Upcoming Global Economy Crash?

[Southern Hampshire]

I wasn't exactly the shining star in my economics and accounting classes but doesn't anyone think the current global situation is exceptionally suitable for an economic crash to happen within this year?

Let's see, within the past few weeks this has happened:

• Massively falling share prices
• Deutsche Bank & Mizuho Financial Group instability
• UK & France fragility
• Eurozone failure (won't even call it 'struggling', past that point.)
• Germany and China slowdown, slashed growth expectations
• 7-year Gold prices low
• 55% Oil price slump from massive oversupply on market
• As a result of ^ Saudi Arabia & Russia (+sanctions) recession
• US Jacob Lew, Janet Yellen & regulators meeting with UK Mark Carney, George Osborne & regulators meeting for 'war games' in the situation of a 'hypothetical' cross-border banking crash TOMORROW to end the problem of 'too big to fail' (Citigroup?)

Conditions aren't too far off 2008, thoughts?

[Calimera II]

The most worrying part is that China's housing market is about the burst.

[The Serbian Empire]

The most worrying part is that China's housing market is about the burst.

China has been on the edge of the bubble for some time. If it causes a crisis then I suspect that the global economy is dependent on bubbles for most of it's growth now.

[L Ron Cupboard]

Don't most stock market crashes happen in election years?

[The Serbian Empire]

Don't most stock market crashes happen in election years?

I don't think 1929 had an election. That is what the Chinese housing market could spark is a repeat of 2008 or 1929.

[Tubbsalot]

...the economy is still recovering from the last crash. It has yet to return to historically expected values, which suggests the market isn't generally overvalued. Which means it can't crash.

Maybe in a very limited way (e.g. the housing market of a particular country), but speaking more broadly, if it could have happened it would have done so already.

[The Serbian Empire]

...the economy is still recovering from the last crash. It has yet to return to historically expected values, which suggests the market isn't generally overvalued. Which means it can't crash.

Maybe in a very limited way (e.g. the housing market of a particular country), but speaking more broadly, if it could have happened it would have done so already.

I have heard PE ratios on Wall Street are ripe for a crash, but most of the economy is too weak for a great crash like 2008 or 1929. This is more like Black Monday in 1987.

[Jute]

I don't see how the Eurozone is failing. It's doing pretty well at the moment, considering the state in which it was a few years ago. It has maybe not completely the crisis yet, but it has definitely gotten a bit better again.

[Republic of Coldwater]

Indeed it could be, fractional banking in America and the Chinese Housing bubble can result in a massive economic crash and cause significant repercussions for the global economy. China would have to stabilize their economies and America needs to end the failed monetary policy of fractional banking to ensure that the economy won't crash.

[Socialist Tera]

Capitalism is unstable, market crashes are inevitable.

[Othelos]

Another recession will suck ass, since the economy never fully recovered from the last one.

[Conscentia]

I don't see how the Eurozone is failing. It's doing pretty well at the moment, considering the state in which it was a few years ago. It has maybe not completely the crisis yet, but it has definitely gotten a bit better again.

I concur. Calling it a failure is a bit of an over-reaction.

[Greed and Death]

If we can get the Republicans to default the US debt after they win the senate maybe.

[Distruzio]

If we can get the Republicans to default the US debt after they win the senate maybe.

That'd be entertaining. A pain in the ass and incredibly irresponsible. But who doesn't enjoy watching skateboarders fall in pain every once in a while? Watching the GOP ruin their balls is something I shamefully admit looking forward to.

[Southern Hampshire]

I don't see how the Eurozone is failing. It's doing pretty well at the moment, considering the state in which it was a few years ago. It has maybe not completely the crisis yet, but it has definitely gotten a bit better again.

The failure to grow and the racking up of debts without cutting spending meaning increasing rates but no one to pay them is a failure, is it not? It can't continue like this in the long-term because interest payments already make up expenditure in the 100s of billions a year in the Eurozone. With zero growth and continued debt-creation soon enough the Eurozone will be paying more in debt than the GDPs of it's biggest members.

[Cyrisnia]

If we can get the Republicans to default the US debt after they win the senate maybe.

That'd be entertaining. A pain in the ass and incredibly irresponsible. But who doesn't enjoy watching skateboarders fall in pain every once in a while? Watching the GOP ruin their balls is something I shamefully admit looking forward to.

"M-Mitt....its happening."
"I know Paul. I know."

[Olivaero]

I don't see how the Eurozone is failing. It's doing pretty well at the moment, considering the state in which it was a few years ago. It has maybe not completely the crisis yet, but it has definitely gotten a bit better again.

