Is the world heading for a recession?

Hello, Leonardo here at TV Centre, with the first thoughts of the day.

Black Monday, meltdown, recession. We’ve talked about it, it seems to be here.

Markets dropped by more than 5% yesterday in London. Similar losses in Frankfurt, in Paris and across the world.

And more is expected — a much bigger blow — when Wall Street starts trading today. It was closed yesterday, due to a national holiday.


Is this what everyone feared?

After the crisis in the US property market and the credit crunch, the announcement of major losses by giants like Citibank and Merryl Lynch: is this the final evidence that a recession is round the corner?

This is a major talking point. It’s the number one story on the BBC Online and many other websites.

As Ros mentioned in his blog post yesterday, several journalists from US Public Radio came to watch the programme yesterday. And they were all worried.

But is the panic justified? Are you worried?

 Have you been affected in any way by this crisis? How can it affect you, in the US, in Europe, Africa, in Asia?

Post your comments here on the blog.


On Sunday night, Hamas, closed the only functioning power station in Gaza. It said it had run out of fuel, after a blockade imposed last week by Israel.

Today, Israel allowed fuel trucks to enter the Gaza Strip to alleviate the situation. It’s lifting the blockade for one day.

The blockade has been condemned by the international community. The UN says it’s against the Geneva Convention.

Israel denies this is collective punishment. It blames Hamas for continuing to strike the civilian population in Israel, and mainly the border town of Sderot, with Kassam rockets.


I’d like to hear from people in Gaza. How are they coping with the situation? What’s working, what’s not working?

And what can be done to revert this situation?

President Bush has just been to the region and made very optimistic forecasts of a peace deal still this year. Is there reason for optimism?

Send your comments, post here on the blog.


It looks like the European Union has decided to take some direct action against the United States on climate change.

The president of the European Commission — the executive body of the EU — Jose Manuel Barroso, has said he’s considering imposing tariffs on American exports such as steel, aluminium and cement.

These are energy-intense products. You burn a lot of fuel to produce them.

As the US doesn’t sign up to international treaties on climate change, the European Union could start charging them for their carbon emissions.

Is this the way forward? Is Mr Barroso right when he says the US should be forced to pay carbon allowances for energy-intense products?

Tell us what you think, post on the blog.

27 Responses to “Is the world heading for a recession?”

  1. January 22, 2008 at 10:28

    Life is rough

    Run for money, run for fun;
    Show your honey, none will shun
    Your company, run, run, run!
    Rough, rough, rough, life is rough:
    I, he, she will laugh, laugh, laugh
    At those who don’t have enough.
    Laugh, laugh, laugh:
    That’s rough stuff. But life is rough.
    So run for money, run for fun;
    Show your honey, none will shun
    Your company, run, run, run!

    Ya Subhanallah!


  2. January 22, 2008 at 11:26

    Yes! We are already in recession I would argue, here in the US every sector (including the entertainment industry) is feeling the pinch. But the middle class and working class are now equally struggling for solid ground.

    Beverly in California


  3. 3 ZK
    January 22, 2008 at 11:40

    Olmert should be culpable under international law for anything that happens in Gaza during the blockade.

  4. 4 Brett
    January 22, 2008 at 12:20

    On the Climate Direct Action – It is a tough call seeing as how I am a US citizen and I know this will have some effect on our economy if the EU imposes tarrifs on US imports of the listed products. I however support this idea and hope that the rest of the world begins to catch on. Sadly, I think the only way the US will learn and change its stubborn ways is if the rest of the world bands together to stand against it.

    Bush’s optimism – Bush is an idiot.

    And on the recession – I am far more worried about gas / oil prices than I am about a recession. You can always pull out of a recession, you can’t always pull more oil out of the ground.
    Directly, any recession hasn’t really hit me at all. I see no change at all in my financial wellbeing from last year to now. Items cost a little more, but that just means I spend wiser.

    Id love to see a WHYS on the Climate Direct Action issue!

    Brett ~ Richmond, Va.

  5. 5 steve
    January 22, 2008 at 12:27

    It’s funny that pretty much most of this recession mess is due to materialism. People not happy with what they have, buy things they don’t need, to impress people they don’t like, with money they don’t have. In real life cases I know of, this is how it goes. John and Jane live in a decent size home. Jane’s friend just got a larger house. Jane cannot stand it that her friend has a larger place, so Jane pester’s John to get a larger house. John says he really doesn’t think it’s wise, as they don’t have that much spare money. Jane then starts talking about how unhappy she is in the marriage, so John gives in, and gets a larger place, that if he loses his job, he will be living on the streets. Jane got her way via threats of divorce.

    Sure, not all cases are like this, but in the other cases of subprime, it’s peopel whoshouldn’t even be owning a home buying homes, not thinking of consequences, such as interest rates going up on their ARM, and them thinking “the values will go up, and Iw ill sell and make money”. You were wrong.

