This Is Signaling An ALL-OUT Global Recession

Summary

The video explains how global economic downturns spread recession across countries, even to economies thought isolated like Japan's, through trade and sentiment. It traces synchronized recessions back through history, like the deep 1980s global recession, showing national economies are globally integrated. Despite strong US GDP, global troubles spread, seen in statistics beyond GDP and in how regular people feel. Weakness spreads in a globally synchronized cycle no matter how strong parts may first appear.

Takeaways

• 😯 The world economy is interconnected - problems in one region can spread globally
• 😞 The 2001 recession was a globally synchronized downturn, triggering the first QE by Japan
• 🤔 Despite decent GDP, the US economy was still impacted by the 2001 global recession
• 😠 The Euro area felt pressure to help stimulate the global economy in 2001 but declined
• 😤 Major economies like Germany, France and Italy all contracted in 2001 along with Japan and US
• 😨 China's economy substantially slowed in 2001 with plummeting trade and industrial output
• 😡 There were globally synchronized recessions going back to the 1970s great inflation era
• 🙁 The IMF reported deep global recessions in the early 1980s impacting every region
• 😕 Paul Krugman realized Japan's woes showed recession can spread from one region to another
• 😃 More countries slipping into recession now is a warning for the still-strong US economy

Q & A

What was the first instance of quantitative easing in response to a recession?

The first quantitative easing was done by the Bank of Japan in 2001 in response to the globally synchronized recession that was impacting economies around the world at that time.

How did the 2001 recession impact the economic recovery in Japan?

The 2001 recession halted Japan's economic recovery that had begun in 2000. Japan experienced multiple quarters of negative GDP growth in 2001 due to the global downturn.

What role did the ECB play during the 2001 global recession?

The ECB acknowledged the recession was impacting Europe too but said it was not their role to try to stimulate the global economy, only focus on Europe's needs.

How did the 2001 recession impact China's economy?

In China, economic growth slowed substantially. Exports stalled, industrial production declined sharply from double digits to just 2.7% by 2002, though investment cushioned the blow somewhat.

What evidence is there of globally synchronized recessions prior to 2001?

The video cites globally synchronized recessions going back to the 1940s, including the Great Inflation of the 1970s impacting many countries, and the global recession in the early 1980s that most regions worldwide experienced.

What is the warning sign of more economic weakness spreading in 2024?

The spreading recessions to more economies by end of 2022 is a warning sign that economic trouble is proliferating through the globally synchronized economy and could reach even economies like the US.

How could US GDP remain high while weakness spreads to other US economic statistics?

If measures beyond GDP like GDI are showing weakness, it indicates problems spreading in the US. GDP alone does not give full picture.

Why do people feel there is a recession even if technical definitions are not met?

People can sense coming economic trouble even if official recession definitions based on GDP have not yet been triggered. Their experiences reflect real struggles.

How does economic weakness spread globally in a synchronized economy?

Recessions spread due to trade declines, financial links, risk aversion slowing business activity, and overall tight interconnectedness of global economy.

What is the conclusion about decoupling in a global economy?

The video argues that "decoupling" is a myth - because of global integration, no economy is immune if enough other major economies fall into recession.

Outlines

00:00

🤔 Paragraph 1 discusses the global economy interconnection and 2001 globally synchronized recession

Paragraph 1 explains that the global economy is interconnected, using the 2001 recession as an example, which was the first quantitative easing by Japan. It argues against the decoupling theory and states that problems in one part of the global economy affects everyone.

05:02

🌎 Paragraph 2 talks about the 2001 recession impacting various countries like Japan, Europe, Germany, France, Italy

Paragraph 2 gives examples of how the 2001 global recession impacted many countries around the world including Japan, Europe, Germany, France, and Italy. It shows the recession was globally synchronized.

10:05

📈 Paragraph 3 discusses China's economic slowdown in 2001 due to the global recession

Paragraph 3 focuses on China's experience during the 2001 recession, including a decline in GDP growth, industrial production, exports. This shows the global synchronization.

