Is An Australian Recession Likely? This Expert Thinks So
The entire developed world is booming.
All major G7 countries are currently expanding.
Even Japan is seeing some economic growth.
Never before in modern economics have all major developed economies and emerging markets expanded at the same time.
According to an article in The Economist, the only countries expected to shrink this year are Venezuela, Puerto Rico, North Korea and Equatorial Guinea.
That’s it. Only four countries aren’t going to see their gross domestic product grow.
Quite frankly, it’s odd.
At any other time in history, some countries expand while other contract.
Check it out:
Entire World Grows Together
Source: The Economist
This simultaneous growth comes a decade after the financial crisis.
That’s 10 years after we learnt the sinister truth. That Wall Street financial engineering created layers of debt. And this debt is now in charge and propping up the entire financial system.
Perhaps the synchronised growth is a payback for the financial cliff the US — singlehandedly — led us over.
The near decade-long economic expansion is unprecedented. It continues no matter how many countries threaten to cut off energy supplies or intimidate one another with their bombs. The unrelenting growth continues.
Things continue to be built, at the lowest possible cost, using the cheapest possible labour. Then it’s bought by someone on the other side of the world, with fiat dollars that are slowly being eroded, to be worth the least amount compared to the other fiat dollars.
It’s a constant game of reverse one-upmanship.
Who can make it the cheapest, and then who can buy with a currency made the most worthless by governments?
This method, by the way, is behind the confounding, synchronised global growth trend.
It ends with a boom
The world economy is tipped to reach 2.7% for 2018. That’s lower than the 4% average in the pre-financial crisis years. Nonetheless, it’s still consistent expansion.
There are setups in place that will further encourage the synced expansion.
The US tax cuts will stimulate the US economy a little longer.
Wile the European Central Bank is ending its bond buying program — and therefore ending stimulus to the eurozone — it has confirmed it’ll keep the rates low until mid-2019.
China has no plans to buy less rocks from us. It reported a 6.8% increase in first quarterly GDP for 2018. Whether you believe the official statistics from the government or not doesn’t matter. The near one trillion-dollar ‘One Belt, One Road’ multiyear infrastructure project will keep the Chinese economy humming a little longer.
Locally, the Aussie government is doing anything it can to prop up the Aussie economy with its own form of stimulus. Already the federal government has committed nearly $80 billion to build bridges and highways.
Anything it can do to keep that one million people in construction employed. That’s 10% of the Aussie workforce. With Australian property construction slowing, we can’t risk one million people looking for jobs, as that would lead to a recession.
As every country (minus the four mentioned earlier) continue to grow, we are ignoring the fallout.
The biggest problem with synchronised growth is that it will lead to a synchronised fall.
The interconnectivity of the global markets means a slowdown in any pocket of the globe will reach us like never before.
The thing is, this simultaneous and exceptional period of global optimism can’t last.
Something has to give.
History tells us that the triggers of an economic crisis come from unusual places.
The Asian Financial Crisis began with a Thai land developer defaulting on bonds.
The US subprime crisis of 2008 began with an unknown subsidiary of AIG in a dingy office in London.
The point is, the miracle that is the synchronised global growth trend is likely to end with a bang.
The kind of bang that could even bring the entire financial system to its knees.
Enjoy the growth of 2018; it may not last.