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| Europe |
| More signs of the Great Depression of 2005 |
| 2005-03-23 |
| A large increase in oil prices has always led to a recession and this time will be no different. When you factor in the Kyoto tax, cyclical factors - there has been a long run of good times - and the China factor, the recession will be severe in Europe and ripple across the globe. Business confidence in Germany, Europe's largest economy, unexpectedly fell to an 18-month low in March as oil prices surged to a record and the euro's increase against the dollar weighed on exporters. The Ifo institute in Munich said today its business confidence index fell to 94, the lowest since September 2003, from a revised 95.4 in February. Economists expected an unchanged reading, the median forecast of 43 economists in a Bloomberg survey showed. The euro and European stocks dropped. ``The increase in oil prices and the appreciation of the euro are basically eating up the modest recovery that is gradually emerging,'' said Lorenzo Codogno, co-head of European economics at Bank of America in London. ``If this continues, it could result in another sluggish growth performance this year.'' A 35 percent increase in oil prices this year is imposing additional costs on companies already squeezed by a slump in consumer spending amid the highest unemployment since World War II. Further dimming the outlook, a 9 percent appreciation in the euro against the dollar in the past seven months is making German goods more expensive on markets tied to the U.S. currency. |
| Posted by:phil_b |
| #5 I think Hup Clit is Mrs Davis. She is full of good sense on economic matters. |
| Posted by: Classical_Liberal 2005-03-23 1:19:29 PM |
| #4 The money is just shifting from European purchases to Chinese purchases. That's bad for the Europeans, but simply shifts the employment to the Chinese. You're shifting a line on a pie graph. That's an interesting take on the issue of recession: it may be localized, but not as globally serious as the entire pie shrinking. Good point, HC. Don't stay anonymous, btw. |
| Posted by: Ptah 2005-03-23 12:50:43 PM |
| #3 Correct me if I'm wrong, but the German and French economies have been flat for a decade or so, unlikely to have major 'ripples'. The UK economy is relatively better and the eastern countries are also raising [from the communist era bottom they existed in for nearly half a century]. The unemployment in both major countries is tied to their socialist laws which makes firing all but impossible, ergo, the employers didn't hire in the good times in anticipation for exactly this sort of thing developing [self fulfilling prophecy]. So the hit on the employment figures isn't likely to change much either. As far consumption of oil, the US demand for foreign oil, that which the Euros and Asians compete for, is flat since refinery capacity has remain unchanged for nearly two decades. It just means more money shipped to China from Walmart goes to the oil supplier, rather than to Mercedes and on to the oil supplier. The money is just shifting from European purchases to Chinese purchases. That's bad for the Europeans, but simply shifts the employment to the Chinese. You're shifting a line on a pie graph. I don't see a great depression in that structure. I do see localized stagnation and recession, but that has a great amount due to interfering with free market system. |
| Posted by: Hupising Cliting6229 2005-03-23 9:23:08 AM |
| #2 Unlike in the past oil represents a tiny % of our economy. Even if oil doubled it would be annoying and slightly lower peoples' standard of living temporarily but it wouldn't cause much more than that and I doubt would lead to even a short lived recession. |
| Posted by: Damn_Proud_American 2005-03-23 9:20:14 AM |
| #1 I have never been accused of being an optimist, but I can't extrapolate from this story to the "Great Depression of 2005." Germany has been in the tank since the decision to redeem OstMarks at parity with Deutschmarks. Add to that the demographic problems in Europe and it's not hard to see Europe going through a long dismal period like Japan has for the last 10 years. However, I can't see this precipitating a worldwide depression. |
| Posted by: RWV 2005-03-23 9:19:59 AM |