Global Recession

The world is falling into the first global recession since World War II as the crisis that started in the U.S. engulfs once-booming developing nations, confronting them with massive financial shortfalls that could turn the clock back on poverty reduction by years, the World Bank warned Sunday. The World Bank also cautioned that the cost of helping poorer nations in crisis would exceed the current financial resources of multilateral lenders.

Beyond tensions over Iran and refinery problems, the recent jump in gasoline prices stems partly from an encouraging sign: The economy is improving. The demand for crude oil has risen as the recovery from the severe global recession has picked up steam in the U.S. and abroad. That, in turn, has helped fuel higher prices at the pump, economists and industry analysts said. "A lot of what drives prices is projection of future demand," said Carl A. Larry, president of Oil Outlooks and Opinions, a research and consulting firm.

The world's developed countries, hard hit by the financial crisis, have probably tipped into a recession that will last at least through the first half of 2009, according to projections issued Thursday. The Paris-based Organization for Economic Cooperation and Development forecast that economic output would shrink 1.4% this quarter for the 30 nations that make up its membership -- and keep contracting until the middle of next year.

Stock markets around the world fell sharply as investors feared that a European debt crisis was coming to a head and threatening to tip the global economy into a recession. The market declines were driven largely by reports from Germany that its leaders were preparing for Greece to default on its bonds but were struggling to reach a consensus on how to handle it. The news sent German stock markets down 4.1% on Friday, similar to the declines elsewhere in Europe. Leading U.S. stock indexes followed, with the Dow Jones industrial average experiencing its worst day in more than three weeks, wiping out gains made earlier in the week.

Economics professor Benjamin Jerry Cohen will discuss the prospect of a global recession and its effect on the United States during a lecture at Ventura College on Wednesday. The free talk will begin at 7 p.m. in the campus theater. Cohen teaches international political economics at UC Santa Barbara. For more information, call 654-6400, Ext. 1217.

The United States and its rich allies looked set to agree Sunday on a massive aid program for Russia but faced an uphill task sorting out their differences over ways to avert a threatened global recession. The Bush Administration, worried that weak growth overseas could undermine the fragile U.S. recovery ahead of November elections, has strongly urged its partners in the Group of Seven to pump up their sagging economies. But neither Japan nor Germany seemed to be listening.

Is the world heading into a serious global recession? Seldom has it been more crucial for the world's economic policy-makers to be able to answer that question, but at the end of their semiannual meetings last week, finance ministers and central bankers from the United States and its major economic allies were far from agreement.

A stark indicator of what is about to happen to the U.S. and world economies in the wake of Tuesday's attacks on the United States was visible at the ports of Los Angeles and Long Beach as ships were held outside the docking areas of the nation's largest port complex so vessels could be intensely inspected. Such heightened security is necessary, but imposes a special tax cost on goods and services moving across the world.

President Bush had one word Wednesday to describe the state of the economy, and two words of advice. The economy? "Lousy," he said. How, he was asked, could his audience help him meet his goals? "Vote often," he cracked.

When Lebo Malepa decided to rent out his bedroom and another room in 2003, his economist father doubted his son's ambitious vision for tourism in unlikely Soweto township. "Soweto is a township full of energy and full of trendsetters," Malepa said. "When I started my business, I was convinced I was going to make it happen. " Malepa's enthusiasm, hard work and ability to spot a market niche helped Lebo's Soweto Backpackers expand dramatically. He now has 57 bicycles and two tuk-tuks (three-wheelers)

When Lebo Malepa decided to rent out his bedroom and another room in 2003, his economist father doubted his son's ambitious vision for tourism in unlikely Soweto township. "Soweto is a township full of energy and full of trendsetters," Malepa said. "When I started my business, I was convinced I was going to make it happen. " Malepa's enthusiasm, hard work and ability to spot a market niche helped Lebo's Soweto Backpackers expand dramatically. He now has 57 bicycles and two tuk-tuks (three-wheelers)

The resurgent tide of international trade lifted nearly all major U.S. seaports this year, but none is gaining freight and jobs like Los Angeles and Long Beach, the nation's busiest cargo complex. Challengers competed harder than ever this year for cargo traffic that still trails the 2006-08 boom preceding the great global recession. They were aided in their efforts by retailers that spread their goods through more ports for greater flexibility. But sometimes size really does matter, as well as the local ports' relative proximity to Asia, trade experts said.

Whatever else they've thought about their much smaller neighbor to the north, Americans have almost never looked to Canada as a role model. Indeed, during the long, bitter push to revamp the U.S. healthcare system, opponents repeatedly warned that, if we weren't careful, we could end up with a medical system like Canada's. But on healthcare, as well as on such critical issues as the deficit, unemployment, immigration and prospering in the global economy, Canada seems to be outperforming the United States.

Three decades ago, the Yasnogorsk Machine-Building Factory stamped out thousands of pounds of steel and iron into parts for wagons, pumps and locomotives for Russia's mining industry. Now two-thirds of its stamping and welding machines have been shut down. The old Soviet-era equipment is rusting, and fewer than 280 employees clock in every day -- from a peak of 7,000. The factory that had kept this town alive since the days of the czar is on its last breath, the victim of a global recession that has shaken Russia to the core.

Finding the discount on a new Renault hatchback irresistible, lawyer Roni Figueiro of Porto Alegre, Brazil, took the plunge, plunking down $22,200 last week for the first new car he has ever owned. Prodded by government incentives, consumers like Figueiro are not just keeping the Brazilian economy afloat amid the global crisis but propelling it toward a robust recovery next year, according to a survey of Brazilian economists made public by the central bank last week. The expected recovery is another example of how things seem to be breaking Brazil's way. Today, the nation will find out whether Rio de Janeiro will host the 2016 Summer Olympics.

Addressing leaders of the world's most important economies early Thursday, President Obama wasted no time in proclaiming a new day for U.S. policy on climate change. "I know that in the past, the United States has sometimes fallen short of meeting our responsibilities," he said. "So let me be clear: Those days are over."

A private measure of the manufacturing sector's health for January rose from a record low but still showed the 12th straight month of contraction in a global recession. The Institute for Supply Management, a trade group of purchasing executives, said its manufacturing index rose to 35.6 in January from an upwardly revised 32.9 in December. The January reading was above the 32.6 that economists had expected. Any reading above 50 signals growth, while a reading below 50 indicates contraction.

With the arrival of 1992, it is once again time to look over the coming year's investment strategy in light of both national and global economic conditions. In the United States, I expect a second leg to this recession. This is not a typical postwar slump driven by inventory building, and the as yet unresolved debt explosion of the past two decades will continue to plague the U.S. and foreign economies.

Stocks fell in Europe and Asia on Friday, extending the MSCI World Index's longest weekly losing streak since March, as reports on retail sales and the service industry added to concern that the first global recession since World War II will persist. U.S. markets were closed for the Fourth of July holiday. Metro AG, Germany's biggest retailer, slipped 2.5% as European retail sales dropped more than economists estimated. Seven & I Holdings Co.

Reeling from a rash of drug-world violence and the effects of the global recession, Mexico's tourism is now taking a beating from the swine flu outbreak that is suspected in the deaths of 149 people and prompted the closing of theme parks, soccer stadiums and other public places. The country's benchmark IPC stock index plunged 3.3% on Monday, and the peso slumped as the ramifications of the outbreak filtered through the business and tourist community.