As most readers are aware, we are all affected by economic and financial trends occurring in other parts of the world. Advances in technology, transportation, and communications have caused the globe to shrink, leading to a truly international economy. Occurrences in London, Berlin, Tokyo, Beijing, New Delhi, Riyadh, Ankara, Buenos Aries, and other distant locales have an impact on our daily lives in Alabama.
This is underscored by recent global happenings that create a cause for concern in this nation. That is, they collectively could impact each of us in the prices we pay for goods and services.
Japan, a major trading partner, officially is in a recession. GDP shrank by 1.6 percent for the July-September quarter. This occurred despite massive stimulus programs by its central bank, the Bank of Japan. And the downturn will affect that nation’s ability to produce goods and services as well as purchase various items.
As noted in a recent column, the Eurozone is struggling, hovering on the edge of recession. Unemployment is high (11.5 percent), GDP is creeping along at a glacial pace (0.2 percent), and investment continues to stagnate. The drop-off has greatly reduced demand throughout the region, and production is at a virtual standstill. The European Central Bank has announced that it is poised to take steps to further stimulate the economy.
China, the world’s second largest economy, has experienced an unexpected slowdown in economic activity during the most recent quarter. It expanded at a five-year low (7.4 percent). This led to a November 21 surprise lowering of the one-year benchmark lending rate by China’s central bank. Peoples Bank of China dropped the rate charged to financial institutions from 6.0 percent to 5.4 percent, the first reduction since 2012.
Geopolitical risks play a significant role in the international arena. Lingering uncertainty continues regarding the “hot spots” currently the headlines – ongoing war in Syria and Iraq, clashes in Ukraine, and the escalating tension between Russia and the West. How these will play out is a key unknown. They have potential ramifications for the rest of world.
Globalization is a two-sided coin. Everybody benefits when world economies are humming. But the reverse occurs when activity slows and, in the case of Japan’s, halts. And this has implications for all of us.
Wayne Curtis, former superintendent of Alabama banks, is a retired Troy University business school dean. Email him at firstname.lastname@example.org.