[GregT]

DEFINITION of 'Global Recession'


According to the IMF, there have been four global recessions since World War II, beginning in 1975, 1982, 1991 and 2009, respectively. This last recession was the deepest and widest of them all. Since 2010, the world economy has been in a process of recovery, albeit a slow one.

Global Recession

Interesting that they left out this part:

Before April 2009, the IMF argued that a global annual real GDP growth rate of 3.0 percent or less was "equivalent to a global recession".[3][4] By this measure, there were six global recessions since 1970: 1974–75,[5] 1980–83,[5] 1990–93,[6] 1998,[6] 2001–02,[6] and 2008–09.[7]

https://en.wikipedia.org/wiki/Global_recession

[ralfy]

I think it was mentioned in another thread that global growth has been low the past decade compared to the previous one.

[kublikhan]

Interesting that they left out this part:

Before April 2009, the IMF argued that a global annual real GDP growth rate of 3.0 percent or less was "equivalent to a global recession".[3][4] By this measure, there were six global recessions since 1970: 1974–75,[5] 1980–83,[5] 1990–93,[6] 1998,[6] 2001–02,[6] and 2008–09.[7]

I believe that is an oversimplification. In the source wikipedia links to it mentions that even back then the IMF took many factors into consideration, not just GDP. Further, that date is wrong. On October 8, 2008 the IMF said they don't agree with the 3% figure. It wasn't always 3% either. Depending on who who is in charge sometimes they said 2.5%. And even then it was informal.

Informally, past IMF chief economists have called global growth lower than either 3% or 2.5% — depending on who was the chief economist — a recession. But that didn’t pass muster with Olivier Blanchard, the IMF’s current chief economist, who on Oct. 8, 2008 said “it is not useful to use the word ‘recession’ when the world is growing at 3%.”

Now, IMF economists have cranked through the numbers and come up with a more precise way to measure global recessions: a decline in real per-capita world GDP, backed up by a look at other global macroeconomic indicators. Those indicators include industrial production, trade, capital flows, oil consumption and unemployment.

What’s a Global Recession?

[GregT]

“Six years after the world economy emerged from its broadest and deepest postwar recession, a return to robust and synchronized global expansion remains elusive,” Maurice Obstfeld, the IMF’s new chief economist, said in the foreword to the fund’s latest World Economic Outlook. Besides a broad-based downgrade in growth around the world, “downside risks to the world economy appear more pronounced than they did just a few months ago,” he said.

The fund said there’s a 50% chance the global growth rate will fall below 3% next year, a level it has, in the past, said is “equivalent to a global recession.”"

http://www.wsj.com/articles/imf-downgra ... 1444140016

If not for palliative central bank policies, ZIRP, austerity, and the ever changing definition of GDP, it would be far easier for most to see where we really are, and where we are really heading. We are already in deep recession. Some of us are willing to look behind the curtain, while most others find reality too uncomfortable to face. Denial runs rampant.

[kublikhan]

If you have enough respect for the IMF to drudge out their 7+ year old comments on the definition of a global recession and paste them as authoritative, you should listen to them now when the IMF's contemporary personal judge whether the world is in a recession or not. After all, the current IMF administration has current information on the current state of the global economy.

[onlooker]

https://www.wsws.org/en/articles/2014/1 ... r-o09.html
Here is a nice article for you deniers and doubters. The IMF continuously wrong in its forecasts over a number of years. That anyone can take seriously anything that comes from the large institutions, governments, main stream media, big corporations etc. is beyond me. The world economy is in financial straits, no renewable energy economy is on the horizon, social and political stalemates and conflicts are boiling over, the richer get richer and the poor get poorer. If its any consolation, hope us economic doomers are right and consumerism grinds to a halt because if not we may not have much of a viable planet in which to do economics of any kind or even survive for that matter.

[GregT]

If you have enough respect for the IMF to drudge out their 7+ year old comments on the definition of a global recession and paste them as authoritative, you should listen to them now when the IMF's contemporary personal judge whether the world is in a recession or not. After all, the current IMF administration has current information on the current state of the global economy.

The article that I quoted was from the Wall Street Journal, 11 days ago. You would be better served arguing with them. I have long since gotten over my denial, and I am in complete understanding of the reality of our situation.

[GregT]

https://www.wsws.org/en/articles/2014/10/09/imfr-o09.html

Thanks for the link Onlooker.

[dolanbaker]

The current economic model is totally dependent on infinite growth of x% (that figure appears to be 3% right now), without that growth, "trickle down wealth" stalls and governments find that the pool of businesses that they can tax is shrinking due to mergers and takeovers. These really big multinationals are so big that they can determine the policies of many governments around the world. Try to take a fair share of tax from them and they'll close down and move elsewhere.

It's impossible to grow business if you're sucking the wealth out of your customers, they simply can't afford to buy more. It is also very important to remember that most consumers who can afford stuff, are simply maxed out on stuff!
Just how often do you need to change your mobile phone for example and most people have already replaced their CRT TVs so they're not going to buy again until the current flat screen fails. Growth in other parts of the world is difficult to achieve due to the lack of wealth as people are only buying the essentials of life, food & fuel and the like.

They'll probably just change the definition to avoid recessions in the future, a bit like changing a railway timetable to have a train arrive at its destination 5 minutes later to hide the fact that is was always 5 minutes late!