    Nothing makes me laugh harder than to go through the garage of my apartment building (rental, nobody owns the units here) and seeing the BMWs and Mercedes’ here which the people obviously cannot afford, so they are probably leasing them anyways. Worse, the low income/subsidized housing not far away were even MORE people drive luxury cars..

    Sure, the rampant materialism here drives the economy, but unfortunately with debt, which will eventually bring the house crashing one day.

  6. 6 VictorK
    January 22, 2008 at 12:29

    So, Israel’s blockade of Gaza is – accoring to the UN – in breach of the Geneva Convention; but the missile attacks on Israel launched from Gaza that led to the blockade in the first place don’t get a mention? Just as the US is too much of a partisan of Israel in this conflict, the UN is an out and out ally of the Palestinians. Neither the US or UN can bring peace to a conflict in which they are themselves partisans.

    The Israelis aren’t fooling anyone: of course it’s collective punishment. But what other option do they have when faced by a collective enemy, namely the entire Palestinian people? The Palestinians have a simple choice: end your aggression or pay a heavy price for it. The Israelis showed a lack of resolve in lifting the blockade. They should have maintained it, come what may, until there had been no rocket attacks for several days. Hamas – who were elected by the Palestinian people, and whose actions are therefore blameable on the generality of Palestinians – is a terrorist outfit driven by an ideology of religious fanaticism. Appeals to reason, moderation, self-interest or even the Geneva Convention are wasted on them. Force and punishment alone will tell, since the culture of the region is one in which power alone is worshipped and obeyed.

    Israel is entitled to use whatever force and apply whatever punishment it considers necessary in defending its security and its right to exist – the Geneva convention be damned.

    The Palestinians are the aggressors in this latest chapter of the conflict. We shouldn’t lose sight of that, however determined the UN may be to.

  7. 7 John D. Anthony
    January 22, 2008 at 12:33

    Today will be one for the history books and all the commentators will probably do their best to make it sound like the end of the world.
    Am I worried?
    Yes, but not for myself.

  8. 8 steve
    January 22, 2008 at 12:35

    ZK, shouldn’t Hamas be culpable under international law for the daily rocket attacks on Israel?

  9. 9 john
    January 22, 2008 at 13:30

    Hello Ros.
    Why should we worry?. Investors on the share market do it to gain as much as possible. The bad side is that the whole economics are geared to the biggest gambling set up going.

    A way to save many problems would be to stop the profit making on commodities, regulate them with out the money grabbers being involved, and the world would be a better place.

    What worries me are the loses made by pension funds, that is a problem.

    Other wise wait and see, it will turn out all right in the end.

  10. 10 Grant Colvin
    January 22, 2008 at 13:53

    I’m very apprehensive that the major plummets in markets around the world will have a very detrimental effect on American markets today, as well as on the world economic situation. I think, however, we have to wait and see if the American markets will drastically fall today and act accordingly.

  11. 11 Bedoon Esam - Bahrain
    January 22, 2008 at 13:57

    With the amount of leverage and reselling of financial paper by the banks having increased exponentially over the last decade or so, such recessionary trends are now here to stay.

    I dont really feel sorry for the likes of CITI, Merrill Lynch they knew exactly what they were doing and hoped to get away with it, and to put things in perspective most of the write downs are just that PROVISIONS FOR LOSSES that may occur. It is very likely the banks in actual fact will require quiet a bit of these assets that they have now written off.

    With the interest rates falling the repayment burden of the common man will also reduce thus making it possible for many to continue servicing their loans.

    The fall in Asian markets is just co-incidence as Global Investors are actually booking profits in Asia rather and taking there money out for now 3 months down the line we will be back to normal.

  12. 12 ZK
    January 22, 2008 at 14:02

    Steve: Sure, but punitive action against the Gazan civilians isn’t going to stop Hamas attacking Israel.

  13. 13 Mark
    January 22, 2008 at 14:06

    I looked up the word Stupid in my dictionary and the first definition listed was; European. Can’t Europeans put two and two together and ever get four. In one breath you worry that recession in the US will lead to worldwide economic disaster and in the next, you talk about imposing taxes on US exports to Europe to punish it for not signing up for a treaty which Europe has not complied with itself. Would you impose similar taxes on China, India, Brazil, and other developing economies who also didn’t invest in the expensive measures to reduce their carbon emissions? Europe seems to be spoiling for a trade war, even a full blown economic war with the US. It’s a war it will lose disastrously. It may be inevitable whether either side wants it or not.

