Today’s global economic climate is like some twisted experiment in Chaos Theory. The smallest, most insignificant events can lead to unpredictable and disastrous consequences. The micro-flutter of a butterfly’s wings can trigger a chain reaction that grows into a macro-catastrophe on the other side of the planet.
As the world slowly recovers from one of the worst financial disasters in history, the fate of even the most stable countries depends on the economic survival of the weakest. When the tiny city-state of Dubai nearly defaulted on their foreign debt at the beginning of the year, a shockwave reverberated across major international stock markets. A sheik in the Middle East bounced a check, in other words, and the overdraft fee was deducted from your 401(k) balance.
Now more than ever, we need to recognize which countries are standing on solid ground. On our map these are the green countries. The yellow sectors are not in immediate danger of collapse, but may be pushed over the edge the next time somebody tickles the global panic button. Finally, there are the red-zone nations teetering on the brink of ruin, just a butterfly’s sneeze from dragging the rest of us into the abyss.
At the turn of the century, the “Celtic Tiger” roared in a short-lived resurgence, thanks to booming property markets and debt-fueled spending. Today, Ireland’s double-digit unemployment rate is one of the highest in Europe.
The socialist ruling party blames a steep slide in tax revenues for jaw-dropping increases in deficit spending. Portugal’s debt load accounts for 85 percent of gross domestic product. The government has tried belt-tightening reforms, but even the sunniest economic forecasts call for an agonizingly slow death under crushing debt obligations.
The Spanish economy continues to shrink, and a strong rebound in labor-market growth is desperately needed. Experts predict that the national unemployment rate could peak at a staggering 25 percent. Among the youngest workers, the jobless rate has soared to over 40 percent.
ENGLAND, FRANCE, AND GERMANY
The color of money is green, unless of course you live in Europe, where the shared currency is printed in every color of the rainbow. Recovery across the “Euro Zone” has been slow and uneven. The largest economies in northern Europe—England, France and Germany—are reasonably stable, but their future is linked to debt-ridden neighbors known collectively as the “PIIGS” (Portugal, Italy, Ireland, Greece and Spain).
Italy’s Audit Court has cautioned city governments from borrowing money via risky derivative contracts that could weigh down local public budgets for generations to come.
Greece is struggling to meet debt repayments totaling more than €300 billion, which is roughly 120 percent of gross domestic product. Jittery European leaders have been forced into an uneasy pledge to bail out their neighbor in the event of a crash. If Athens collapses into ruin, a domino effect could spread across southern Europe and beyond.
The world’s largest supplier of oil and natural gas has been hurt by weak demand and low prices. Trading partners have serious questions about Mother Russia’s commitment to democratic principles and market transparency. This is the shakiest bet among the powerful “BRIC” bloc of emerging markets (Brazil, Russia, India and China).
Trade deficits and inflation fears have led to currency devaluation. Reports suggest that Vietnamese residents have begun stockpiling gold and U.S. dollars.
China is the 800-pound gorilla of globalization. The communist regime has permitted entrepreneurship and competition in cautious doses. At the same time, China nurses foreign appetite for their low-cost products by manipulating the exchange rate of their currency. China continues to emerge as an economic superpower.
HONG KONG, SINGAPORE, SOUTH KOREA, AND TAIWAN
The four “Asian Tigers” imposed tough reforms following a regional credit crisis in 1997. As a result, they were relatively well positioned to ride out the current storm. Their future is still dependent on China’s insatiable growth. Luckily, 2010 is the “Year of the Tiger” on the Chinese lunar calendar.
Once the undisputed economic champion of Asia, Japan has limped through two decades of near-zero growth. The worldwide financial crisis has led to a troubling drop in demand for expensive Japanese goods.
Crazy doesn’t count as an export when you are giving it away for free. The reclusive midget tyrant Kim Jong-Il has imprisoned this nation of 23 million on the brink of starvation. The meltdown of his totalitarian regime could result in a humanitarian disaster that overwhelms the resources of China and South Korea.