Even if we're able to escape another recession in 2013, world economic growth is almost certain to remain slow. Even worse, we may not experience substantial growth again until perhaps 2020 or later. And why is that?
Well, my guess is it's primarily related to the European mess and the massive debt accumulation in the U.S. during the past several decades. We didn't get here in a few short years, and it's probable that we won't get anywhere much better anytime soon either. So let's all hope that my guess is wrong (I sure do), but let's also be honest enough with ourselves to not ignore the warning signs that are all around us.
Thus, even if we do manage to avoid another recession in 2013, which my guess is that we will, we'll still by no means be out of the woods globally. Not here in the U.S. either.
The residual effects of too much debt, too much government, too many bad policies, and too little economic growth will team up to make for a difficult job market and an equally difficult situation for the "middle class" we're so intent on saving, no matter how much we may wish it to be otherwise.
OECD Warns on Global Economy says this about the outlook for the world's economies:
"The world economy is at risk of a fresh contraction if euro-zone and U.S. policy makers fail to restore confidence by resolving their fiscal problems, the Organization for Economic Cooperation and Development warned Tuesday. . . . the Paris-based think-tank delivered its most urgent call to action since late 2008, when the global economy was confronting a deepening financial crisis.
"After five years of crisis, the global economy is weakening again," said Pier-Carlo Padoan, the OECD's chief economist. "The risk of a new major contraction can't be ruled out.". . .
"We don't think the euro-zone crisis is over yet," . . . Rising unemployment could trigger reform fatigue and social resistance," Mr. Padoan said.
The other major imminent threat to growth comes from the U.S., where big tax increases and spending cuts are due to come into force next year. . . .
The OECD said uncertainty about developments in the euro zone and the U.S. had further weakened business and consumer confidence at a time when global demand is under pressure from efforts by governments, businesses and consumers to cut their borrowing.
But the failures that have weakened confidence go beyond the euro zone and the U.S., and the OECD had a broader rebuke for policy makers.
"Lack of confidence largely reflects insufficient or ineffective policy responses, both in terms of too little short-term action and a lack of credible long-term strategies," Mr. Padoan said. "Policy challenges, both macroeconomic and structural, are present in emerging market economies as well."
In common with the International Monetary Fund, the OECD said the negative impact of austerity programs on growth has been much larger than had been expected, partly because so many countries are cutting spending at the same time. . . .
Assuming that its worst fears don't come to pass, the think-tank said it now expects the combined GDP of the OECD's members to grow 1.4% next year, unchanged from 2012, and pick up to 2.3% in 2014. In May it forecast growth of 1.6% this year and 2.2% next. Under those circumstances, it said unemployment could continue to rise until the middle of next year and fall only slowly thereafter {NOTE: Unemployment should rise in Europe next year but fall in the U.S.}.
It now expects the euro-zone economy to contract 0.1% in 2013, having previously forecast an expansion of 0.9%. The U.S. economy will grow 2% instead of the 2.6% predicted in May, while growth in Japan will be 0.7%, rather than the 1.5% previously forecast. . . .
The OECD lowered its 2013 growth forecasts for all but three of its 34 members."
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And immediately below the chart, there's a link to the full OECD report.
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Post-recession recovery is taking a lot longer this time, says OECD:
As the global economy lurches forward, it seems history is being made, and not in a good way.
Out of the three major recessions that have hit the global economy since the 1970s, recovery from the current one that landed in the late 2000s has not been up to par, according to the Organization for Economic Cooperation and Development said in its latest Economic Outlook released on Tuesday.
Alongside a gloomy view of the global economy . . . the thinktank said activity this time around is lagging well behind prior recovery periods.
“There is unanticipated weakness in many OECD and non-OECD economies, and generally soft business and consumer confidence, with slowing demand for consumer durables and capital goods depressing business order books,” it said.
The OECD charted out domestic demand, which rebounded strongly in the 1970s and 1980s following recessions in those periods. But then you get to the 2000s and it’s a less pretty picture, almost flatlining."
Summing Up
To be forewarned is to be forearmed.
Let's consider ourselves forewarned.
Message received.
Let's hope our policy makers don't make things even worse than they already are.
Thanks. Bob.
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