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July 09, 2012 at 07:26 AM
I was at a friend’s house for a July 4th party when the host asked if I thought our economy was going to collapse. Immediately, I responded, “Of course it’s possible, but I don’t really think it will.” That question was the catalyst for a 15-minute discussion on the state of the global economy. In this post, I’d like to elaborate, and perhaps, editorialize a bit.
Our economy, as measured by GDP is about $15.4 trillion in size (as a historical reference point, this compares to $237 billion in the first quarter of 1947). However, when you compare U.S. GDP with the rest of the world, it’s quite staggering. Our economy is over two and a half times larger than that of the next largest nation, China. It could be said that as the U.S. goes, so goes the world.
THE LARGEST GLOBAL ECONOMIES
| Country/Area |
GDP: $ T |
Status |
| United States |
15.4 |
In Recession? |
| Euro Area* |
12.4 |
In Recession |
| China* |
5.8 |
Slowing |
| Japan* |
5.4 |
In Deflationary Trap |
*Source: TradingEcomonies
I like to divide the world into three parts, the U.S., the Eurozone and the emerging markets or rest of the world. For the past few years the emerging markets have been the bright spot, propping up global growth. It has been my belief that if the U.S. and Europe could begin to grow at greater than 3.5% to 4.0% before the emerging markets slowed, then the global economy would be all right. However, as we now know, Europe is in recession, some believe we are as well (I don’t believe we are, but I do think we’re dangerously close) and ,of course, the emerging markets are slowing.
