This Is Signaling An ALL-OUT Global Recession
Summary
TLDRThe 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
🤔 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.
🌎 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.
📈 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.
🌐 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.
Mindmap
Keywords
💡Globally synchronized recession
💡Decoupling
💡Interconnected economy
💡Global great inflation
💡Trade impacts
💡Risk aversion
💡Financial impacts
💡Weakness spreading
💡Warning sign
💡Global integration
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
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