[onlooker]

It's impossible to grow business if you're sucking the wealth out of your customers, they simply can't afford to buy more

Exactly Dolan. So now the wealthy and entrepreneurial have found a new game and that is to "speculate" gamble in the stock market with derivatives, sub-prime loans etc. This is because their immense greed was not satiated by weakening the middle class for their benefit. It is also because the entire edifice of the "growing" economy and abundance is ending. They the corporations and such realize this so they are tightening their belts at the expense of the working class. They also went full out "lending" money into existence. So on many fronts they have responded to the realities and limitations of the planet. Yet this response cannot hope to forestall much longer the forces of contraction arrayed against business as usual or the insatiable greed of the wealthy class.

[kublikhan]

GregT, the press often wants easily digestible news to report. If it is sensationalist, so much the better.
Something like: "We are in a global recession! world GDP fell below 3%!" is much more attention grabbing then:
"IMF global growth downgraded from 3.3% to 3.1%"

Onlooker, I am reminded of a particular quote:

Prediction is very difficult, especially if it's about the future.
Niels Bohr

It's easy to throw mud on someone for making failed predictions(Zerohedge would win a gold star in the category of failed predictions). But if you are going to listen to an institution at all, I think it makes more sense to look at what they are currently saying about the economy then to try and look at their categorizations from years ago that may not apply to conditions today and even then were distilled down to a press sound bite. The truth is often more complicated than sound bites or simplistic "growth below 3% = recession" rules of thumb. Have you guys even read through an IMF economic outlook? The last one was over 200 pages long. The one from 2008 was over 300 pages.

[onlooker]

First K, I do think predictions are relevant. The more often they are wrong, the less credible the source. Your right I think about Zerohedge and in fact some other outlets of information have gotten their time-line wrong and anticipated too early bad conditions. Having said that, the tendency among big mainstream purveyors of information is too paint too rosy a picture of the situation. As Greg said by studying and learning what is "really" going on, one then arrives at certain axioms and patterns which characterize the state of both the US and world economy. So in summary, the trajectory is down and I and some others on this site know this quite well and no amount of "feel good" news or info can sway us from this honest and factual assessment of the situation and trajectory.

[kublikhan]

Onlooker I want to ask again, did you even read the IMF's recent outlook? Because it does not seem very "feel good" to me. It seems like a pretty gloomy outlook. It seems to me like you guys might be painting with a rather broad brush and dismissing anything remotely mainstream without even hearing what they might actually be saying. I'm not asking you to read all 200+ pages of it, but how about just the portion below? Would you really categorize this as mainstream drivel to placate the masses that should be dismissed without a second thought?

Six years after the world economy emerged from its broadest and deepest postwar recession, a return to robust and synchronized global expansion remains elusive. The revised forecasts in this latest World Economic Outlook report underscore the challenges all countries face. Despite considerable differences in country-specific outlooks, the new forecasts mark down expected near-term growth rates marginally, but nearly across the board. Moreover, downside risks to the world economy appear more pronounced than they did just a few months ago.

The ongoing experience of slow productivity growth suggests that long-run potential output growth may have fallen broadly across economies. Persistently low investment helps explain limited labor productivity and wage gains, although the joint productivity of all factors of production, not just labor, has also been slow. Low aggregate demand is one factor that discourages investment, as the last World Economic Outlook report showed. Slow expected potential growth itself dampens aggregate demand, further limiting investment, in a vicious circle. Aging populations further restrain investment in a number of countries; in some others, institutional shortcomings or political instability are deterrents. In its more extreme forms, political conflict has created a large global stock of displaced persons, both within and across borders. The economic and social costs are immense.

Recessions may have a permanent negative effect not only on trend productivity levels, but on trend productivity growth. This mechanism would make current low productivity forecasts look in part like products of the post-2007 turbulence. Some economic historians advance the idea that the postwar global growth experience largely reflects diminishing returns along the extensive margin of technological innovation, punctuated temporarily by the entry of China and the former nations of the Soviet Union into the global market economy and by the information and communications technology revolution.

Commodity exporters in particular have seen sharp depreciations of their currencies, but a general trend of reduced financial inflows to emerging markets has resulted in more generalized depreciation against the U.S. dollar, euro, and yen. Past attempts by emerging markets to fix their exchange rates in the face of large financial outflows had quite negative consequences for global financial stability.

In an environment of declining commodity prices, reduced capital flows to emerging markets and pressure on their currencies, and increasing financial market volatility, downside risks to the outlook have risen, particularly for emerging market and developing economies.

World Economic Outlook

[onlooker]

Sorry K, your actually right. I am amazed no satire intended.

[AgentR11]

pstarr, their one and only economic fear is deflation. their one and only strategic fear is grain rotting in the field while store shelves are empty. Everything follows from that. They will say anything, do anything to avoid those fates. And I mean absolutely anything.

[kublikhan]

Pstarr, you really had a problem with this statement:
"Low aggregate demand discourages investment"

I thought that sounded similar to one of the points dolan was making:

It is also very important to remember that most consumers who can afford stuff, are simply maxed out on stuff!
Just how often do you need to change your mobile phone for example and most people have already replaced their CRT TVs so they're not going to buy again until the current flat screen fails.

I thought you would agree with that.

[ralfy]

On p. xiv, more investment is seen as a solution, together with more prudence, to ensure continuous growth. There are hardly any references to peak oil, global warming, etc., which will obviously negate such solutions.