Global Economy Could Shrink In 2009, First Contraction Since 1947

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The global economy has not contracted since 1947. But, an HSBC economist believes that it will happen again in 2009.

According to The London Telegraph, Stephen King, HSBC’s chief economist writes "On the basis of nominal GDP weights, we expect global GDP to shrink in 2009, an extraordinary development in the modern era."

That probably means that even countries which have had extraordinary growth like China could move into deep recession. The economic results will not be the only fallout in developing nations.

There is already news of social unrest in large countries including Russia and China. The Russian central government is beginning to influence how the national press describes the financial crisis so that it can "spin" the problem as being less troubling than it is. Labor strikes have begun in certain parts of China.

If wages drop quickly in most countries and unemployment rises sharply the political fall-out in nations from Russia to Venezuela could push the current governments out of power. Who replaces them could have a significant effect on world trade. Panic often fails over into paranoia and protectionism.

Douglas A. McIntyre