By Robert Borosage
Listening to the presidential debates would suggest that the only foreign policy challenges that the U.S. faces are ISIS, Syria and a touch of Ukraine. Accelerating catastrophic climate changes – already costing hundreds of billions in damage and destabilizing countries – go unmentioned. And most perplexing, at a time when most Americans still make the economy their leading concern, the threat of another world recession is simply ignored.
Tremors in the stock markets – which have erased about $8 trillion in stock market values – have roused fears in the financial pages. But, of course, the stock market, as Paul Samuelson acidly noted, has predicted nine of the last five recessions. Economists assure us that the U.S. economy is still on a sound growth path. But the consensus of economists predicted, alas, one of the last nine recessions.
In fact, global economic troubles are already apparent. The Japanese economy is contracting and struggling with deflation. The so-called BRIICS – the set of countries heralded as a new source of economic dynamism – are a mess. Brazil and Russia are in recession or worse. South Africa is headed there. Growth in India and Indonesia is slowing. And China’s slowdown has savaged commodity prices and commodity exporters across the world. South American countries are struggling with plunging prices for oil and other exports. Global industrial activity and trade growth ground to a halt by the end of 2015.
Europe – still in the chokehold of German austerity and roiled by the flood of immigrants from Syria and elsewhere – eked out growth of 0.3 percent last quarter, and its GDP hasn’t recovered to its 2007 levels, before the financial collapse eight years ago. The U.S. has enjoyed relative buoyancy with record months of jobs growth, top-line unemployment dropping to 4.9 percent, and even signs of wages beginning to inch up, but its fourth quarter growth was an annualized rate of 0.7 percent. The strong dollar, weak export markets, the threat of Chinese devaluation and Europe’s travails all will add to U.S. difficulties. The burden of student loans is stifling an entire generation, and potential defaults pose a growing threat. Federal Reserve officials have indicated their growing concerns about the ability of the U.S. to weather these storms.
Continue reading: Global Recession: A Real and Present Danger?