Dr. Yea-Mow Chen gave us a guest lecture on global economics and the current developments in the world. According to his outlook the economy is functioning but their are still some problems. Europe has been through some major issues, especially with Greece back in May, but the EU came in to save Greece in order of preventing a domino effect throughout Europe. However, Greece is not the only problem area in Europe as Spain is facing around 20% unemployment and 40% unemployment amongst young adults. Overall, in the first half of 2010 there has been a 5% increase in global GDP, but most of this increase is from developing countries and less from the advanced economies. This is mostly due to the amount of debt by advanced economies, and now many of the bigger countries are de-leveraging by attempting to cut government spending.
One of the other issues he talked about was if the economy was recovered from its recession, if it was going to have a double dip and enter into another recession, or if the world is entering a Great Depression. Dr. Chen believed we were going to have a double dip and enter another recession. He believed this would occur because of inadequate spending by the governments. As the focus has been to cut spending consumption has decreased which brings in the threat of deflation. Some other signs he pointed to was that 96 small commerical banks have closed this year, property values have decreased around 40%, and loans in foreclosure are still rising. In listening to Dr. Chen I do think we are at risk of entering another recession as opposed to a Great Depression. I also believe that as the economy continues to plod along the idea of free trade may drastically change because I see more tariffs placed on imports in order to boost domestic markets.
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