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Published by Mary | Filed under International Economy, Markets
The world’s top industrial market economies are increasingly finding themselves in a recession, or about to tip into one. The collapse of the U.S.’s financial market has spread far beyond American shores, resulting in bankruptcies, forced mergers and massive job losses around the globe.
This financial crisis, which is likely to continue over the next year, just won’t seem to rest until it brings the whole world down with it.
Iceland has been hit particularly hard this past month. The New York Times said in a November 8 article, “Like a bad dream, Iceland has now awakened to find that it is all coming true.” The collapse of Iceland’s banks; the drastic currency drop; mass layoffs; and a tarnished reputation abroad; the city of Reykjavik, which is home to two-third of the country’s people, has gone from boom to crash.
Prices have soared; companies are having trouble doing business abroad; people have lost their savings; and inflation is at 16 percent and rising.
According to an October 15 Forbes article, “Icelandic banks relied more than most on cheap debt and sloshing liquidity to sail abroad and conquer the world. The result was a ballooning financial sector that far exceeded Iceland’s own gross domestic product, making it impossible for the state to do much more than seize and protect its banks’ domestic operations when the market crisis hit.”
In Canada, unemployment has risen and Ontario’s manufacturing sector has claimed about half of November job losses. The unemployment rate has risen to 7.1 percent. With energy prices falling, a usually prosperous Western Canada has also been cutting back budgets and postponing projects.
Consumer spending has dropped drastically. 70 percent of all job losses have been in the service sector, particularly in retailing, and hotel and restaurant employment.
The AFP says, “Japan, which is in the midst of its first recession in seven years, ran up a deficit of 131.9 billion yen in the balance of trade in goods and services, reversing a year-earlier surplus of 96.1 billion yen.”
Whereas Japan can usually count on its exports of electronics and cars and other goods, it too has felt the impact of weak demand from recession-hit economies.
Despite China’s accounting for one-third of global GDP growth in the first half of this year, its economy is struggling, mainly due to the decline in overseas market (i.e. the U.S). The U.S. essential funds a large part of the Chinese economy so as American wallets tighten so does the flow of cash to China.
According to a Herald Tribune article on December 5, “The World Bank cut its growth forecast for China last week to 7.5 percent in 2009 from a 9.2 percent estimate in June, citing a slowdown in domestic investment and exports. CLSA Asia-Pacific Markets estimates the economy could expand by as little as 5.5 percent next year, the least since 1990.”