World Trade Slump

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  • June 10, 2015 at 8:27 am #83958
    Young Master Smeet
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    This is an interesting blog post:

    http://www.georgemagnus.com/hey-what-have-you-done-with-my-exports/#more-1499

    Quote:
    World trade in goods and services amounts to roughly $22 trillion, which is close to 30% of world GDP. From the mid-1980s until the financial crisis, world trade grew at twice the rate of world GDP, fueling rising living standards worldwide. For developed economies, trade increased from 13% to 27% of GDP, while for EMEs, it rose from 20% to 40% of GDP. Before 2007 world trade grew at twice the rate of world GDP for about 20 years. Since the financial crisis, though, this 2:1 relationship has broken down. World trade has done no better than grow in line with world GDP.

    (One for the Luxemburgists, has capital run out of new trading markets?) interestingly:

    Quote:
    The sensitivity of world trade to world GDP, as suggested earlier, has weakened. In economic jargon, the income elasticity of trade has fallen, as shown in the following picture. Note that the decline began in the 2000s, though not materially until late int the decade and subsequently.

    This supports my pet theory that the crisis has it's heart in the Asian Tiger crisis, which Britain and the US dodged by basically printing money, making the 2008 affair worse.  Finally, grist for the Marxist mill is this:

    Quote:
    changes in the composition of global demand, in which investment spending both in western economies and in EMEs has been weak, relative to consumption, have most likely taken the edge off world trade

    the problem remains capital formation and investment.

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