15:06

🌐 Paragraph 4 concludes that global recessions have occurred for decades and weaknesses can spread due to interconnections

Paragraph 4 states that global synchronized recessions have happened for decades dating back to the 1970s. It argues that problems can spread between countries through trade, sentiment, and financial channels showing the risks.

Keywords

💡Globally synchronized recession

The video argues that recessions tend to be globally synchronized events across countries and regions, rather than isolated national experiences. For example, the 2001 recession in the U.S. coincided with downturns in Europe, Japan, and emerging markets. This shows the high degree of economic integration in the global economy.

💡Decoupling

The concept of 'decoupling' suggests that countries like the U.S. can be economically independent from the rest of the world. But the video argues this is false - when major parts of the global economy suffer downturns, it eventually impacts everyone negatively through trade, sentiment effects, etc.

💡Interconnected economy

The global economy is deeply interconnected through trade, finance, sentiment, and other channels. This means economic troubles are easily transmitted globally. For example, the 2001 U.S. recession impacted Japan's recovery and sent it back into deflation and recession.

💡Global great inflation

The high inflation of the 1970s was not just a U.S. phenomenon but was global in nature. This further illustrates economic integration and transmission of conditions across countries over the long run.

💡Trade impacts

The 2001 recession led to a plunge in Chinese exports, from 40% growth to near zero, showing trade is a key transmission mechanism of economic troubles. This impacted China's industrial production growth too.

💡Risk aversion

Beyond just trade effects, recessions also trigger behavioral effects like risk aversion across countries. Firms hesitate to invest or expand globally when major markets face downturns.

💡Financial impacts

Recessions spread across borders via financial channels too. Credit, asset prices, interest rates all get impacted globally during synchronized downturns.

💡Weakness spreading

Towards the end, the video notes that even though U.S. GDP looks strong, weakness has spread to metrics like income and employment. This may be further evidence of global synchronization unfolding.

💡Warning sign

The spreading global recession is a warning sign. Though U.S. growth persists for now, synchronized downturns eventually impact every country, despite policymakers claiming 'decoupling'.

💡Global integration

The video traces global economic integration back decades, countering views that it is just a recent phenomenon. It has made synchronized cycles & recessions a recurring possibility.

Highlights

The world economy is interconnected and problems in one part can spread to others through trade, sentiment, risk aversion, finance, and more.

The 2001 recession in the U.S. was relatively mild but still impacted Japan's economy, leading to its first round of quantitative easing.

The 2001 recession was globally synchronized, with multiple countries in Europe, Asia, and emerging markets seeing economic declines.

China's economy slowed in 2001 with drops in GDP growth, industrial production, and exports due to the global recession.

There have been globally synchronized recessions and inflationary periods going back to the 1970s and earlier.

The early 1980s brought a deep global recession to most regions as countries focused on ringing out inflation.

Whenever the U.S. economy declined, it often meant the rest of the world would follow, showing economic synchronization.

Paul Krugman realized European weakness can bring recession to Japan, disproving the idea economies are isolated.

Trade is one way economic troubles spread globally, but factors like risk aversion and sentiment matter too.

Recent unexpected recessions spreading globally are a warning for the U.S. economy despite strong GDP numbers.

U.S. GDI numbers may show more similarity to struggling economies, indicating synchronization is already underway.

People can feel a recession coming even before technical measures declare it, due to global economic integration.

The 2001 recession provides a lesson that no economy is an island unaffected by global economic weakness.

Policymakers globally need to pay attention to economic declines spreading through an interconnected world.

Weakness and recession may not hit all areas at once but will eventually impact the broader global economy.

