August 2011
Intermediate to advanced
320 pages
8h 43m
English
CHAPTER 5
Global Mega-Money Meltdown
IT’S NOT JUST AMERICA’S BUBBLE ECONOMY, IT’S THE WORLD’S BUBBLE ECONOMY
A popular fairy tale gained favor in early 2008, proposing that the rest of the world, especially China, had magically decoupled from the naughty U.S. economy. Regardless of whatever foolishness and financial problems we happen to get ourselves into here, China (and to a lesser extent, the other emerging markets) would continue to be a reliable hotspot for investment profits. Even more magical, these burgeoning economies might actually help buffer the rest of the world, and even the United States, from the full impact of the U.S.-led recession.
Unfortunately, by the end of 2008 it became fully evident that this de-coupling myth could not be further from the truth. It was just another failed attempt at wishful thinking and economic cheerleading. In fact, when the U.S. housing bubble, stock market bubble, private debt bubble, and discretionary spending bubble all began to burst in late 2008 and 2009, the speed at which the rest of the world fell into deep recession was staggering. In the fourth quarter of 2008, GDP in the United States declined by 6.2 percent on an annual basis; in the UK it declined by 5.9 percent; Germany declined by 8.2 percent; Japan declined by 12.7 percent; and South Korea declined by a staggering 20.8 percent. By comparison, during the Great Depression, U.S. GDP fell by about 25 percent. Both Germany and Japan had accelerating declines in the first ...
