News

Growing Debt Accelerates Worldwide Economic Contraction

An investment firm that manages over $2 trillion in assets has raised its estimate of a worldwide recession to over 60% in the next 3-5 years, according to CNBC (6/11).

The firm says recessions come about every six years, and global debt has increased since the recession that began in 2007.

This big asset management firm may not be going out on a limb with its call for a future global recession.

First, the notion that the United States has recovered from the "Great Recession" is highly questionable. Second, much of the rest world already appears to be facing economic challenges.

Let's start with Europe.

The euro-zone economy has contracted for six quarters in a row and forecasters don't expect growth in the current quarter.

 The Wall Street Journal, June 11

Also consider the economies in other regions of the globe.

The International Monetary Fund points to "weakness in China and dim investment prospects in Brazil, India, Russia and South Africa," according to the WSJ.

The Bank of Japan governor is quoted in an April 9 Globe and Mail piece: "Japan's economy has suffered from deflation for nearly 15 years. This is an extraordinary situation even on a global scale."

Japan has a debt to GDP ratio of more than 200%, according to CNBC, and the ratio in the U.S. was about 101.6 in 2012. That's up from 99.4% in 2011.

Read the entire Wall Street Journal article here.