The failure to grow and the racking up of debts without cutting spending meaning increasing rates but no one to pay them is a failure, is it not? It can't continue like this in the long-term because interest payments already make up expenditure in the 100s of billions a year in the Eurozone. With zero growth and continued debt-creation soon enough the Eurozone will be paying more in debt than the GDPs of it's biggest members.

Cutting spending has been at the top of the Agenda since 2008... I don't know where your getting this from.

[Augarundus]

There's pretty strong reason to believe that the global economy will take a massive downturn. A few points:

1) There hasn't been a global recovery yet. In the very best scenario (which I'll address in subpoint 2), there has been an American recovery. But, overall, I contest the belief that the global economy is resilient today, for a few reasons:
a) The European Union has extremely anemic growth rates. Even Germany, the "train that keeps on chugging", has declining GDP growth and rising unemployment.
b) China's growth rates are in free fall, unemployment will probably rise, the financial sector is a house of cards (that China can no longer afford to bail out), and the real estate market is an enormous bubble.
c) The declining price of oil (thanks, US shale) has made oil-dependent producer economies very fragile: Venezuela, Russia, and Saudi Arabia, for example.
d) Global instability (Ukraine, Syria, South China Sea) has led to a crisis in confidence in the global order.

2) The US economy is incredibly tenuous. GDP growth rates are a little higher and unemployment is down, to be sure, but this doesn't mean that the US economy is sustainable in its current form.
a) Much of the growth has probably been afforded by the shale boom - a technologically-driven coincidence that has unlocked a massive economic potential in cheap energy and lowered the cost of doing business in the US. The "manufacturing renaissance" that this was predicted to trigger, however, has been unimpressive: growth is occurring and unemployment is dropping, but not by the leaps-and-bounds that we would expect of a dynamic economy. This leads me to suspect that the economy is still in structural decline, and the growth that we are seeing is simply the effects of cheap energy hiding this decline.
b) If Austrians are to be believed, then stimulus spending is responsible for a growth in GDP/employment, but this constitutes a form of malinvestment: economic expansion built on faulty foundations as the result of artificially low interest rates.
----This malinvestment is measured as "growth", but is actually a wasteful misallocation of resources that distorts the structure of production. The architecture of the economy is out of wack, which means it will eventually have to reordered. The Federal Reserve has kept interest rates low/zero (which has lent itself to high growth rates) since the 08 crisis, but is now considering allowing them to rise again. This will reveal the underlying unprofitability of these project and cause the US "growth" to reveal itself as malinvestment, and the economy will be all the worse for it.

3) This time, the vulnerabilities will be global. There are no 'strong' economies now that can sustain the engine of the global economy if 08 repeats itself: China, as above, is falling apart (even and especially liberal economists predict that China will encounter massive economic difficulties - Krugman writes about this regularly). This leads me to believe that the next crisis will be far worse than 08.

[Nazi Flower Power]

Define "crash."

Could the economy suck this year? Sure. Sometimes the economy sucks.

Is it going to completely implode leading to the collapse of civilization as we know it? No.

[Republic of Coldwater]

Define "crash."

Could the economy suck this year? Sure. Sometimes the economy sucks.

Is it going to completely implode leading to the collapse of civilization as we know it? No.

It may not implode society, but it could severely incapacitate economies like what happened in the Great Depression.

[Risottia]

I wasn't exactly the shining star in my economics and accounting classes but doesn't anyone think the current global situation is exceptionally suitable for an economic crash to happen within this year?

What? Do you mean we're not in a widespread economy crash already?

[Neo Umbrella Corporation]

I wasn't exactly the shining star in my economics and accounting classes but doesn't anyone think the current global situation is exceptionally suitable for an economic crash to happen within this year?

What? Do you mean we're not in a widespread economy crash already?

Well, if you want it that way, we could arrange for that to happen.

[Bandwagon]

In Russia in 2015.
In Middle East in 2016.
In Asia in 2024.
Or something like that.

[OMGeverynameistaken]

Spoilers:
Capitalism doesn't work unless people have money to buy things with. If people don't have jobs, they can't buy things.

The US economy in particular has become absurdly topheavy in the past decade or so. Fewer people are expected to do more work for less pay. "Entry level" jobs are being taken by baby boomers and college graduates, and most upper level jobs are being shuffled around between those who already have upper level jobs. The uppermost portions of the upper class have concentrated so much wealth into their hands that the rest of society doesn't have enough to function.

It's times like this I wish we did live in a corporatist dystopia. At least global megacorps generally seem to know what they're doing. Go Houston Energy Corp!

[L Ron Cupboard]

"If you build it, they will come"