    The reality of the US economy is that the government is deeply in debt, many major financial institutions hold massive loans which will never be paid off under current conditions but they will wind up owning houses nobody will buy while millions of families face becoming homeless having lost them, many citizens are deeply in debt on mortgages and credit cards facing financial ruin, consumer confidence is very low, people are frightened about losing their jobs and their personal finances are a mess, and there is a large trade deficit with huge debt and US currency held by other nations. Economists who projected the recent trends would continue out into the indefinite future such as the continued growth of China’s economy are daft. The situation is very unstable.

    The US government faces a stark choice. This is not the first time it has been confronted with this kind of problem even though the details are different every time. The underlying principle is always the same. The government needs to put massive amounts of money into Americans pockets quickly. A 120 billion dollar tax cut President Bush proposes in a 14 trillion dollar economy ain’t spit. What benefit such a tax cut will bring will be too little too late. The failure to add liquidity and create credit was the mistake which led to the stock market crash and great depression in 1929. The US government is in a unique position in the world. Its currency is the world’s currency like it or not. It’s the one place anyone and everyone can count on for political stability no matter what. If the US ever became politically unstable, it wouldn’t matter what the rest of the world did, the game would be over. This means that the government can, should, and must use the one trick in its playbook that always works as unpalatable as it is to people who call themselves conservatives (they ran up as much government debt when they controlled the White House and Congress earlier this decade as so called liberals did in prior decades.) And what is that trick? For the Treasury to print money like it’s going out of style. The US is due for a massive round of wage/price inflation. This will depreciate its value against foreign currencies even more and it should be measured by how effective it is driving the US dollar down. The US needs to deflate the value of the dollar against the Euro and the Pound Sterling by 50% to 80% of its current value. This will allow both the government and private individuals to pay down debt they otherwise couldn’t with cheap easy to obtain dollars. It will also force banks to absorb huge losses on the dumb loans they made with their lack of due diligence buying these otherwise worthless mortgages. 30 cents on the dollar for those loans is better for them than nothing and owning vast stockpiles of empty houses which BTW still require taxes to be paid, insurance, and maintenance even if no one is living in them.

    What will this do to the rest of the world’s economy? It will sink it. Exports to the US will dry up as their prices skyrocket. Airbus will go bankrupt as will many other businesses in Europe and China. The price of oil will go to $200 to $300 a barrel but for US citizens, they will be flush with cash and the US government will have to start using its oil reserves and adopt flex fuel engines in new vehicles as the law. Meanwhile, investments will flood into the US to buy cheap stocks, homes, and other investments while the opportunity exists because once economies around the world start to fail, their own currencies will drop like a rock against the dollar. In Europe, I think France’s economy is the most fragile and vulnerable of the large economies. It doesn’t matter whether exports to the US earn a country money directly or indirectly as exporters to other countries which do depend on exports to the US, the pinch will be felt universally. You can also expect a steep rise in interest rates which inflation always brings and the US stock market to do poorly for awhile until the immediate crisis is over and the economy stabilizes at a new equilibrium level.

    Many analysts feel that the reason the first President Bush was not re-elected was that the Federal Reserve refused to lower interest rates soon enough and this kept the US economy in recession longer than it should have been. This was the result of Alan Greenspan’s lifelong war against inflation, a battlefront he was reluctant to make even a modest retreat on until it was too late. If the Federal Reserve won’t act or its measures are ineffective, the Treasury must and its effects will be almost immediate. How long will the US government wait to act? Unless the Republicans want to concede the upcoming Presidential election right now, not much longer.

  14. 14 steve
    January 22, 2008 at 14:25

    ZK: Maybe if they were pissed off enough at having no electricity they might ask hamas to stop rocketing Israel? If mexico was rocketing Arizona, we would invade and stomp out Mexico. Cutting off electricity is a lot nicer than I would be.

  15. 15 ZK
    January 22, 2008 at 14:42

    The fact is that Hamas will attack Israel just for the sake of doing so. Their own people being starved to death with lack of food aid or frozen to death due to lack of electricity isn’t going to change that. It’s just another excuse for Hamas to continue attacking. I just can’t see what a blockade would do.

    In your scenario, Mexico has no reason for rocketing Arizona, and I’m certain they would stop if threatened by their own people. But Hamas isn’t like that and I don’t believe they’d listen.

    This is why we need Fatah back in control over the whole Palestinian Territories. At least Mahmoud Abbas and Salam Fayyad would be able to convince Olmert not to blockade Gaza. As it is, Fatah have no reason to do so, as they see this as being detrimental to Hamas, which they wouldn’t mind at all.

  16. 16 steve
    January 22, 2008 at 15:00

    ZK: Frozen to death on the mediterranean cost in January? Please ZK, come up with a better lie. The average daily temperature in that area is between a low of 45 and a high of 70 degrees fahrenheit this time of year in Tel Aviv, and Gaza is even warmer.

