A new kind of global recession: Why this time is

different | Business Beyond

the world is in the midst of an economic downturn certainly a global

recession is a major risk three of our biggest economic engines are
sputtering from war in Europe to a lockdown China and Rising inflation a
bitter blend is hitting the world's economic powerhouses and there is no no
no no sort of point of light at the end of the tunnel here because it all now
begins to feed on each other in this video we will be asking what makes
this economic downturn so different from the Great Recession in 2008. this
is a recession that is unlike perhaps the financial crisis recession that was
due to finish crisis that is being felt but every single individual definitely for
the years to come we are going to witness a world from a Chinese
perspective that we are not accustomed to we will discover the paradoxes
that make this downturn unique so the labor market actually looks quite
good which is one of the confusing things about today's economy we will
assess how easily this crisis can be remedied compared to the last we don't
have tools at the moment that could address the recession that we're
facing and we will look at the countries who are bucking the negative Trend
that's all coming up on business Beyond both the IMF and the World Bank
are warning that we are edging towards Global recession but determining
what counts as a recession and what doesn't can be complicated there is no
official definition a common rule of thumb is that when an economy
experiences two consecutive quarters of negative growth it's in recession
but a decline in GDP isn't the only indicator other metrics like
unemployment levels and consumer confidence also play a role people lose
their jobs they have to cut into their savings unemployment can be
extremely disruptive personally not just for economic reasons but for one
sense of well-being for a recession to happen many factors are at play
that's why declaring a recession is often in the hands of national
organizations that analyze business Cycles like National recessions Global
ones also don't have a clear-cut definition they happen when a large
number of major economies are going through an economic slump in our
globalized economy a recession in one place spells trouble for another
knock-on effects reverberate throughout the globe and that's what has
analysts worried right now certainly a global recession is a major risk but
our current forecast has what we would call a growth recession we do not
have a contraction in the global economy but we have subpar growth with
Rising unemployment GDP growth in the global economy is slowing down
the international monetary fund predicts that a third of the world economy
will likely be in a technical recession next year the US and Eurozone are
facing an especially gloomy Outlook in the U.S economic growth is
declining to a fifth of its 2021 levels next year in the Eurozone growth is
almost completely stalling for many of us the phrase Global recession still
conjures up images of publicly shamed bankers and people losing their
houses to understand the current economic downturn better it's worth
revisiting what happened in 2008 during the financial crisis pushed the
world's banking system towards the edge of collapse and left borers no
longer able to afford their homes and it all started with a housing bubble in
the U.S a whole industry ballooned around giving people mortgages
mortgage brokers eventually got greedy they started giving out loans to
people that didn't make enough money to pay them back those mortgages
were combined into big packages and sold to Banks ultimately the
inevitable happened borrowers couldn't pay their loans back and the House
of Cards collapsed causing a banking crisis the first recession was a
recession that was essentially one that was built on fear of Banks and
mistrust people that were in Banks because they weren't sure anymore
which of the banks was solvent and which one wasn't so they stopped
Landing all together Banks had to be rescued from roon by government
bailouts and the crisis spread beyond the United States European Banks
had bought a lot of Bad Mortgages from the US so they also collapsed and
had to be bailed out by governments many European countries eventually
could no longer pay their own debt government budgets were squeezed
resulting in years of austerity and dramatically impacting the lives of
millions of Europeans so how is the current economic downturn different
this time around money isn't the issue there is no Capital shortage in fact if
anything Banks and the cap the the the capital markets are sitting on loads
of money that at the moment they can't really spend because there is
nothing that comes into the EU economy so this time the world isn't short
of cash but it's sort of almost everything else when the pandemic struck the
fragility of Supply chains became apparent factories from Asia to Europe
and North America halted production sending the global economy into a
free fall as countries emerged from lockdowns demand for goods and
services returned faster than Supply now swelling orders have outstripped
availability businesses across the economy have struggled to hire workers
food and energy prices are on the rise adding to that the world's
manufacturing Powerhouse has closed shop in China lockdowns continue
to wreak havoc chienping's zero covet policy aims to isolate every
individual case of covet 19. a strict implementation means regular
shutdowns make business and Manufacturing extremely difficult when they
get waves you know entire cities are shut down and that affects the supply
chain throughout the world now shortages of one thing have turned into
shortages of another a scarcity of semiconductors has halted car
manufacturing and unlike during the us-led financial crisis it's Europe that
feels unique pressure now with the world Supply chains and trouble are
ready one added Factor made for the perfect storm on the continent the
war in Ukraine which woke us up to the realization that Europe is relying
on is for one of the most important inputs for its production namely energy
on a very very unreliable partner for decades Russia was Europe's main
provider of gas delivering almost half of the Block's gas supply but that's
drastically changed this year as Europe has rushed to find alternative
energy sources Europe needs to reduce energy Demand by 10 percent that
already means that we will get into an economy that produces uh produces
much less but it's not just energy that's become a casualty of the war
Ukraine is one of the biggest agricultural exporters in the world since the
Russian invasion food prices are on the rise for the European and for the
global economy supply shortages and a drastic rise in food and energy
