OPINION> Commentary
|
OPINION> Commentary
|
|
Americans find 2008 worst year
(China Daily)
Updated: 2009-01-03 07:57
This wasn't just a bad year for the economy. By some measures, it was the worst year any American under age 70 has ever seen. The loss of jobs in the US may be the biggest since the end of World War II. This year's declines in stock and home prices haven't been exceeded since the Great Depression. The slump in holiday spending may set a record; foreclosures already have. Credit markets seized, halting the longest expansion in consumer purchases. Europe and Japan also sank as US demand faltered, marking the first simultaneous recessions since World War II ended. High-flying emerging economies, such as China and India, weren't immune, signaling the world economy is just as interconnected in bad times as in good. "It was the year we wish it wasn't," said Harvard University professor Kenneth Rogoff, a former International Monetary Fund chief economist. "The global scale and magnitude" of the financial crisis and recession "is much greater than those we've seen before". The National Bureau of Economic Research this month determined the US economy had been contracting for 12 months, already the longest downturn in a generation, with no end in sight. The length and depth of the slump leave even the most experienced economists at a loss for superlatives. "We've never seen this before and we don't really have a sense of where the bottom is going to be," Nobel laureate economist Edmund Phelps, 75, said. Housing led the downturn. Sales of single-family homes dropped in November by 7.6 percent, the biggest decline in two decades, to an annual rate of 4.43 million, a 12-year low. A 13 percent decline in the median resale price from a year earlier was likely the largest since the 1930s, according to the National Association of Realtors. The share of mortgages 30 days or more overdue hit an all- time high 6.99 percent in 2008, and the proportion already in foreclosure jumped to a record 2.97 percent, according to the Mortgage Bankers Association, whose statistics go back 29 years. Problem loans morphed into toxic securities that brought down Wall Street banks and forced more than $700 billion in write-offs worldwide this year. Bear Stearns Cos, which survived the 1929 crash, collapsed in March. Lehman Brothers Holdings Inc, founded in 1850, filed for bankruptcy in September. Merrill Lynch & Co sold itself to Bank of America Corp to avert a similar meltdown. "There's no more Wall Street," Alan "Ace" Greenberg, former CEO of Bear Stearns, has declared said in a Dec 8 Bloomberg Television interview. Panicked lenders froze credit to businesses and consumers, who slammed the brakes on spending. Consumer spending dropped 3.8 percent in the third quarter, the biggest drop since 1980. Business investment in equipment and software fell 7.5 percent, the most since 2002. The Federal Reserve opened a new era this month by cutting its target interest rate to as low as zero for the first time in its 95-year history and signaling it would buy unlimited amounts of securities to jump-start borrowing and spending. The holiday season was a bust, as November and December sales probably dropped as much as 2 percent, the most since at least 1969, according to the International Council of Shopping Centers. More than a dozen retailers, including Circuit City Stores Inc, Linens 'n Things Inc, Sharper Image Corp and Steve & Barry's LLC, sought bankruptcy protection in 2008. "Every aspect of the industry has been gutted," said Richard Hastings, consumer strategist at Global Hunter Securities LLC of Newport Beach, California. US corporate profits probably skidded for the sixth quarter in a row in the final months of 2008, the longest streak in at least 20 years, sending the stock market reeling. The Standard & Poor's 500 Index, down 39 percent for the year, and the Dow Jones Industrials, down 35 percent, are poised for their worst year since 1931. Some $7.6 trillion of investor wealth disappeared. The statistics that matter most to many Americans, those on jobs, were also the worst in decades. US job losses this year, 1.9 million through November, may finish the year above 2.3 million, the most since 1945. The recession spilled over US borders to infect most of the industrial world. The 15-nation euro-area is in its first contraction since the single currency started a decade ago, while Japan's economy will probably shrink at an annual 12.1 percent pace this quarter, the sharpest drop since 1974, estimates Barclays Capital. The worst part about the 2008 economy, economists say, is that the deterioration is likely to last well into the new year. "The recession will stretch for at least the next six months,"said Marc Faber, managing director of Marc Faber Ltd. "2009 will be a write-off in terms of economic activity." Agencies (China Daily 01/03/2009 page4) |
