The Global Economy, The Collapse of The European Union & The State Of The World

Global Economy

Update: 21/12/11

In recent days the biggest international news stories have no doubt been the withdrawal of the US troops in Iraq, with the hope that they'll come back home before Christmas, as well as the passing away of the North Korean leader, Kim Jung Il with his son, Kim Jong Un to be taking the reigns in the interim.

Economically, it seems that the European Union is still struggling to come to terms with how they'll resolve the debt crisis plaguing much of Europe at the moment with quite a number of non-EU nations also looking to implement austerity measures to curb their spending and ensure they don't default on their loans. With constant headlines of bailout packages, rescue packages and the like, the outlook still isn't looking too positive. Although there's optimism amongst the European political leaders, there's also the failure to understand that injecting funds into struggling economies will only make matters worse, especially when unemployment rates are so high coupled with a weak inflow of funds into the economies by means other than loans and foreign debt. The band aid approach of injecting funds into struggling economies and banks can only last so long before the debt is realised to be as great as it truly is.

My prediction is that there will be tough times ahead for the global economy in 2012. Perhaps there won't be as much tension between global nations as we had recently seen in the Middle East experiencd by Egypt and Libya, but there will certainly be struggling businesses and economies throughout the world. Expect to see interest rates throughout the world take a nose dive, with sharemarkets expected to continue to suffer and plummet even further in mid-2012 as the effects and severity of the global and European debt crises are exposed. If the correct measures were put in place during the 2007-2009 financial crisis, then we wouldn't be experiencing the levels of global debt as we are now in 2011 and further into 2012-2013.

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So based on recent economic events, we've noticed the Global Financial Crisis which had a drastic effect on the world triggered by the collapse of some major banks in the United States, individuals and businesses failing to pay their debts, and governments and corporations being exposed of a debt greater than was first realised in many situations. So looking back on the past few years since the GFC, has there really been so much of a change in the nature of the world and the global economy?

Although locally, it was obvious to me that Australia didn't experience the same effects as that of the US during the GFC, I always had a thought that Australia will be affected by a post-GFC effect, and it's evident by the daily news headlines. Over the last few months, there have been signs that the growth of property in most regions has either been steady or declined, people are reluctant to spend their earnings, and businesses are facing profit downgrades. Although some of this is attributed to natural disasters, the events have been accumulating for such a long time that any significant events (such as the floods experienced in Queensland), will expose the weaknesses of the Australian economy, with both consumers and business facing hard times.

Internationally, Greece is experiencing debts which almost appear immeasurable at how large and almost unrealistic they seem with protests and riots in the streets signifying the tension experienced by the majority of the population. In the Middle East, we've been exposed to the underlying tension that was faced by Libya, Egypt, Iran and Sudan, to name a few.

We're all aware of the United States and the excessive spending that has gone into moving their troops into Afghanistan and Iraq over the last few years since the September 11 attacks and claims of Weapons of Mass Destruction (WMDs). The United States seems to be following Greece in the level of uncontrollable debt they're currently facing.

So it comes down to the point that there's underlying growing global tension not just in the countries that we read about in the front page news headlines. There's nothing to suggest that there's no underlying tension between North and South Korea. Further to the point, there's nothing to suggest that there is no underlying tension amongst citizens in most countries around the world with government dissatisfaction, uncontrollable debt levels, businesses facing liquidation, unemployment levels increasing and taxes being increased to recoup losses experienced from unnecessary spending.

The underlying global tension will be evident the more time goes on until there's something to bring back the confidence that once was. Looking back on the value of the Euro since it was introduced, we're led to understand the the European economies are facing tough times, as is the rest of the globe. So if the Euro currency constantly drops in value, what results? Will the countries begin pulling out of the European Union after noticing the debt levels of their neighbouring countries? The unfortunate thing is that while economies in the globe are experiencing some of their worst trade, and with the European Union evidently lacking the confidence that was once shown, what's the result for countries including Croatia and Serbia who are looking to join the European Union in hope of economic wealth and stability?