Transcripts

the US government just updated GDP for

the fourth quarter and still as strong

as ever the US economy appears to be

invulnerable yet recessions keep

spreading around the rest of the world

if you can't shake that nagging feeling

the rest of the world might really

matter that's because it actually does

and Far More Than People realized we

keep hearing about decoupling but that's

not how the global economy works because

it is a global economy that's not how it

ever really worked the idea of globally

synchronized goes back a very very long

way in fact the world's very first

quantitative easing episode was in

response to a globally synchronized

recession and I don't mean 208 I'm

talking about

2001 the world economy is a world

economy and when there's a lot of pieces

in that world economy that are suffering

substantial setbacks it's going to be a

problem for everyone no matter how it

looks along the way a globally

synchronized cycle is still a globally

synchronized cycle and more and more

evidence continues to Pile in in 2024

the cycle remains on the downswing but

let's go back to 2001 to really drive

home this point globally synchronized

it's not anything new the modern economy

is interconnected and interwoven

whether we ever realized it or not

because the financial media and

economics has done such a poor job of

educating the public this has been the

case for a long time so let's go back a

little bit over 20 years to 2001 and the

very first QE which means we're talking

about the Japanese now in the United

States the US economy fell into a very

shallow recession in the second quarter

of 2001 and there weren't actually two

straight quarters of of negative GDP

either therefore showing that a

recession can happen whether or not it's

a technical one or

not because the the recession in 2001

was relatively shallow many people

didn't realize it was happening as it

was happening most attention was focused

on the com bus that kept on busting

through the year 2001 and then of course

the tragedy in September 2001 which many

people associated with the downturn in

the economy but it actually goes back to

Global weakness somewhat tied to the com

Bost from the year before so even

entering 2001 the worldwide situation

was questionable enough that even the

Japanese were thinking we better do

something

drastic Bank of Japan's statement

announcing what it was intending to do

with quantitative easing the very first

paragraph says this this is March 19th

of 2001 Japan's economic recovery has

recently come to a pause after it slowed

in late 2000 under the influence of a

Sharp down turn of the global economy

prices have been showing weak

developments and there is concern about

increased downward pressure on prices

stemming from weak demand and they mean

weak demand not just in terms of Japan

but also around the rest of the world

weak global economy as kazua waa said in

May of 2001 downside risks of the

Japanese economy have increased sharply

since the fall of last year as both the

US economy and the it it boom turned

downward the downturns have hit the new

economy hardest and it means again

Global new economy globally I hasten to

add that GDP may have expanded at a

reasonable rate in the second half of

last fiscal year which ended in March

meaning Q4 2000 and q12 2001 but going

forward the downside risks have just

characterized are the major concern such

was the background for our monetary

policy decisions in the last quarter

again he's basically saying and waa by

the way is the the current bank of Japan

Governor what he was saying is that we

turned to QE because we were worried our

economic recovery was going to be short

circuited by the growing Global

recession which by the way it actually

was when you look at GDP as he was

saying it looked relatively decent and

stable to end 20000 GDP was up around 1%

quar over quar in the fourth quarter of

2000 and nearly three a little bit over

3/4 of a percent in the first quarter of

2001 and in that first quarter of 2001

Along Comes the bank of Japan to do QE

because they don't know what else to do

did it work no it didn't the next three

quarters in Japan Q2 2001 Q3 and Q4 so

the the balance of that year 2001 GDP

turned negative and pretty solidly

negative in the second and third

quarters which means the globally

synchronized recession that definitely

hit the United States actually did

interrupt the Japanese recovery and send

it plummeting back into a deflationary

mindset as well as recession so again

what what good was QE in fact they

actually did a second QE because of the

recession so even the Japanese which you

would think was an economy unto itself

an island after a lost decade was still

getting impacted negatively by global

developments globally synchronized and

it wasn't just Japan of course you look

around the rest of the world in 2001 and

you see the same thing over in Europe

the brand new or relatively new ECB and

its its president Dr William dusenberg

dienberg dusenberg I'll go I'll go with

dusenberg in June of 2001 he gave a

speech which was titled what exactly is

the responsibility of central banks of

large economic areas in the current

slowdown of the world economy because

many people were turning to the E the

ECB and to Europe to say the rest of us

are experiencing recession can you help

us out here maybe do a little bit of

