Global Trade Collapsing

In the financial frenzy to drive the stock markets up and out of oblivion some sobering data made a brief but unwelcome visit. Taking data from the last five months, as the credit crunch intensifies, the decline in US exports is equivalent to an annualized rate of 49%. The drop in imports is a mere 30%.

The pace of the decline is unprecedented in modern times, economists say. "We doubt even during the Great Depression that trade collapsed with such ferocity," said David Greenlaw, an economist for Morgan Stanley.

The Great Recession, as the IMF calls it, has severed a crucial link in the global economy. U.S. consumer spending has been the main engine of growth for the whole world, but that spending was based largely on phantom gains in asset prices that were inflated by that cheap money from abroad that has now been disrupted. As such inflated asset prices were repackaged and resold around the world the collective debt - and collective pain - have been spread far and wide. (Marketwatch)

Talk of the real economy with real products and saving to spend all sound like a really severe hangover. As one commenter noted,"China has surpassed the United States in a key measure of high tech competitiveness." The Georgia Institute of Technology's bi-annual "High-Tech Indicators" finds that China has risen to 82.8 (out of 100) whilst the USA now sits at 76.1. America peaked at 95.4 in 1999 and has drifted lower whereas China has soared from a lowly 22.5 in just 10 years. No wonder Hillary Clinton went begging to Beijing.

If the economic landscape is changing let us hope it does so with small tremors and not one mighty earthquake.