World economy to shrink in 2009; first time since 1945

[Lenny]

The global economy will shrink this year for the first time since World War II, the World Bank has said. Trade may record the biggest decline since 1929, it said. http://news.bbc.co.uk/2/hi/business/7931899.stm

{Graph of world GWP growth - past recessions have all simply briefly levelled off GWP growth, never declined}.


"Gross World Product" growth in past millennium, by period
AD 1000- 1500: 0.15%/year
1500 - 1820: 0.32%/year
1820 - 1870: 0.93%/year
1870 - 1913: 2.11%/year
1913 - 1950: 1.85%/year*
1950 - 1973: 4.91%/year**
1973 - 1998: 3.01%/year***
[2009: Negative -0.5%?]



* - Growth in this period almost totally driven by the USA; Europe had terrible negative net-growth during this period; USA accounted for an astonishing 50% of GWP in 1949 [today it's about 18%].
** - The recovery of Europe, the emergence of the Asian Tigers and the teeth-cutting of other formerly-weak economies...
*** - The end of this period is when China really started taking off. [source]

[Lenny]

[2009: Negative -0.5%?]

It's worse than expected already --

Global GDP is now forecast to shrink 1.4 percent in 2009 and the world economy won't start to markedly recover until 2010 at the earliest.

http://bloomberg.com/apps/news?pid=2...d=a2oaDrBSipy0

That figure will probably still be revised downward. I mean, the E.U. itself is now predicting a yearly (negative)2.5% growth - which may yet go even further into the red - and who knows how Russia could fall. The USA, it is said, will decline by at least 3% on the year (link), and even that presupposes a recovery by year's end (if current losses continue it will be more like -6%).

Europe+USA account for 43% of the world economy, and between them they might very well lose 5% on the year.


This is absolutely incredible - there has not been anything like this in living memory. Even today's elderly would've been children the last time this happened in peacetime.

[SwordoftheVistula]

It's going to continue the downwards spiral. For the past decade or so, people in the US have had a negative savings rate (consuming more than producing) and much of the economic 'growth' has come from the real estate bubble. People are consuming more and working less, more and more people out of the workforce (early retirements, welfare, 'disability', etc). It will be harder for the economy to bounce back because it has become so regulated that it is hard for new companies to pop up and replace the ones that are dying, and our government is doing its best to keep the bad companies operating (wasteful banks

Much of the rest of the world has manipulated their economy to be reliant on exports to the US in order to maintain domestic tranquility, 'full employment' in east Asia and large welfare systems in continental Europe. What are they going to do when they can't find anyone to sell cars and stereo systems to? East Asia especially doesn't have a large enough domestic middle class for a self sustaining economy.

Another article from the same site:

http://news.bbc.co.uk/2/hi/business/8049574.stm

Spanish economy shrinks rapidly

Spain's economy suffered its largest contraction in 50 years in the first three months of 2009, preliminary estimates have shown.

GDP fell 1.8% from the previous quarter and was down 2.9% year-on-year, the National Statistics Institute said. It will release final data next week.

Economists said the falls were the steepest seen since 1959.

Spain had enjoyed 14 years of consecutive growth before entering recession in the last quarter of 2008.

The near-collapse of its key construction industry has hit the economy hard.

The Spanish government has predicted GDP will shrink by 1.6% in 2009, while the European Commission has said it expects Spain to be the last European Union country to exit recession, probably in 2011.

"Although Q1 could mark the trough in the recession, any improvement in Q2 and beyond may be fairly modest," Ben May, European economist at Capital Economics said.

"Indeed, Spain's economic imbalances will ensure that it experiences one of the most prolonged downturns in the eurozone."

No shit, Spain doesn't actually produce much of anything, it's economy has relied on Brits vacationing and retiring there. Now that the British finance industry has crashed, not as many of them can vacation or retire there anymore. Basically, Spain is another Iceland only one step removed, thus the delay in effect.

[Lenny]

For the past decade or so, people in the US have had a negative savings rate (consuming more than producing) and much of the economic 'growth' has come from the real estate bubble. People are consuming more and working less, more and more people out of the workforce (early retirements, welfare, 'disability', etc).

This is quite true and has bugged me for some time, too.
It seems simple enough that a child could understand it. Yet there was a collective delusion for 20 years - at least - that pushing around paper was somehow "wealth creation".

It's going to continue the downwards spiral.

For some reason, everyone is predicting imminent recovery.

This chart was made a few months ago, before it was announced that USA Q1-2009 in fact had another (negative)6% growth rate. (As you can see it guessed GDP losses would start to level off in Q1)--


http://forecasts.org/gdp.htm

[SwordoftheVistula]

For some reason, everyone is predicting imminent recovery.

Yeah-the same morons whose policies caused this mess are trying to cure it with more of the same

[Skandi]

None of the big players seem to see that the issue cannot be permanently solved by doing the same things that they have always done. Continued economic growth cannot be sustainable and all of our policies rely on this growth to service the debt that is being incured. Even when we come out of this recession, there will be another, and another and another until the system really does crash. I hope in many ways that I am not around for that, but maybe I will be.

[SwordoftheVistula]

Continued economic growth cannot be sustainable

It can be, but it can only be sustained by increases in productivity. The problem comes from politicians that seem to think that creating money creates wealth, or that increasing the number of people employed without regard to what exactly they are doing while employed creates economic growth. If a house that was worth 200k goes up in price to 300k, that is not 'economic growth'. For example, the internet did create 'economic growth' because it cut down on the amount of people in 'merchant' type jobs.

[Lenny]

At this point all I can do is post this:



That about sums it up, IMO.

[SwordoftheVistula]

At this point all I can do is post this:



That about sums it up, IMO.

Yes, that's another problem, that the politicians have focused on the overall GDP (not really relevant) instead of the per capita GDP (a rough measure of quality of life), thus leading them to attempt to grow the population with immigration.

[Psychonaut]

Yes, that's another problem, that the politicians have focused on the overall GDP (not really relevant) instead of the per capita GDP (a rough measure of quality of life), thus leading them to attempt to grow the population with immigration.

Right. I'm also constantly confused by the fact that the government cotemporally advocates the expansion of the American population (mainly through immigration) and the development of types of technology that make manual laborers redundant.