costs make for a toxic cocktail if the demands stay the same and the supply
of a good falls in the price Rises if you have that across the economy as a
whole in the labor market in many Goods markets in energy markets and in
Food Markets then you have a generalized inflation for the first time the
world is facing an inflation crisis the U.S the United Kingdom and the
Eurozone are especially feeling the price surge in the EU inflation is the
highest it has ever been in the US it's at a 40-year high inflation is a major
challenge for all of us around the world too much money is chasing too few
goods that means items we need for our day-to-day lives are getting more
expensive it's also what makes this economic downturn so different from
the last this is a recession that is unlike perhaps the financial crisis recession
that was due to finish crisis uh that is being felt but every single individual
simply because all of us have to use energy at home and and all of us
understand that when inflation is high with the pregnancy power of our
salaries or of our income and of our wealth reduces the cost of living crisis
confronting the world is now causing a shift in global economic policy
making Central Bankers say they've had enough of Rapid price Rises we
took today's decision and expect to raise interest rates further because
inflation remains far too high and is likely to stay above our Target for an
extended period we have both the tools that we need and the resolve it will
take to restore price stability on behalf of American families and businesses
price stability is the responsibility of the Federal Reserve and serves as the
Bedrock of our economy and the U.S reduced a boost to encourage Banks
to start lending and help economies weather the storm this time they're
flipping the script for every Central Bank that is currently cutting interest
rates there are now 25 that are raising them according to Deutsche Bank a
ratio that hasn't been seen in decades by making it more expensive to buy
a car get a mortgage or use a credit card they hope to reduce people's
spending and slow inflation but the tools that will fix Rising prices also stall
economic growth it means that we have two problems and we have both
low growth and high prices and therefore the policy makes then is to
address this crisis needs to be quite different and also the policy mix is a
little bit more Awkward if you like in terms of meeting the two problems
central banks are facing a difficult Balancing Act raising interest rates could
further sink a rudderless economy doing nothing means letting inflation
run loose there's several real questions that we'll determine how the next
year plays out first how effective are central banks in reducing the inflation
without sending the economy into you know worse recession that would be
required it's very difficult to get monetary policy just right because there
are substantial lags in the system right so what's perfect for today policy
wise we often can't tell until six months down the road and something else
feels different about this economic downturn especially in the world's
biggest economy the United States for many people the word recession
means worrying about losing your job that's because the two usually go
hand in hand in the U.S GDP went down in 2008 and unemployment went
up this July the country's unemployment rate was the lowest it has been in
half a century and it has stayed exceptionally low since despite an
economic downturn so the labor market actually looks quite good which is
one of the confusing things about today's economy you have some
indicators that look very positive and and consistently so and you have
some indicators that are far more worrisome but the the labor market
indicator in the U.S in particular is very strong unemployment is quite low
labor force participation is good job openings are high relative to the
number of people seeking jobs so this is a time of enormous labor market
opportunity and strength for a lot of American workers this is a unique time
in the U.S companies can't afford to lose employees because many of them
are having problems finding workers in the first place but the US is facing a
paradox despite a strong job market people are worried especially those
looking to start their careers current class of 2023 is certainly worried about
the current economic situation so about 50 percent of our respondents
from one of our most recent surveys shared that they absolutely have some
concerns and anxiety things are looking good and gloomy at the same
time and that is making Americans feel uneasy sumer's sentiment is a
measure that shows how people feel about the economy and whether they
will spend or save their money right now people are only feeling slightly
more optimistic than during the 2008 recession and what does that mean
for the future of the US economy the job numbers are looking much Rosier
than during the last economic downturn but how people feel is a core
driver of economic growth and a pessimistic Outlook can turn into a self-
fulfilling prophecy a very different economy but one which is also going
through a turbulent period is the world's second largest China Decades of
surging growth have seen China dramatically catch up with the U.S
economy in terms of size but policy makers in Beijing are now grappling
with a multi-faceted economic crisis the pandemic and the real estate
bubble have combined to take a hammer to something which China had
come to take for granted economic growth China's annual GDP growth has
steadily declined over the past decade somewhat inevitable given how
Hyde has been before the pandemic the country was still recording growth
of around seven percent but following a bounce back in 2021 the IMF now
expects the Chinese economy to grow by just three percent in 2022 what
we have been witnessing for the past nine months roughly is a continuous
slowdown of the growth dynamic in China during the 2008 financial crisis
China introduced a huge fiscal stimulus package many analysts created this
as the reason China weathered and recovered from that storm much
quicker than other major economies if you look at the 2008-2009 recession
the Chinese fiscal response was quite um strong like they did a good job
keeping the Chinese economy going despite that recession and that was
helpful to the world economy as a whole if Chinese growth helped the
global economy out of the last crisis it's unlikely to do so this time around
China's zero covert policy and the Draconian rules that accompany it are a
big reason that largely send a message to Chinese consumers and investors
that now in China politic trumps everything when politics would come as a
as a hindrance for economic growth the Chinese Communist Party would
would make the right call and and let economy Prevail what zero covet has
