The risk of a global coordinated slump

The Economist asks whether the golden age of stable growth enjoyed by America and others for 2 decades is coming to an end.

Regular readers will know that my prognosis is not optimistic. While the risk of a global coordinated slump is low, it seems that economic imbalances have grown rapidly beyond historical norms in the last 5 to 10 years and a more balanced flow of economic and social energy is likely. Expansion of emerging economies like China and India should provide an engine while selective opportunities in developed economies will be attractive. The most likely catalyst of a global slump today is a coordinated housing slump, but that is a more remote possibility and the most exposed countries like the US and UK will weather the adjustment.

And if the US does suffer recession, this might even be good for China.  As the Economist notes in a review of China’s economy:

A recession in America would reduce China’s growth, but since Beijing’s policy-makers are fretting that the economy is starting to overheat, weaker exports and hence slower GDP growth might be a good thing. Not only would it reduce the risk of inflation, but it would also help to trim China’s embarrassing trade surplus.


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