter of global GDP, would naturally have an adverse impact on growth in other nations.

For those who know how to think (which excludes the "experts" already noted above), then, the following Agence France-Presse report, "OECD Sees Growth Easing in Top Economies," should come as no surprise at all.

Comments

[snakyjake:]

Worst credit bubble? Where? I don't see it anywhere. If I didn't listen to the news, I wouldn't even know what you're talking about. I'm sure there's some losers in the market....but it seems like that's the minority.

2008 Aug 10 10:10 AM

[henarl:]

Good for you snakyjake. It's nice that you haven't lost your job or your house or a big chunk of your stock portfolio or that you haven't had to pay way more for your fuel, groceries, health care, etc. Congratulations!

2008 Aug 10 10:51 AM

[wpdragon:]

when one's head is stuck deep in the sand in denial, it is very difficult to see anything, snaky

2008 Aug 10 11:27 AM

[Jimbo:]

I don't often go to malls, I went to one this week that is closest to me.(six miles) At least 30% of the business locations were shuttered. I have also observed a noticeable drop in auto traffic, particularly on weekends.Local stores seem almost vacant except for Walmart. Snaky may be doing just fine, but a lot of other folks may not be.

2008 Aug 10 02:46 PM

[investor88:]

Michael's article says economies are coupled rather than economically decoupled. This point is by now a proven fact. The US being the most advanced and biggest single economy with its credit binge blew up the world economic bubble from 2003-2007; the develeraging and recession/slowdown at the core US economy is now also affecting other economies in the opposite direction ie global slowdown/recession. Snakyjake seems to be doing well but that doesn't mean the gist of Michael's article is wrong. Looks like people who don't feel a thing in this downturn are either quite wealthy to begin with or have made some smart moves--the world is like that, there are always winners and losers.

2008 Aug 11 02:14 AM

[Did U Think...:]

Things are not bad in Texas yet so I can understand that they might not be that bad all over, per snaky jakes comments. But we are in the 3rd inning here folks. The bad stuff really hasn't happened yet. It will happen and you will know it has happened when gold is 1500/oz in the next 3 years. If you have any sense of self preservation whatsoever, buy gold.

2008 Aug 11 03:43 AM