European stimulus to help out a a global

economic system that is suffering a

substantial downturn it was worse than a

it was worse than a downturn it was

actually an outright recession and what

he said was yeah that's not really our

job but I understand the problem because

we see the pressure hitting Europe too

he said the topic of the introdu I've

been invited to provide at the central

Bankers panel is both challenging and

welcome the challenge is to answer a

question that has been hovering around

in recent months should the Euro area

assume the role of a global growth

engine in the current slowdown of the

world economy this notwithstanding the

Euro area is not of course economically

speaking an island and Global

developments do affect the Euro area

economy hence let me also stress that

one of the requirements of a globalized

world is a frequent exchange of

information and Views among policy

makers and what he was saying is that

you know we feel bad for everyone else

but it's not our job to bail anyone else

out especially since Europe was going to

have an increasing amount of its own

problems too as it would turn out the

European economies which which back then

it was they were thought of as more

National economies than an integrated

European economy but they weren't it was

Again part of the global economy but the

individual European economies many of

them had already suffered into recession

as well globally synchronized look at

Germany for example Germany which was a

mess at the time they had contractions

in GDP in the third and fourth fourth

quarter of the year before in 2000 so

the.com bust was busting a whole lot of

places around the world including

Germany then they had a big Rebound in

the first quarter of 2001 and followed

by second quarter of 2001 consistent

with Japan and United States Germany

actually actually suffered four more

contractions in GDP an entire further

year of negative output globally

synchronized France headed a little bit

better they had slow growth in the

second quarter of 2001 A small

acceleration in the third quarter and

then a small negative in the fourth

quarter you put that together and it is

a very very mild recession in France

Italy was basically exactly the same as

Japan as Europe's third largest economy

that made a big difference which means

three straight negatives from the second

quarter of 2001 on even the timing is

quite synchronized the same three

quarters as Japan the same three

quarters as the United States Dutch GDP

another one another big one that is a

more that that is characterized as a

more stable economy they had a slow

quarter in the first quarter of 2001

even before the globally synchronized

recession then another slow quarter in

the third quarter before a negative

quarter in the first quarter of 2002 so

even the Dutch economy one of the more

steady and stable systems there are that

one experienced a more than slowdown in

2001 as well how about Emerging Markets

China a very big one the Chinese in

2001 their experience in terms of

General output wasn't as bad as the

Asian not financial crisis in 97 and 98

but it was still a substantial setback

in 2001 you look at GDP nominal GDP fell

under 9% by the fourth quarter of 2001

that was up from that was down from

double digits real GDP there was a dip

there as well you see a moderate dip in

retail sales because there was still a

lot of investment coming into China that

didn't stop with a 2001 recession it

would take a euro dollar crisis to stop

that then but you do see a substantial

slowdown in things like industrial

production IP in China slowed from

double digits down to around 8% by July

of 2001 and then got down to 27 2.7%

year-over-year at the start of 2002

which was an incredible slowdown for the

Chinese industrial engine and the reason

was huge huge massive drop off in trade

exports alone uh exports into CH exports

from China to the rest of the world were

growing at a 40% yearly rate in the

third quarter of 2000 that dropped down

to basically flat that almost zero in

the fourth quarter of 2001 as the global

economy fell into recession in those

three quarters of 2001 obviously the

Chinese were experiencing an impact at

good for them at the time at least they

had that Rush of investment still coming

in to cushion the blow but it was still

a sizable and substantial blow

nonetheless there was very little

Shelter From the globally synchronized

downturn because it is a global economy

and it's not just the 21st century as

maybe you're imagining now it goes all

the way back go back to the 1970s I mean

first of all the great inflation the

great inflation was not a uson phenomena

it was a global phenomenon because the

euro dollar system expanding rapidly all

over the world so you had a global great

inflation and at the end of the 70s you

had a global recession which was

increasingly nasty as 1980 became 81 and

then in

1982 I've talked about the 1979

recession before in the United States it

was as the fomc characterized the most

advertised recession in history

everybody could see it coming but it

wasn't just the United States there was

weakness spreading around the rest of

the world as the fomc discussed in

October of

1979 there's a there's a conversation

here that really gets to the heart of

the issue um Nancy ters asked the

possibility does exist that we could get

