The Global Economy in Turbulent Times

CHAPTER 151 2015: A Dismal World Where Oil and Currencies Are Causing Havoc¹

Flashback 15 years to the time when the United States was in the midst of a disruptive digital revolution. By 1999, the United States was having the time of its life—gross domestic product (GDP) was up 4 percent (double the rate of advanced nations) and unemployment was down to 4 percent (a 30-year low). Foreign capital flowed in and US dollar and S&P 500 stock index were up: US stock prices reached 30 times earnings, and tech stocks went wild.

1990s All Over Again?

Sound familiar? Not unlike recent years, Japan slipped into deflation in 1997; Germany was then the “sick man” of Europe (now it’s the entire eurozone). Emerging nations were in crisis, culminating in the currency crisis of 1997–1998 when many currencies (especially from Asia—from Thai baht to Korean won to the ringgit) crashed as foreign capital withdrew and servicing US$ debt became unsustainable. The parallels with today are not dissimilar. In the 1990s, Harvard’s Lawrence Summers warned that the world economy was flying on one engine. Today, Columbia’s “Dr. Doom,” Nouriel Roubini, echoes the same sentiment, stating only the Anglosphere (United States and United Kingdom) engine is functioning.² Eventually, the United States got sucked in: The tech-bubble burst in early 2000; business investment shrank and share prices fell and consumers cut back. By early 2001, the United States and the rich world had slipped into recession—albeit ...