I'd love to hear the opinions of all of you out there. Do you believe there is a growing tension throughout the globe which is only slowly being exposed through the news stories we're receiving in the press? Will the global economy be able to sustain the level of debt that has been self inflicted upon some of the nations throughout Europe and the United States?

Do You Believe That The Global Economy Is Heading Towards Another GFC?

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CHRIS57 profile image

CHRIS57 5 years ago from Northern Germany

Quite a pessimistic view of things.

I believe it is not all that bad. Just try to understand the nature of political and economic processes. A simplifying attempt to explain:

World is at tension because there are differences between countries, economies, people. Some countries are luckily sitting on huge natural resources, some countries have managed to evenly and justly distribute earned wealth and income, others have well organized infrastructures or are benefitted by geographical advantages, many countries have pleasant forms of social and political organization, some countries share high spirits and optimism and a few countries have none of this.

It is only natural that those who have little ennvy those with plenty. In a world getting smaller and smaller through technological advancements it is easier than ever to compare.

But then - global major conflicts like the cold have ended and by now even the deputy conflicts at the cleavages of cultures are cooling down.

So it seams to be high time for an optimistic age of world prosperity. And it is. Look at the BRIC economies, the Asian tigers and understand it is true.

There appears to be a self regulating mechanism in balancing and regulating economies on this planet. The state of technology has allowed world population to live with an ever decreasing effort to feed themselves. It is simply taking less and less for an economy to produce enough for living.

However this producing thing has something with it. World productivity has reached a level of some 15%. In average the world´s economies need to have 15% of their GDP´s to be used for producing something, the 85% rest is for distributing of what was produced.

Now all those economies who have less producing than 15% will run deficits. They have to import and to pay for that they have to borrow. Dept is created and not necessarily only public dept but also private/corporate dept.

Economies like the US or Greece are those with little productivity and thus have dept problems. Economies like China or Germany/Sweden/.. Japan, Australia, Russia are above 15% median world productivity, so they run surplusses. For those economies it is not even relevant if they have high public depts because private earnings overbalance the public hole the wallet.

The US is special. Its producing industry lost contact to the competitive edge long time ago in the 60ties and piled up huge public and private depts. But before that the US was very competitive, ran surplusses and made the world treat their currency as a holy reserve.

In the 90ties it became obvious that producing was no more up in the US and the status quo could only be held by borrowing. So some smart people came up with the idea that what was good for the country (living on trust and blue eyes) may be good for the you and me on the streets as well. That is when the subprime thing got startet, a huge bubble with money out of thin air.

That bubble blew up in 2008 and world economy took a little hit. But not for long. Today things are quite ok. But the US is still on dept dope with the next bubble growing(Quantitive easing).

So just sit back on your couch and wait and watch what will happen. There will be a next crisis coming. I am certain the next crisis will not shake world economy as much any more as the Lehman Brothers did in 2008. While the next crisis will also breed in the US, the US economy will not be that important for world economy any more.

Don´t worry, be optimistic, good times ahead.


DeviousOne profile image

DeviousOne 5 years ago from Sydney, Australia Author

It was certainly interesting to read your opinions and comment CHRIS57. Thanks for posting your comment. I think that for the local people in Australia, the optimism is wearing thin. The government keeps falling back on the reliance of commodities and taxes to strengthen the GDP and inject money back into the economy. Unfortunately for Australia, this 'mining boom' as is so often labelled in the media, will sooner or later slow. Should this be felt through the major exports of iron-ore and coal to China (being two of the largest exports from Australia to China), then Australia will have less to fall back on.

I agree with you that there will be another crisis. Where it erupts first and where the core will be, we'll have to see. I also agree with you that the US will no longer be as important to the world economy as it once was. It makes me wonder, when will this next global economic global downturn be evident and to what level will it then affect the rest of the globe.


vibipsybums 3 years ago

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