notified is that that perception is if not wrong at least no longer viable um
in in in XI jinping's China zero covet has dampened Chinese economic
sentiment and sapped domestic consumption Chinese consumer spending
is more than 10 percent less than it was before the pandemic another major
factor driving China's problems is its housing market China's property
sector has been in crisis since 2020. new government regulations on debt
aimed at Cooling and overheated real estate market saw companies like
evergrant run out of cash soaring property debt has been described as a
systemic risk for the entire economy and since the Crisis began China's
housing market has experienced a severe downturn between zero covid
and the real estate crisis China has enough problems of its own to contend
with and that's having a knock-on effect around the world if China is not
buying that means that Europe is not selling so I think there is there is there
is an element of sort of bad news if you like coming also from the Chinese
economy slowing down so what does this all mean for China and the world
economy as a whole well the Chinese economy is still growing not
Contracting but a Slowdown has already begun and it may be part of a
longer term shift there was this almost unbreakable feeling that the Chinese
leadership or the Chinese Communist Party put it as you wanted would
guarantee that their children or a decade to come will be richer than the
decade that has just passed and indeed that was rooted in almost five
Decades of astonishing economic success nowadays it seems that the
Chinese households understand that the growth driver that they've
experienced for the past decade has run out of fuel and that the Chinese
leadership in Beijing is ambitioning to redirect the economy towards a new
form of equilibrium it appears that the engine which helped jump start the
world out of the last Global recession won't be up to the task this time
around it's clear that the world's biggest economies are facing a storm but
one area of the world has been bucking the trend during the 2008 crisis
China was still outpacing its Asian neighbors now for the first time since
1990 other Asian countries are set to outperform China economically
growth is still outpacing inflation here I would have never thought right I
think it's it's just the difference in Cycles because uh Asia asean and India
you know they were they were really buffeted by our first The Wave in 2020
then the Delta Delta wave in in 2021 but thankfully not So Much by
Omicron and you know they are coming out of their lockdowns for most of
this year as China went into a lockdown uh this year because of the zero
covered uh approach so just you know it's still very much Kobe Centric that
that difference and in terms of their demand emerging economies are
benefiting as China's zero covert policy is worrying investors if China goes
into lockdown where is your alternate production base in Asia you know
should you be moving to an Indonesia in the Asia Pacific Indonesia has
been thriving especially Against All Odds economic growth has been
outperforming forecasts here and inflation is still slightly under six percent
the cost of living crisis is crashing down on Europe and the us but in
Indonesia government fuel subsidies have softened the blow the
Indonesian government is setting its own prices for gas so-called
administered prices Indonesia is definitely benefited from a lot of policy
support so the reason inflation is so low is because it's administered price
there and you've and because that has kept that low the central bank has
not been under so much pressure too high the subsidies have amounted to
a hefty bill for Indonesia's government and might not be sustainable in the
future at the same time Rising commodity prices around the world have
actually helped this economy Indonesia's coal exporters are bringing in
record earnings the country is looking at a promising 2023 so at 4.7 I would
still say that growth Outlook is is looking pretty resilient uh next year
especially you know when we talk about our major economies entering
recession at the beginning of this video we looked back on the recession of
2008 and we asked how this economic downturn will be different what the
experts we spoke to described was a crisis not triggered by Banks but when
partially set off by War and by politics are there some things that are
inevitable like standing up for democracy as the Europeans and as Ukraine
and as the United States are trying to do right now I think you know the
cost of that um is not zero right and but some things are worth paying a
cost for um of course governments should do whatever they can to cushion
their citizens from these costs but I don't think telling citizens that the cost
is zero is is realistic or true and there are some things in life that are you
know worth making a sacrifice for with bank bailouts and regulation policy
makers have the tools to react to the financial crisis but much of what's
happening right now is outside of policy makers control the mechanisms to
address the supply side crisis are you know nothing more than invade
China and force them to produce semiconductors invade Russia enforce
Putin to to to to to stop invading Ukraine and and loosen energy superbly
and so on and that's obviously not going to happen so we don't really have
tools in the normal State of Affairs we don't have tools at the moment that
could address the recession that we're facing while central banks intervene
to stimulate the economy in 2008 they are adding to a downturn this time
the medicine against Rising prices is also poison for the economy and
unlike the 2008 financial crisis this downturn is having a much more
obvious impact on our daily routines everybody understands that we
cannot switch on the heating at the coming winter as much as we did in
other years or we are going to see an exorbitant Bill everybody who has a
car will have seen it in the run-up to the uh to today to the financial in the
run-up to the energy crisis how petrol was so expensive in filling up the car
so this is a crisis that I think dissipates across everybody in the society and
therefore it's much more felt it's not just about the economic impact the
households feel it you you feel it immediately in your uh in your household
income but there are also positive developments that run opposite to the
financial crisis we are in a moment where there is great talent shortage and
so even if we do go into a recession there's still a lot lots of jobs that are
available that are out there we are at a unique inflection point in the global
economy compared to the last crisis the one we are facing now is much
more multi-faceted war in Ukraine an energy crisis soaring living costs and
widespread pessimism are combining into an unpredictable economic
concoction