Global Recession

Bank Warns World on Brink of Global Recession
ABC, July 19, 2001

Echoing the concerns of the Federal Reserve chairman, a major Australian bank has warned that the world stands on the brink of a global recession. The ANZ Bank has also cautioned that the Australian economy will be compromised. Just when the domestic economy in Australia was starting to hum, conditions offshore and beyond Australia's control loom as the bogey. "What we are now looking at is for the first time in arguably 20 years, a synchronised slowdown in all of the major economic regions of the world," ANZ Bank chief economist Saul Eslake said. Mr Eslake says world growth will be doing well to average 2.5 per cent. "Two-and-a-half per cent is significant because it represents for the global economy what consecutive quarters of negative growth have traditionally represented for any individual advanced economy, namely recession."

Commentary: It's Not Pneumonia, but Asia's Deep Chill Could Last
BusinessWeek, July 30, 2001

Japan and Singapore are in recession. Just about every other major economy in Asia is contracting--and even go-go China is slowing. Jitters in Argentina and Turkey are prompting worries that another financial contagion is about to spread around the globe. If you believe the gloom meisters, what this means is a reprise of the 1997 Asian crisis - crashing stock markets, swooning currencies, bankruptcies on an epic scale, and bailouts from the International Monetary Fund. In fact, Asia does face a crisis, but one of an entirely different - and more chilling - nature. The region has insulated itself against a 1997-style financial meltdown by stockpiling foreign currency reserves, running current account surpluses, and reducing its dependence on short-term, dollar-denominated debt to foreign banks. But in the past few years, much of Asia has become addicted to high-tech exports, and it's not likely to get another major fix for several years.

Since the crisis, Malaysia, South Korea, Taiwan, and Thailand have relied to a dangerous degree on supplying the seemingly insatiable U.S. appetite for PCs, mobile phones, and personal digital assistants (chart). Now, America is sated, and it's not likely to develop similar demand for some time - if ever. Economists have come to realize that the U.S. high-tech binge in 1999 and 2000 was an anomaly, driven by Y2K fears, euphoria over the possibilities of fiber optics, and a rapid buildout of the Internet. When tech spending in the U.S. recovers, it's unlikely to reach the same level of intensity witnessed during the bubble years.