Depression in the east points the way for the rest of the world

[CHIMO]

Anybody who doubts that the global economy is facing its most serious downturn since the 1930s should take a squint at the latest trade figures from Japan. Exports in January were 46% lower in January than they were a year ago – a phenomenal drop for a country that is so heavily dependent on sales of its industrial products overseas.

Japan has got used to economic setbacks over the past two decades: it has been in and out of recession on a regular basis. But make no mistake, this drop in exports does not mean recession: it means depression.

In the circumstances, comments by analysts that the data was "not good" and "seriously bad" were somewhat otiose. The Office for National Statistics confirmed today that the UK economy shrank by 1.5% in the final three months of 2008 and is on course for an annual decline in GDP this year of between 2.5% and 3%. But in Japan, things are much, much worse. Maya Bhandar at Lombard Street Research, says that the economy is contracting at an annualised rate of 14-15% in the current quarter. Strong exports have tended to disguise the weakness of Japanese domestic consumption in recent years: now that prop has been kicked away, growth is plummeting.

Why is this happening? Quite simply, the great engine of globalisation has gone into reverse. During the long boom, the US acted as the consumer of last resort: it sucked in exports from China and Japan. As China industrialised, it needed high-grade investment goods from Germany, and as prosperity spread in the world's most populous country, there was strong demand for Japanese electronics, cars and consumer gizmos. Now that America has stopped spending, Chinese factories have closed. The knock-on effects of that are being felt in Tokyo and Hamburg.

http://www.guardian.co.uk/business/2009/feb/25/larry-elliott-depression-japan

[Sarah Ibarruri]

1. Does any of this have anything to do with the market being flooded with China goods?

I read an article about that, and so many countries have set up manufacturing in China, that the amount of goods available worldwide is explosive. Any of that bear any weight in the depression?

[OHdem10]

2. Of course it does. All the companies who went to China to produce

goods, and took American's jobs are now feeling the chickens coming
home to roost. Over the last decades, the Middle Class have
lost about 10,000 dollars in annual income. The Mean income is
now just a little over 34,000 dollars annually. At one time the
mean income was over 40,000 dollars annually. The US was not
the market of last resort. We were the Primary Market. China
therefore did not push to raise middle class in their country.
Now Americans cannot afford all this stuff from China. China
does not have a large consumer base at home.

In other words, as some have had courage to admit, the Trade Policies
have not worked out as predicted when they were instated.

As a result, part of the job layoffs are the result of Trade
Policy gone awry, we are in the process of 40 million job dislocations.
Right now it is easy to blame everything on the banks but sooner
or later America will see the whole picture.

[kaygore]

3. I have often commented on how short-sighted the companies were

that sent jobs off shore to save a few dollars. In the end, what did they expect when they had leveled the pay of US workers so low that people were not able to purchase goods any more???!!!! It all seemed so logical and simple to me who has no MBA or background in economics that I never could understand why those high-paid CEOs didn't see it!