Tags: sean | hyman | Four | Reasons | Global | Economy | Recession

Global Economy Is on Brink of Recession

By    |   Monday, 21 March 2011 08:32 AM

We’ve all heard of the high jobless rates and the high food costs, etc. that have hit the world.

But I want to talk to you about four recent reasons why the global economy will struggle to grow and could very well slip back into a global recession later on in the year.

• Japan’s earthquake-tsunami-nuclear reactor meltdown has caused supply disruptions to major Japanese companies that the entire world uses.

Nissan, for example, has at least nine vehicle and parts factories that have been affected along with 35 suppliers of theirs. It’s going to take them months to get all of this sorted out and ramped back up to production.

Honda and Toyota have had similar disruptions too. But it’s not just the car companies that are having these issues. It’s Japan’s silicon chip makers that find their way into cell phones. Its Sony products that will be delayed also, etc.

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Nissan is also running tests on their cars right now to see if they have radiation exposure.

Japan does know that the radiation has been found in some of their milk, spinach, and tap water.

Now Japanese officials are saying that the water that they’ve been dousing the reactors with may have leaked into the ocean. If so, it could cause some problems with radiation finding its way into fish and other sea creatures.

• The fighting in Libya just went to another level. It’s going to disrupt oil supplies there for months and jack oil and gasoline prices up even higher.

If there’s one thing that can single-handedly have a huge effect upon the global economy, it’s the price of oil and gasoline. You see, the more it costs to fuel an economy, the more it tends to slow it down.

With France, the U.K., U.S, Italy, Qatar and Saudi Arabia all getting involved in the Libya conflict, it’s taking things to a whole new level. It’s eventually going to shut down Gadhafi’s efforts to kill off all of his people that rebelled against him. But in the meantime, it’s going to run the price of oil and gasoline higher.

The average price in the U.S. right now is $3.57 a gallon. Some places in California are already over $4 a gallon right now. In Europe, the average price (if it were measured in dollars and gallons) is almost $9 a gallon!

As if that wasn’t enough, the U.S. Coast Guard is investigating reports of an oil spill-leak that’s about 20 miles away from the Deepwater Horizon oil rig explosion. The reports are that there is a leak or spill that is 100 miles long and 10 miles wide.

• China just raised its bank lending reserve requirements for a third time this year.

Every time China raises its bank reserve lending requirements, it’s just that much more money that their banks cannot lend out. They’re trying to cool their housing market right now. But many fear that it will cool off the need for commodities and also slow down their economy. And in doing so, they fear that it will aid the global economy in slowing down again too since China would be doing less business with the rest of the world than it was when it was growing at a much faster pace.

• Three major G-8 economies already have negative GDP readings for the year.

Think that all of this can’t affect the major economies of the world?

Think again. Three of the world’s largest economies are already producing negative year-over-year GDP readings.

So that means that their economies are already retracting some rather than expanding. The U.K. has a negative 0.6 percent reading. Japan comes in at negative 0.3 percent and New Zealand comes in at negative 0.2 percent.

Then there are four economies that are not even growing at 1 percent on a year-over-year basis right now. Switzerland is 0.9 percent, Canada 0.8, Australia 0.7, and the eurozone comes in at 0.3 percent.

The U.S. data claim that America is coming in with a GDP reading of 2.8 percent but I honestly think that’s inflated. I don’t think the United States is doing that much better than our other major counterparts.

But nonetheless, if you had many of these other countries slip into negative GDP growth in the coming months to year due to these four factors above — it wouldn’t take much to drag down the U.S. again either just like the last recession did.

All of this is very likely to make it very hard for stocks to continue to head higher because it’s going to make it very hard for corporations to expand their earnings with all of these ankle weights on them.

As stocks start to correct even further, it will give the dollar a temporary boost for some months as the fallout continues in these other markets.

About the Author: Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of Money Matrix Insider. Discover more by Clicking Here Now.

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We ve all heard of the high jobless rates and the high food costs, etc. that have hit the world. But I want to talk to you about four recent reasons why the global economy will struggle to grow and could very well slip back into a global recession later on in the year....
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Monday, 21 March 2011 08:32 AM
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