All of the world's major economies -- the United States, the European Union, and Japan -- have most likely slid into a recession -- the Organization for Economic Cooperation and Development (OECD) announced in its most recent projection.
A tri-polar contraction
The OECD sees GDP in the three major zones contracting 1.4% in Q4 and 0.4% for all of 2009 -- a decline in output that will create a global recession for at least the first half of 2009.
Economist Richard Felson told BloggingStocks Friday it's difficult if not impossible to put a positive spin on the OECD's latest projection -- a projection he believes will prove to be accurate.
"Other than the bursting of the commodity price bubble and a pull-back in inflation, it's hard to see any positives," Felson says. "The world needs expansion in at least one and ideally two of the major economies to maintain adequate global growth, so you can see the fix we're in, from a demand standpoint. That's all the more reason for governments in both the developed and developing worlds to increase fiscal stimulus."
Further, if the three major zones fall into a recession in 2009, it would be the first time since 1974-75 that the U.S., Europe, and Japan all fell into a recession at the same time. Then, the 1973-75 oil shock following the Arab oil embargo plunged the three major economies into a recession. During that period, Japan fell into a recession first, followed by the U.S., then Europe.
The world's major economies are set to meet in a G-20 summit Saturday in Washington and the OECD has highlighted the need for more macroeconomic stimulus.
The OECD sees the U.S. economy contracting 2.8% in Q4, and 0.9% in 2009. Europe is seen contracting 0.5% in 2009; Japan, 0.5% in 2009.
Economic Analysis: It's highly unlikely that the OECD forecast will prove to be wrong, so the world's major economies are in their worst condition collectively since1974-75. Regarding the U.S. recession, as in 1974-75 (and 1980 and 1990), it follows an oil shock. (What a surprise!) Hopefully, this will propel U.S. policy makers toward enlightened action: a national energy policy aimed at reducing, then ending, dependence on oil.
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