The perfect storm of a global recession
The probability is growing that the global economy - not just the US - will experience a serious recession.
This looming global recession is being fed by several factors:
the collapse of housing bubbles in the US, UK, Spain, Ireland and other euro zone members;
punctured credit bubbles where money and credit were too easy for too long;
the severe credit and liquidity crunch following the US mortgage crisis;
the negative wealth and investment effects of falling stock markets (already down by more than 20% globally);
the global effects via trade links of the recession in the US (which still counts for about 30% of global gross domestic product);
the US dollar's weakness, which reduces American trading partners' competitiveness;
and the stagflationary effects of high oil and commodity prices, which are forcing central banks to increase interest rates to fight inflation at a time when there are severe downside risks to growth and financial stability.
By Nouriel Roubini (The Edge Malaysia, September 1, 2008)