a worldwide recession session and the

response was well from our models and

this is Ted Truman in only one of the

major countries do we have what we call

a recession or negative growth but we do

have economic activity in all the major

countries dropping down essentially

growing at half the rate over the next

four quarters that's into 1980 that they

had they had over the previous four

quarters 1978 and 1979 and the last four

quarters have been affected to some

extent by oil prices in 1979 but it

wasn't just oil prices and the Federal

Reserve models were being overly

optimistic as they tend to be because

the world would indeed suffer a

substantial slowdown in 79 and then be

pushed into a recession which many

countries struggle to get out of in the

entire first couple years of the 1980s

we got a double dip recession in the

United States many countries were just

in a single prolonged recession all

together at once as the IMF reported in

1989 the process of ringing out

inflationary pressures also brought on a

deep Global recession in the early

1980s every region of the world except

Asia experienced marked declines in the

growth of output in the majority of the

world's countries recorded one or more

years of negative growth neither the

causes nor the symptoms of the cyclical

downturn were unusual except that the

Primacy of inflation reduction as a

policy goal made the adjustment more

wrenching than in previous post-war

episodes in other words we do have

globally synchronized recessions going

back really to the 1940s there are

instances throughout the world where we

can see common patterns common Cycles it

wasn't just 2008 it wasn't just 2001 it

wasn't just the 1970s we have been

living in a more globally integrated and

synchronized economy than we have ever

been led to believe and it goes way way

back if one part of the economy starts

to experience trouble that's one thing

that's something to be concerned about

but as that trouble spreads to other

parts of the global economy it means

that nowhere is are you going to be

spared there isn't a place to hide the

old addage the economic cliche whenever

the US sneez the rest of the world

caught a cold and that was just a

recognition of how globally synchronized

the system had been with some us

nativism thrown in as as the cause

behind it all but it wasn't it wasn't

about us demand strictly though that was

a prim Prim primary point of contagion

throughout the global system it was the

fact that there was a highly integrated

global system and keep coming back to

Paul Krugman in 2016 who was forced into

this realization because of the Japanese

experience which again Neo kenian

economists think that these are all

these National economies are indeed

National economies they're bathtubs

they're Islands they're they're they're

just individual ual systems with very

little links between them as Krugman was

forced to realize that's just not true

that when we have a problem in Europe

that can lead to recession in Japan when

you have a recession in Japan that is

going to mean problems not just in

Emerging Markets with the Great

Migration as I talked about in the

recent video but more so direct economic

and financial impacts and as China

showed the direct impact is usually

through trade

which has an enormous impact on many

places and in many businesses and in

many settings but it goes beyond just

trade trade is just where it begins you

have sentimental effects risk aversion

not just in terms of markets but also in

general economic you don't want to grow

your business if your customers around

the rest of the world are experiencing a

recession so you you pull back in stuff

that you're doing at home there are

Financial impacts there are monetary

impacts there are a number of different

channels that are available for problems

to proliferate and spread throughout

this globally synchronized

economy as more and more economies

slipped into recession to end last year

unexpected recession of course let's

keep that in mind that is a warning to

everyone in the global system more this

weakness is spreading through it

globally synchronized may not mean

exactly synchronized as far as

timing it's a warning despite the fact

that US GDP looks absolutely Stellar

although when you take a closer look

Beyond GDP some of the other statistics

look like some of the other countries

around the rest of the world too so even

the weakness has already begun to spread

inside the us as well unfortunately we

didn't get the GDI in numbers for the

fourth quarter those are delayed by an

extra month every time we get to the

fourth quarter which as we've seen

before GDI does not agree with GDP on

the state of the US economy either you

look at GDI compared to say Germany or

Japan

GDP it looks a lot like it globally

synchronized maybe after all and that's

really the point here we've had a

globally integrated economy for a very

long time what are the chances that this

time will will be

different more than just the statistics

regular folks Americans people around

the world can feel the recession coming

they you feel like it's a recession now

talking about why people feel like

there's a recession that's in the video

linked below as always I thank you very

much for joining me huge thank you yal

University members and subscribers until

next time take

care