According to Bear Stearns Chief International Economist David Malpass, the global economy is likely to contract by about half a percent in nominal terms this year. I spent last week in Seoul, South Korea, meeting with President Kim Dae Jung, members of the National Assembly, and leaders of both the ruling party and the opposition party. It is painfully obvious that the Korean economy is contracting. Japan is flat on its back and likely to contract by double digits this year. The stocks on the Nikkei stock exchange recently hit a 16-year low.
Exports are down and output is shrinking in developing economies such as the Philippines.
And the problems aren't confined to Asia. Production is slowing throughout Europe, and the European Union economy will likely grow little, if at all, after accounting for the oil-swollen price deflator. The economic outlook in South America is precarious as its second-largest economy, Argentina, deteriorates rapidly and fears of a currency crisis loom. Economic growth in the United States is flat, thanks to Alan Greenspan and the anti-tax cutting Democrats. If the grip of monetary deflation and fiscal austerity isn't loosened soon, we may find ourselves in the first global crisis of the 21st century.