Nouriel Roubini, the NYU professor who amongst others (very small amount), predicted the economic collapse just recently predicted another double dip recession due to a cocktail of American unemployment, a Chinese economic slowdown, earthquake-rattled Japanese scare, oil and food pricing elevations, and the crisis of the Eurozone.
Combining this potion, Roubini, as the negative soothsayer, issues varying degrees of death shouts to failing Euro policy and a crumbling China with its economic boom towns to ghost towns as fall outs due to all the interconnected problems point to more troubled times.
This double dip recession threatens the world to tumble further into two seperate worlds that are at the heart of every political and economic argument in the West: austerity versus investment.
By lessening spending and playing an isolationist for economic push, conservative-minded countries look to level their own playing field by getting their fiscal houses in order. This is the route of the British, Greeks, and other European non-hopefuls who sees this as the only logical choice to ensure their survival post-Great Recession. With austerity comes the shouts of the people (see Greece) and religious leaders (See Britain). Apparently, starve the beast and let it die rather than die with it. Decision is the ‘heart‘ of the matter.
On the other end, foreign investment efforts have been pushed by the Obama administration as one effort to kickstart the globalized workforce. Foreign direct investment or FDI increased close to 50 percent in 2010 from the United States, helping to spur 5 million jobs according to a report from Obama’s White House Council of Economic Advisers.
Of course, how many of those 5 million jobs really came to fruition or made it onto America’s shores remain unclear, and foreign investment in itself has been an evil word in America’s conservative circles. Giving our already debt-bound future, conservatives spout that these directions only push us towards more debt and more tough choices over what a government should provide.
So that’s it, the choice between holding back the power of government to ensure survival and the choice of using the power of government to ensure survival, right?
The biggest elephant in the room though is the next tragedy. The next bubble. The next recession.
While the United States was the beginning of the problem stemming from the securitization of its housing and eventual pricing bubble burst, it has not born all the brunt of its financial instruments of destruction it spawned from its New York City skyscrapers.
In a graphic map from the Harvard Business Journal, a portrait of bailouts coupled with stimulus paints a very grim picture for many countries of the West. To speak bluntly, the large colored pies (especially the red ones) represent countries laying their economic power on the lines via their coffers. For the United States, Ireland, Iceland, and others that means it will be rough seas to negate all that color.
The blue part is the stimulus that countries like China, Saudi Arabia, and South Korea used to combat the then-sinking world economy. Investments in projects such as green energy spurned these countries past the residual hangover that has been the Great Recession.
The world is still teetering as Roubini sees, and debt, not austerity or investment, is what in the backs of the people’s mind.
The United States is over $14tn dollars in debt or 25% of the world’s debt, and it is closing in on equaling 100% of the US GDP. American debt is more than Germany, France, the Netherlands, and Japan’s combined.
This does not present the whole picture though. If America was an individual, it would be living paycheck to paycheck. Scraping by.
But, other economic titans also feel the pain which a much larger percentage of their debt exceeding what they bring in. Singapore is at 102%. Italy 124%. Germany 143%. Japan 225%. Ireland 1124%.
To put that in perspective, Ireland made $227 billion dollars last year, and it’s in debt to the tune of $2 trillion. That’s like working at McDonald’s and owning a Bentley. It can’t be done.
I told my mother about this today, and she was surprised having the same question everyone asks. How did this happen? Who owes who?
The answer is simply that the world is in debt. It owes $58 trillion dollars. It makes $58 trillion dollars. It is living paycheck to paycheck until the next crash where the global panic will start the merry-go-round of money move diplomacy. What happens when the world cannot pay?
Time to hit the global reset before it is too late.
Christopher Manfredi, UH/GA
