How multinational companies help spread recessions
By Bob Simison – The Great Recession a decade ago was one example of how economic cycles across the world can move in parallel, a phenomenon that economists don’t fully understand. It could be that a common event, such as a surge in oil prices, affects many economies at the same time—or perhaps linkages between countries transmit economic shocks from one country to the world economy.
One such linkage is multinational corporations, according to Marcus Biermann, a postdoctoral scholar at the Catholic University of Louvain, and Chicago Booth’s Kilian Huber, who explore the role of multinationals in spreading the global recession by analyzing the ripple effects of one German bank’s struggles during the 2008–09 financial crisis.
Commerzbank was Germany’s second-biggest commercial lender behind Deutsche Bank. Losses on trading and investments abroad hammered the bank, especially after Lehman Brothers collapsed in September 2008. Commerzbank’s capital fell by 68 percent between December 2007 and December 2009, which forced the bank to reduce its aggregate lending stock by 17 percent. Biermann and Huber find that this pullback in credit available to German parent companies affected subsidiaries in other countries, thus helping to transmit the economic contraction. more>
Posted in Business, Economy, Education, History, How to, Technology
Tagged Business improvement, Capital, Chicago Booth, Financial crisis, Multinational, Recession, Skills
By Mike Dolan – History suggests governments and central banks would do well to sit up and take notice, but with policy coordination at its lowest ebb in decades, a coherent response is unlikely.
With almost $6 trillion wiped off the value of global stock markets since the start of the year and another 25 percent off already low oil prices, there is a real risk investor anxiety itself will be the catalyst for a world recession.
“When two players sit down at the board, they are unlikely to have a satisfactory game if one of them thinks they are playing checkers and the other thinks they are playing chess,” Jeffrey Frenkel  wrote.
By any measure, we are in historic territory. more> http://goo.gl/fnenki
By Noah Smith – “So, what really causes recessions?”
We really just don’t know the answer.
Some people — the types who think the market is self-adjusting and wonderful and doesn’t need any government help — believe that recessions are a natural, even healthy process. Maybe recessions are responses to changes in the rate of technological progress, or to news of future progress, or even bursts of creative destruction.
Others — the people who tend to think the market needs a little helping hand — believe that there’s something blocking the market from adjusting to the shocks that buffet it. more> http://tinyurl.com/p4yl25k
Posted in Business, Economic development, Economy, Education, History, Leadership, Media, Regulations
Tagged Business, Capital, Financial crisis, Industrial economy, Monetary policy, Recession, Regulations, Super regions
By Jonathan Cable and Kim Coghill – Euro zone factories sank deeper into recession in December as new orders tumbled, business surveys showed on Wednesday (Jan 2), a sharp contrast to continuing signs of revival in China.
“It’s pretty grim really,” said Jonathan Loynes at Capital Economics. “These surveys are pointing to a pretty deep recession. If the German industrial sector is contracting quite sharply it is pretty hard to see where growth across the euro zone as a whole is going to come from.”
Germany, Europe‘s largest economy, saw its crucial manufacturing sector shrink for the 10th straight month and at a faster pace, while French data showed a decline in all but one of the past 17 months. The slump in Spain deepened, while Italy’s index, although improved, remained below 50 for the 17th month. more> http://tinyurl.com/bkoxzz8
Posted in Business, Economy
Tagged Business, China, Eurozone, Germany, Industrial economy, Italy, Manufacturing, Recession, Spain, Super regions
Reuters – The euro zone is likely to have slipped back into recession in the current quarter, according to a survey published on Wednesday (Sep 5) that showed a seventh month of contraction for the bloc’s private sector as new orders dwindled.
The Purchasing Managers’ Index (PMI), published by Markit, showed the economic rot that began in smaller periphery members of the 17-nation bloc is now taking hold even in Germany, the region’s largest and strongest economy. more> http://tinyurl.com/8mjw3mf
Posted in Business, Economy
Tagged Economy, Eurozone, Financial crisis, Germany, Industrial economy, Manufacturing, Markit Group, Purchasing Managers Index, Recession, Super regions
By Paul Taylor – Fierce debate is growing in Europe over whether austerity or growth offers the best strategy to overcome the continent’s sovereign debt crisis. As if it were that simple.
The growth camp argues that synchronized austerity across Europe will only aggravate economic contraction, swell the ranks of the unemployed and make it harder for debt-laden countries to reduce their deficits and restore market confidence. more> http://tinyurl.com/7w2h8z6
Posted in Banking, Business, Economy
Tagged Austerity, European Central Bank, Financial crisis, Greece, Jobs, Recession, Sovereign default, Spain, Super regions