So said Simon Johnson, an economic counselor and director of the research department at the IMF, during a recent press briefing.
In its latest forecast, the IMF said the slowing U.S. economy will act as a drag to world-wide growth. That means, in essence, that the problems caused by the U.S. housing slump and meltdown in the market for subprime mortgages are radiating globally.
Look who’s a drag on global growth:
"World economic growth will slow significantly in 2008 but the U.S., whose housing downturn is rattling global financial markets, will avoid recession, the International Monetary Fund forecast Tuesday.
The IMF sees world economic growth slowing to 4.1% this year, down from 4.9% in 2007. U.S. economic growth will slow to 1.5% in 2008, Johnson said, down from an estimated growth rate of 2.2% in 2007. The 2008 projection is lower than the IMF’s October 2007 prediction of 1.9%."
However, according to the IMF, there will be "no recession in the US" and "no major slow down worldwide."
Sold to you . . .
>
Source:
IMF Forecasts Global Slowdown As U.S. Provides Primary Drag
TOM BARKLEY
January 29, 2008 1:43 p.m.
http://online.wsj.com/article/SB120162159159725505.html
IMF Sees Slowing World Economy in 2008
CHRISTOPHER S. RUGABER
Associated Press, Tuesday, January 29, 2008; 1:46 PM
http://www.washingtonpost.com/wp-dyn/content/article/2008/01/29/AR2008012901702.html
Ba humbug! Crushing debt load, debt saturation, will produce the deepest recession we have seen in years!
according to this article the long term outlook is great
http://www.prospect-magazine.co.uk/article_details.php?id=10022
I’m not sure how the de-couple meme got so metastasized but a little back of the envelope (boe) testwould have debunked it a long time ago. Yet now and in the long-term there is a major underlying unreality. Four things:
1. The “exports” will save us failed the boe if you looked at the size of exports relative to,say, consumption. 5-10 mins.
2. Exports require somebody’s imports which require the fast-growing economies to have consumption that wants foreign imports. The BRICS have emerging middle classes but are still primarily non-consumption economies. 1/2-days research
3. They have crossed a major cusp point that’s putting them onto a road the West traveled post-WW2 but still have a long way to go. We’re talking 40-50 years here. 1-2 days of decent investigative reporting.
4. Many of the Fortune 500, the smarter half, have been re-positioning themselves for this for a while, e.g. GE, Dow, et.al. IBM’s been in China since 1938 :) But foreign growth doesn’t result in US jobs or investment. Another 1/2-3 days of research.
5. US is still largest economy and major importer as well as exporter.
Result: decoupling and/or exports will save us debunked.
It is easier to sloganize than analyze.
Slogans reduce the complex into simple-sounding phrases; the siren’s song that coaxes repetition is that while the world is moving in the same direction, the slogan appears valid; however, at major turning points, slogans metamorphasize into cheerleaders’ placards, biased splashes of paint, unrelated to what is occuring on the field.
“The US will avoid recession”
…
This looks like a forecast to me.
Remind me again how awesome, we, humans are at forecasting the future?
Doesn’t it make sense that the United States would drag on the rest of the world? Hey, everyone wants to be like us! Subprime mortgages for the BRICs!
USA! USA! USA!
the economist has an excellent piece in the current issue regarding decoupling:
http://www.economist.com/world/asia/displaystory.cfm?story_id=10559036&CFID=4897612&CFTOKEN=b075eff14cf6e9e-CB135B3E-B27C-BB00-01437DB2AC56FC7A
To paraphrase a few of its points, its nonsensical to talk about ‘decoupling’ as though it means the global economy will not be affected by a slowdown in the US. Of course it will slow as well, the point is that the impact is mitigated by increased cross border trade in Asia, Europe (currently China’s largest export market), and others. In addition, these countries have large reserves that give them the flexibility in times of crises. The number that really jumped out at me though: US exports account for 8% of China’s GDP. Recession in the US would hurt, but comparisons to the last Asian crises are misguided. It will be more like their reaction to the 2001 recession.
Kuros, that article wasn’t half bad. Thanks.
It’s hard to believe the financial media doesn’t want to admit the 800-1000 billion dollar US trade deficit doesn’t end up in foreigner’s pockets. Doesn’t that bolster their economy also? The rise in emerging stock markets is a result of our huge cash flow to their markets. What’s so hard to understand about that? It’s basic economics. I buy something you produced, I get the product, you get my paper, you invest my paper in your market.
Phil
The de-coupling theory is bogus. What happending in 2000-2001 when the dotcom bust slowed the economy in the US? It was magnified in China.
Who knew? 90% of the time world markets follow the lead of ours. The U.S. consumer is the engine which drives the global economy. This was a no-brainer and who ever came up with this ideology to begin with has no brain. Let’s not get those two confused.