  17. 17 ZK
    January 22, 2008 at 15:16

    That’s not my point. The point is that regardless of whatever happens to the Gaza civilians Hamas won’t care. They’re just using the poor people as an excuse.

  18. 18 steve
    January 22, 2008 at 15:29

    Then ZK, for the good of Gazans, Hamas has to go, wouldn’t you agree? They clearly don’t want to live in peace with Israel, and not in their most delusional fantasy would they ever defeat Israel.

  19. 19 ZK
    January 22, 2008 at 15:36

    Certainly yes, Hamas needs to go. But Israel shouldn’t be allowed to do as they wish and punish the Gazans punitively just to get rid of Hamas.

  20. 20 john
    January 22, 2008 at 15:40

    Hi ZK.
    You hit the nail right on the head. No more No Less. The fact is that most extreme organisations do not care about the have nots, poor is a definition that does not always point.

    How many times have we heard that human shields have been used, the result being dead children and civilians, and sympathy for the terrorists. Our politicians know this, but carry on as if everything was so hard to understand. They do not ask us voters with who we sympathise. Our democratic right to vote does not mean a thing, it is the first step to put under guardianship, with no more rights. Its with whom they sympathise that counts, and it is not always for our good, but follows some party line, or financial interests.

  21. 21 Mark
    January 22, 2008 at 15:42

    The Palestinians voted for a government which will not accept Israel’s right to exist and openly supports rocket attacks and other attacks on it. This is tantamount to a declaration of war. Why shouldn’t Israel use whatever means it finds necessary to defend itself and its people. Too bad for the Palestinians, they should have thought about the consequences of electing a war government and the possiblity of losing that war when they voted. Now they have to live with the consequences. The only reason they do not use more force against the Israelis is that they are so weak, they can’t. Why should Israel accept anything which makes them stronger? The Palestinians should accept unconditional surrender to Israel and hope that somehow they will survive…while they still can.

  22. 22 steve
    January 22, 2008 at 16:50

    ZK: The reason why Gaza attacks Israel is because they think Israel is occupied land and want to get it “back”. The US won Arizona from Mexica, many mexicans view it as part of mexico and want it back. So why don’t Mexicans rocket Arizona?

  23. 23 ZK
    January 22, 2008 at 17:14

    Because the Mexican government isn’t stupid and has many more considerations than Hamas.

  24. 24 J. B. via email
    January 22, 2008 at 17:44

    It is apparent that peace will not reign in the Middle East until we there is an end to occupation and oppression. This means that Israel will have to withdraw from the W Bank and Jerusalem, and Gaza must be granted free access to the outside world. Then the two sides can discuss the long-term future of the region, whether two states or one state.
    J. B. Neilands

  25. 25 robertnyc
    January 22, 2008 at 21:33

    I just can’t get over at how many people are trying to predict if and when “the recession” will begin. I’m often reminded of a qupte I once heard that “one won’t know for sure when the recession hit until it is over.”

    The subject was our featured issue of the day (http://theissue.com/issue/9071.html).

    The Issue | http://www.TheIssue.com

  26. 26 John B. Min
    January 22, 2008 at 22:20

    Recession is a very relative term. For the value of currency, 50 years can be the difference between $100 USD equaling $10 USD. On a pure currency scale, without inflation, we all make more money.

    Problem is the inflation of prices, a necessary evil to our current economic protocol, is in a steady race against the value of our money. The small margin between price being greater than expendable cash can define recession versus stability.

    There is a mental measure that accompanies economic understanding. The real question is whether or not telling the people that recession is coming will help our economic or add to the strain.

    Do people spend money when scared? Do we need conversative spending? What is the best outlook for our future.

    I must say that economic growth cannot be sustained at the current standards. GNP (Gross National Product) is under constant forward mark wherein what we have now is never enough. 4-7% growth indicates the existing benchmark for national prosperity, but that growth is compounding.

    Akin to compound interest upon the interest, the global economy will eventually implode by sheer mass, unless we are able to regulate the production of goods and services.

    At the point where our consumer base is not suitable for the rate of manufacturing, what can be done? This escalates the economic stature of the world into a social application of population supply and demand. This is extremely dangerous with regards to dehumanization of people, who are inevitably the end user of the market.

    We must change the market structure to allow for economic success without the gluttonous need for expansion that knows no stemming.

  27. 27 Robert Moore
    January 24, 2008 at 18:23

    I find it strange that the ordinary citizens of the world have been struggling to make ends meet, living on reduced incomes, losing their homes and in extreme cases their lives for years, yet now when banks industry and goverments are feeling the thrust of financial hardship, billions of dollars can be found to help them out. Now the news carries stories that top people in the banking system may not get their bonuses this year and jobs may be lost.
    Well fat cats welcome to our world.



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