Log In


Reset Password
News Education Local News Nation & World New Mexico

A global financial crisis remains

While the American economy recovers, giants such as China and Japan continue to struggle

LONDON – No one said the recovery from the global financial crisis would be easy, and 2014 provided that in spades.

While the U.S. economy, the world’s largest, is showing clear signs that its recovery is self-sustaining, the picture elsewhere is far less rosy entering 2015.

Concerns remain over the Chinese economy, the world’s second largest, while Japan, the No. 3, has fallen back into recession despite a raft of stimulus efforts. And in Europe, economic stagnation appears to be the new status quo – despite the welcome news that Greece’s savage six-year recession is over.

In the U.S., the Federal Reserve has called time on its monetary stimulus after six years and has hinted that it could start raising interest rates in 2015 from near zero percent. As a result, the dollar was in the ascendant on foreign exchange markets, and Wall Street investors grew increasingly optimistic over the economic outlook – the S&P 500 index hit a series of record highs.

Firms also appeared to be caught up in the growing optimism. After years of retrenchment that saw companies accumulate cash reserves, U.S. companies once again are taking risks. There were a number of headline-grabbing deals in 2014, including Facebook’s $22 billion buyout of WhatsApp.

Elsewhere, the legacy of the global financial crisis remains, notably in Europe, where the European Central Bank is considering a larger, Fed-style stimulus to shore up the ailing economy of the 18-country eurozone and avoid a debilitating bout of deflation – falling prices further can weigh on growth.

Russia is one European economy that’s ending 2014 in far worse shape than how it started the year. After a collapse in oil prices and sanctions imposed on Russia for its actions in the Ukraine crisis, Russia is heading into recession, and its currency – the ruble – has plunged.

For most of the rest of the world, the fall in oil prices to five-year lows below $65 a barrel is an unexpected economic boon. Consumers are feeling the benefit at the pump almost immediately, while businesses may have extra cash available to invest.

Many factors were behind the oil price decline, including the slowdown in growth in China. Supply factors played a role, too, with production growing in countries such as Iraq and Syria.

Despite the boon from lower oil prices, developing economies had a volatile year. Many of their markets were roiled ahead of the Fed ending its stimulus – since much of the money created by the stimulus had been funneled by investors into high-yielding developing markets. That market turbulence likely is to persist next year, too.



Reader Comments