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Generational Dynamics Web Log for 17-Nov-04

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World Bank calls world economic growth "strongest in three decades"

World Bank calls world economic growth "strongest in three decades"

In a "bubble-headed" analysis, the World Bank called 2004 a "fabulous year" for developing countries.

Richard Newfarmer, lead author of the World Bank report, says, "This year we expect growth rates to be on the order of 6.1 percent with growth having increased in virtually every region, every one of the six major regions around the world."

According to the World Bank report (http://www.worldbank.org/prospects/gep2005):

"World growth accelerated sharply in 2004, with GDP advancing an estimated 4 percent.... All developing regions are now growing faster than their average growth rates of the 1980s and 1990s. The ongoing economic boom in China was a major factor, as were the surges in activity registered in Japan and the United States. The economic recovery was slower to take hold among European high-income countries, which contributed to the less marked increase in growth rates there. Meanwhile, very strong import demand -- because of the torrid expansion in China and the continued tendency for domestic demand in the United States to substantially exceed production -- contributed to an exceptional 10.2 percent increase in world trade volumes."

The problem with statements like this is that they don't examine the real underlying fundamentals of the economies involved.

When the report refers to "the torrid expansion in China," it's referring not to strong economic growth but to an economic bubble that's going to burst sooner or later. And since it's the primary engine for the "world growth" that report mentions, when the bubble bursts, as it must, it's going to have a severe domino through several countries.

Japan's economic bubble occurred in the 1980s, and burst in 1990. The country still hasn't recovered; in fact, the Japanese economy suffered a sharp, unexpected slowdown in the third quarter.

And when the report refers to "the continued tendency for domestic demand in the United States to substantially exceed production," it's alluding to the fact that American public debt is historically astronomical. (17-Nov-04) Permanent Link
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