America dodged the Asian financial crisis of 1997-98, but much has changed. Today’s world economic slide is starting to hurt us.
by Ruchir Sharma • Wall Street Journal
Plunging stock prices and slowing economic growth in China have raised anew the question of how much events abroad really matter to the U.S. Many of the answers are quite placid, drawing on the precedents of the 1997-98 Asian financial crisis, when there was similar concern about impacts at home, which never came. The U.S. grew at a 4.5% annual pace during those two years. For much of 2015, when U.S. growth remained steady despite volatile and weak growth in the rest of the world, the optimists said it was like 1997-98 all over again.
That may be, but the world has changed a lot in two decades. After 1998, the U.S. share of global GDP topped out at 32% but has since fallen to 24%, based on my analysis of raw data from the International Monetary Fund, while the emerging-world share bottomed out at 20% but has since doubled to nearly 40%. In that time, China has supplanted the U.S. as the largest contributor to global growth. Continue reading
by Michael Pento • CNBC
The S&P 500 has begun 2016 with its worst performance ever. This has prompted Wall Street apologists to come out in full force and try to explain why the chaos in global currencies and equities will not be a repeat of 2008. Nor do they want investors to believe this environment is commensurate with the dot-com bubble bursting. They claim the current turmoil in China is not even comparable to the 1997 Asian debt crisis.
Indeed, the unscrupulous individuals that dominate financial institutions and governments seldom predict a down-tick on Wall Street, so don’t expect them to warn of the impending global recession and market mayhem.
But a recession has occurred in the U.S. about every five years, on average, since the end of WWII; and it has been seven years since the last one — we are overdue.
Most importantly, the average market drop during the peak to trough of the last 6 recessions has been 37 percent. That would take the S&P 500 down to 1,300; if this next recession were to be just of the average variety. Continue reading