Watch: Is the Second Great Depression approaching? The case for
In the first part of a two part series in which we debate whether we are on the verge of a depression akin to that which hit in 1929, Emerging Markets Economist Craig Botham presents his four key reasons for a bleak global outlook.
The case for a second Great Depression
The parallels between today and the 1920s are manifold:
- We see weak growth in most of the world, with the US as the sole – and stuttering – motor, with even data there patchy recently. With, China now slowing and Japan and Europe weak, there is no leader to pick up the slack if the US falters.
- Commodity prices have collapsed globally due to massive overproduction across the spectrum. This leads to weakness in what we call the economic periphery and gives a very weak backdrop.
- Although we no longer rely on the Gold Standard we still have a global monetary system that ensures the importing of US monetary policy by a significant proportion of countries and a reliance globally on the US dollar as a funding currency.
- The US is stepping back as an economic leader and China is not yet willing able to step up in its place, so there is a lack of coordination allowing issues to fall through the cracks.
Though not our base case, there seems a real risk that the global economy could take another tumble.
See Keith Wade set out his case against a second Great depression