The recent troubles faced by Greece bring to mind a fascinating way in which this financial crisis has been different from so many others. Namely, it has been the wealthy, Western countries that have been hit hardest and who have been made to look bad.
It was troubles in the United States, the world's preeminent economic power, which first initiated the recession. Its sophisticated, modernized financial system self-destructed in a manner previously thought only possible in places like Indonesia or Argentina. For the first time since the Great Depression, First-World banks were in danger of falling; Great Britain even had an old-fashioned bank run.
And it was rich Westernized Iceland that was the first to collapse. Not some Latin American Argentina or Asian Indonesia - but Iceland. Today the country is still in financial chaos - an Icesave bill to restore stability has proven deeply unpopular, much like the bail-out bill for the banks. The bill is being put into a national referendum, where it will almost certainly lose.
I've been extremely skeptical of what I regard as unduly optimistic economic forecasts, simply because this recession is so much worse than others over the past half-century, not to mention the fact that it's causes caught almost everyone by surprise. I've warned that there were false signs of hope during the Great Depression as well. At the same time, I'm well aware that this has not been anywhere near as a bad as the Great Depression, but then, we're not out of the woods just yet.
Now, however, the 30-nation OECD (Organization for Economic Cooperation and Development) has just issued a press release on the June composite leading indicators (CLI), which shows widespread signs that economies are about to turn around. The CLI gernerally forecasts economic conditions 6 months in advance. Signs have been positive for several months now, but temporary upticks happened during the Great Depression, so if this event is any way comparable, it seemed prudent to remain cautious. It still does. Now, however, the last major economy that had had its CLI headed down--Japan--has seen it turn up. That means that all the countries included in this press release show signs of having hit bottom, and having begun to turn up. Since most countries began trending up in March, actual economies could show signs of improvement in September across most of the OECD. I'd be quite relieved to have been wrong in being so pessimistic, both because so many people are hurting, and because of what it will mean for the mid-term elections. It takes months of improvement before it impacts the mode of the electorate. And even then, the job prospects are much bleaker than general recovery. So we're still not out of the woods yet. But we've finally seen broad enough signs of improvement that I'm shifting my focus of concern away from recovery in general, and squarely onto the issue of jobs.
Amidst a recent upsurge of happy talk about economic "green shoots," the Organization for Economic Cooperation and Development (OECD) released a sober reminder this week in the form of its Quarterly National Accounts figures (pdf) showing that the global recession deepened in the first quarter, while the New York Review of Books published a forum, "The Crisis and How to Deal with It" with Bill Bradley, Niall Ferguson, Paul Krugman, Nouriel Roubini, George Soros, and Robin Wells. It was from an April 30 panel discussion, but things have not improved so much as to render it outdated. Indeed, Huffington Post just published a followup report on the "American families" featured in his 30-minute campaign ad. They've yet to see any real help from his presidency. And while they are still patient and trusting towards him, the collective picture is not encouraging.
OECD first:
Gross domestic product (GDP) in the OECD area fell by 2.1% in the first quarter of 2009, the largest fall since OECD records began in 1960, according to preliminary estimates, and followed a fall of 2.0% of GDP in the previous quarter.
In the United States GDP fell by 1.6% in the first quarter of 2009, the same rate as in the previous quarter. Japan's GDP declined by 4.0%, following a 3.8% decrease in the previous quarter. GDP in the euro area was down 2.5%, following a 1.6% fall in the previous quarter.
Of the Major Seven* countries, only in France, where GDP fell 1.2%, did the rate of contraction ease in the first quarter.
Compared with the same quarter a year earlier, all the Major Seven* economies recorded a fall in GDP, and a marked deterioration on the previous quarter's year-on-year figures.
The United States contributed 0.9% to the total OECD fall of 4.2% between the first quarter of 2008 and the first quarter of 2009. Japan contributed 1.0%, the euro area (13 countries) 1.3%, and the remaining countries 1.0%.
* "Major Seven" and other groups of countries defined at end of diary.
STATE BLOGS
I've been extremely skeptical of what I regard as unduly optimistic economic forecasts, simply because this recession is so much worse than others over the past half-century, not to mention the fact that it's causes caught almost everyone by surprise. I've warned that there were false signs of hope during the Great Depression as well. At the same time, I'm well aware that this has not been anywhere near as a bad as the Great Depression, but then, we're not out of the woods just yet.
