"Adrift" is the word. Not Grease!

First it was the academe that was characterized as being adrift.
Now, Nouriel "Dr. Doom" Roubini says the world is adrift:

We live in a world where, in theory, global economic and political governance is in the hands of the G-20. In practice, however, there is no global leadership. And there is severe disarray and disagreement among G-20 members about monetary and fiscal policy, exchange rates and global imbalances, climate change, trade, financial stability, the international monetary system, and energy, food, and global security. ...
A G-Zero world without leadership and multilateral cooperation is an unstable equilibrium for global economic prosperity and security.

So, why this state of a world that is adrift?  Roubini has a few reasons; I like this one the best of 'em all:

G-8 leaders share a basic belief in the power of free markets to generate long-term prosperity and in the importance of democracy for political stability and social justice. The G-20, on the other hand, includes autocratic governments with different views about the role of the state in the economy, and on the rule of law, property rights, transparency, and freedom of speech.

Ok, so, does this mean that we are screwed?  Hey, Dr. Doom, you are usually way more cut and dried than this ... You are leaving it to me to conclude that we are screwed?

A season of China bashing for short-term wins!

So, China has become one heck of a bogeyman for political and electoral points.  There are plenty of valid reasons to beat up on China, but the way the candidates and parties are abusing the China dimension cannot possibly make us more endearing to the party bosses across the Pacific.

The following ad (via James Fallows) is almost creepy:

The Daily Beast notes:

No less than 30 candidates across the country are running ads that negatively tie their opponent to China. On a trip to Ohio this week, my television was flooded with campaign ads, including a telling salvo against incumbent Congresswoman Mary Jo Kilroy, featuring Chinese money, Mao, and the red communist flag. Anti-China themes are also evident in late-inning videos from California and Nevada to Pennsylvania and West Virginia.

And then there is all the punditry that beats up on China. Yes, including Paul Krugman.
It will be one hell of a G20 meeting, I imagine.

Globalisation and trade: world trade shrivels

I blogged earlier that trade limits and recession are a bad mix. Not a blog post per se--it was a newspaper op-ed piece. Along that line of logic, I am not sure if I should be happy that I am right, or if I should worry that I am right; here is an excerpt from the Economist:

Trade is contracting again, at a rate unmatched in the post-war period. This week the World Trade Organisation (WTO) predicted that the volume of global merchandise trade would shrink by 9% this year. This will be the first fall in trade flows since 1982. Between 1990 and 2006 trade volumes grew by more than 6% a year, easily outstripping the growth rate of world output, which was about 3% (see chart 1). Now the global economic machine has gone into reverse: output is declining and trade is tumbling at a faster pace. The turmoil has shaken commerce in goods of all sorts, bought and sold by rich and poor countries alike.

It is too soon to talk of a new protectionist spiral. Nevertheless, errors of policy risk making a bad thing worse—despite politicians’ promises to keep markets open. When they met in November, the leaders of the G20 rich and emerging economies declared that they would eschew protectionism and will doubtless do so again when they meet on April 2nd. But this pledge has not been honoured. According to the World Bank, 17 members of the group have taken a total of 47 trade-restricting steps since November.

Recession watch: Now Japan, too

The G20 summit has ended, which is why the planet feels cooler all of a sudden--after all that hot air :-) ha ha. You know what was even funnier? This news report:

US President George W. Bush emerged from the G20 summit Saturday satisfied with having preserved the principles of free market economics, while leaving his successor wide room for maneuver

Excuse me, there is a "free market"? As Johnny Carson used to say, "I did not know that!" Would the "free market" apply to the 700 billion dollar bailout of private corporations? The proposed 25 billion dollar bailout of the Big3? The massive agriculture subsidies? I will stop here .... no time to list 'em all :-(

Anyway, the news is that Japan has caught the recession bug:

Japan, the world’s second-largest economy, has officially slipped into recession, hurt by weak export growth and steep cuts in corporate spending amid the worsening global slowdown.
Japan’s gross domestic product shrank at an annual rate of 0.4 percent from July to September after declining a revised 3.7 percent in the previous quarter, the government said Monday. It was the first time since 2001 that Japan’s economy has contracted for two consecutive quarters, the definition of a recession

The UK got into that even earlier:

The economy shrank for the first time in 16 years between July and September, confirming that the UK is on the brink of recession. The UK will be classed as being in recession if the economy slows in the fourth quarter as well.
On Wednesday, the Bank of England said the UK has probably entered a recession in the middle of 2008 and is likely to continue to contract well into 2009

In between Japan and the UK, in terms of the largest economies, are Germany and China. So, what is the news from them? Thanks for asking! According to the FT:

Germany has officially plunged into recession with economic activity contracting much faster than expected in the third -quarter, intensifying fears about the depth and duration of continental Europe's downturn.
Gross domestic product in Europe's largest economy fell by 0.5 per cent in the three months to September, extending a 0.4 per cent drop in the previous quarter, the German statistical office reported.

You are probably thinking, hey, Germany is the big dog in Europe. So, does it mean that that entire part of the world is in recession? Ah, the power of critical thinking! Doggone it, you are right, says AFP:

The 15-nation eurozone fell into recession for the first time ever, EU data showed on Friday, with Europe's economic powerhouse Germany among the hardest hit.
Gross domestic product in the economies using the eurozone fell by 0.2 percent in the third quarter after a similar drop in the second quarter, according to the Eurostat figures.

Everybody says the same thing: the worst is yet to come. And I am, like, you got to be kidding me! It was almost humorous to read in the following in the Guardian: "But while output is expected to contract next year, the US economy is predicted to lead the way towards recovery." Wait a minute; the US predicted to lead the recovery? How? By printing a few gazillion dollar bills?I don't get this.

And, you are meanwhile thinking, hey, what about China? You know, I have a pet theory. Let me present it:

For many years now, China's economy has grown at double-digit rates. However, in order to keep inflation under check, among other reasons, the government made sure that a significant surplus created was saved. And it saved that in the US and other places.

This kind of savings created the glut that Bernanke gushed about. Soon, we came up with dizzying schemes to exhaust the savings.

Meanwhile, China's prosperity came from ravaging the environment.

So, here is a thought experiment: we would all have been better off if only China's economy had not grown by leaps and bounds. If, for instance, their average growth rates had only been about six percent, then all the gains from the exports would have accrued pretty much to the Chinese.

No "additional" surpluses that would have resulted in China-dollars that made Americans consume like crazy.

That much of a slower Chinese growth would have also resulted in a significantly lesser environmental impacts.

Which means, in the crisis we have now, we have screwed up the environment for nothing. It is not even as if we have something to show for everything from the Three Gorges Dam to polluted skies to .....

I like my framework here. Not that I am blaming the Chinese for everything that has gone wrong. But, I do wonder about the wisdom in that relentless pursuit of economic growth that merely exported its natural resources as US Treasury notes!!!