2010s - Economics

Economics

The Great Recession, which began in the year 2007, officially ended in mid-2009, though unemployment has failed to recover. In the United States, a Gallup poll found that more than half of Americans believe the country is still in a recession. Some economists believe that the 'recession' has not only continued, but is actually a mild economic depression much like the Great Depression of the 1930s. There is an energy crisis in the world due to the protests and riots in the Middle East and North Africa. Production of conventional crude oil plateaued in 2004 at 74 million barrels per day. Because new sources of energy are still being developed, industrialized nations are still vulnerable to loss of supply, such as the relatively small output that was shut off during the Libya civil war, and the failure of releases from strategic reserves to stem high prices. The International Energy Agency has found that global crude oil production reached its apex in 2006, meaning production from currently producing oil fields is forecast to drop and future oil supply projections represent unconventional sources of crude, a prediction it admits is less than certain. Another school of opinion attributes the high energy prices in the western world to government regulation.

A sovereign debt crisis in Europe began in early 2010, and the Greek government admitted that it was having difficulties servicing its large sovereign debt. Speculation abounded that it would be unable to make required bond payments due in 2010. causing the Euro to drop in value versus the US dollar and pushing the Greek/German yield spread to almost 4%. In May 2010, Eurozone leaders agreed to a billion euro three year rescue package. However, by the following year, the country's fiscal condition had not improved. In the summer and fall of 2011 bond yields for Italy and Spain spike above 6 percent. China becomes the second largest global economy, surpassing Japan. China currently faces out-of-control inflation, a real estate bubble, and troubling demographics that will lead to a shrinking labour force, all of which could lead to a collapse of the Chinese economy.

Debt struggles plague advanced countries. The crisis in Greece fuels growing fears of contagion. Beyond Greece, European countries such as Ireland, Italy, France, Spain, Portugal, Cyprus, Austria, Slovakia and Slovenia see their credit rating downgraded. In August 2011, the S&P downgrades the United States' credit rating from triple AAA to AA-plus. In September 2011 Italy is downgraded by S&P from A+. Japan also sees a rating downgrade due to debt burden. In October 2011 European leaders devised another Greek debt agreement in which private banks that loaned Greece money agreed to voluntarily write down or revalue Greek debt by 53.5%. Overall losses for private bondholders would be above 70 percent when accounting for the new bonds' longer repayment period and lower interest rate. The size of the European Financial Stability Facility was increased from €440 billion to €2 trillion.