Thursday, November 15, 2012

The world's economy: slip-sliding away . . .

The inevitable is getting closer and closer.  The economy of the Eurozone as a whole officially slipped into recession today, according to Reuters.

The French and German economies both managed 0.2 percent growth in the July-to-September period but their resilience could not save the 17-nation bloc from contraction as the likes of The Netherlands, Spain, Italy and Austria shrank.

Economic output in the euro zone fell 0.1 percent in the quarter, following a 0.2 percent drop in the second quarter.

Those two quarters of contraction put the euro zone's 9.4 trillion euro ($12 trillion) economy back into recession, although Italy and Spain have been contracting for a year already and Greece is suffering an outright depression.

A rebound in Europe is still far off. The debt crisis that began in Greece in late 2009 is still reverberating around the globe and holding back a lasting recovery.

. . .

Most economists expect Germany to contract in the fourth quarter for the first time since the end of 2011. And where Germany goes, France is likely to follow.

There's more at the link.

Liberal and progressive economists in Europe are blaming spending cuts and austerity programs for the renewed recession, but this is, of course, ridiculous.  The Eurozone, like the USA and other countries, has plunged headlong into debt over many years.  That debt is now a millstone around its neck, soaking up vast resources to pay the interest on it even as more and more borrowing is necessary to fund social programs.  The only cure is to stop spending money the Eurozone doesn't have, stop printing money like there's no tomorrow, and return to a balanced economic program;  but that would mean cutting back on entitlement programs and social safety networks.  That would spell disaster at the polls for politicians, who will do literally anything - including spend their economies into ruin - rather than accept that fate.  The people of Europe, too, are unwilling to hear any message that they must accept a reduction in the amount of money the state spends on them.  Anti-austerity protests and riots broke out (again) all over the Eurozone today.

I expect the same to happen in this country when (as must inevitably happen one day, probably soon) our government runs out of money to fund the free stuff it's been handing out so liberally to buy political support.  Meanwhile, our own economic future appears bleaker by the day.  The Christmas shopping season is off to a very dubious start, and I think it's unlikely to improve.  If you see breathless news stories about how much money people are spending, I strongly advise you to take them with, not a few grains, but a few pounds of salt.  I'm hearing very worried noises from friends and fellow bloggers who work in a number of large consumer-oriented companies, none of whom are at all happy with the current state of affairs.

This Christmas, I suggest we give each other gifts that will be useful in an economically bleak future.  We'll be all the more grateful for them before long.



Noons said...

I still find it tremendously deceiving that we continue to blame the European and the Global recessions on the Greek economy - aided here and there by Spain and Portugal whenever convenient.

Added up, those 3 economies are such a little part of the global economy that if they disappeared alltogether instantly, the effect would hardly be felt.
There is MUCH MORE at play here than just those three, or this or that economy's output...

Matt said...

And when the current recipients of all the free stuff in this country realize that the well has run dry, they will try and come for us and our stuff.

raven said...

Matt is correct. once the the locust's eat one field, they "move on" .

Stuart Garfath said...

What has happened in Europe, and soon to the U.S. is also on it's way to Australia.
We have a Socialist Government that's spending money so irresponsibly and indiscriminately, and denying the fact that ALL it's programs have utterly failed, our Prime Minister is embroiled in a looming criminal case of personal fraud dating back 20 years and her lying denials are so arrogantly transparent.
Further, a former (Socialist) Member of Parliament, (New South Wales) is currently under investigation for fraud and insider trading on a massive scale, (over $100 million may have been apparently siphoned off from State Revenue), so it's not looking good at all for Australia.
Unhappily, America, you're not alone regarding the coming collapse.

trailbee said...

What did those people expect? They've been at this for several years, borrowing from Peter to pay Paul. This is not going to go away, nor is our problem until we really and truly face our own situation - AND BELIEVE IT!