World Economy, Recession, and Investment Opportunities

Reading the World Economy

First Published: May 31, 2009

While there is a lot of talk about the current economic strife affecting a large part of the globe, it is natural that there will be different levels of concern in different nations. This is a global recession, and it is affecting people on each continent. But when one says “global”, does that mean that everyone is in the same boat? Well, no, of course not. There are different levels of indebtedness and different prospects for recovery in just about every independent economy. How countries have prepared for a time just like this will affect how able they are to deal with it. Some countries are not, for their purposes, in recession at all.

Reading the finance pages of daily newspapers, it can be tempting to try and keep score, as we watch one economy after another slip through the trapdoor. When one country goes it is natural to look at its near neighbours and its historical allies and trading partners in order to see if they will follow – or how their own plans will be affected. It is easy to see, in retrospect, how the major world economies slipped into recession, as credit was given in too cavalier a manner to people who were ill equipped to pay it back. There are some countries who have fallen in a secondary wave because their industries have been hit by a reduction in orders from recession-bitten nations.

Then there are other countries who have managed to remain as yet untouched by the grim hand of recession. It is interesting to look at these countries and see what they have in common – usually it is the fact that they have strong infrastructures, an industry that the rest of the world relies on even in times of financial privation, or have been more or less isolationist from a trade point of view. Some combination of the above is a recipe for being largely recession-proof – but at the cost of being less likely to profit from a global boom.

Reading the recession is worthwhile, whatever your reasons for doing it. If you are a potential investor, it helps to know what countries are ripe for investment opportunities and which are to be avoided at all costs. If you are concerned about your own position within an industry, it can help to see how that industry is faring worldwide. It is also true to say that the first people to see (and maybe profit from) th e end of the global recession will be those who follow the financial news from all over the world.

Although this world is split up into hundreds of countries, and those self-same countries are often devolved into administrative regions, there are generally global consequences to local issues. You may not know today how a drop in the price of a certain commodity will affect your own life, but by watching the stories as they play themselves out you can give yourself a firm grasp of the issues that may not matter right now, but will begin to pretty soon.