An Update to Rerurm Novarum: The Global Economy Section (A Doomsday Scenario)

It has been two years now since I first wrote the rough draft for Rerum Novarum: Of New Things, and a New World. Since then, the trends outlined have generally continued to proceed as predicted (which will be outlined in greater detail in another post): The US has a new President whose policies differ radically from those of George W. Bush, the global economy has entered a major recession, and the international order of the post-9/11, post-Cold War period is generally acknowledged to be failing.

It has been my opinion that beyond predicting the failure of the foundational trends of the world order, it is impossible to determine with any certainty what path the world may take after the failure of these trends—what the new order which would emerge would look like. This is a chaotic period, and chaos is inherently unpredictable. Nevertheless, I thought that this would be an appropriate time to outline my thoughts on where the global economy is going between 2009 and 2011.

I caution the reader that I am nothing approaching an economist: my prediction that the global economy would enter a recession was based on a theory derived exclusively from studying patterns in how history unfolds; it says that in major events, major trends end in close proximity to one another. In order for the world order to change, it was necessary for the economy to enter a recession—and so it did, apparently.

That said, let us get to my speculative prediction—for it is just that, an opinion on the future, for I have no real data to back it up.

Shockwaves Across the Globe: A Global Depression

At the outset, it is important to understand that I think of this crisis in terms of shockwaves—it seems logical to me that an economic recession in the US will ripple to other economies, weakening their foundations and leaving them vulnerable to whatever fundamental problems lurk within their economy; when the economies of these countries are damaged, they will ripple to the US, which will cause damage to the US economy again. Each country sends out a shockwave, which when they detonate, can weaken the economies of other countries to the point where they will also send out shockwaves. It is only when the shockwaves are either too weak to greatly affect the economies of a country, or the economy has shrunk so low that there is not much left to weaken, that the crisis will finally end.

Now, many people have come to believe that the US will move out of recession by the end of 2009—and they might even be correct, if they are only looking at causes and effects within the US. The problem is, this recession is global in nature and the damage it does to other countries will ripple back to the United States. As said before, I see the recession in each country sending out a shockwave, which detonates the foundations of other countries.

Specifically, this is how I see how this crisis has and will progress, as marked by the following Stages:

Stage I was the detonation of the US economy in 2007/2008, with the financial and housing bubbles bursting, sending out a shockwave to the rest of the world. This shockwave hit the rest of the world, and detonated, either destroying or loosening the foundations of many economies, and resulting in Stage II. Stage II occurred in the summer and fall of 2008, when those countries who were weakened by the US shockwave, fell victim to fundamental problems in the economies of themselves and their neighbors, emitting their own shockwaves. Stage III is presently coming to a close, and occurred in the last quarter of 2008 and the spring of 2009, when these shockwaves hit the US, which produced its own shockwave again, which rebounded and hit these countries as well, weakening the economies of everyone further. In this stage, as a result of these effects, the economies of Europe, Japan, the majority of Latin America, and the US all officially entered a major recession.

It is my belief that the entry into recession by these powerful economies will produce a quite large shockwave, which will hit the last large economic growth engine in the world: The People’s Republic of China. This will mark Stage IV, when the economy of China begins to collapse in response to drastically decreased demand from its most important trade partners. The collapse of China’s economy will probably trigger a collapse in the economies of East and Southeast Asia, with the majority of countries in both areas entering a state of economic recession. This collapse will trigger a large number of shockwaves, which will reverberate around the world, resulting in Stage V, when the recession deepens in most major economies, probably to the extent of a Depression. Stage VI will be the time of recovery from this event.

I believe Stage IV, the collapse of China’s economy, (which will trigger the collapse of the remainder of the world economy), will probably occur sometime between November 2009 and mid-2010. This timeframe should give plenty of time for the effects of recession in the US, Latin America, Europe, and Japan, to translate to China and make themselves felt. This collapse of China’s economy need not be marked by negative GDP growth, it should be noted. Rather, collapse is used in the sense that the situation in China will be restricted and unstable, due to the fact that large masses of people looking for work will inevitably begin to challenge the authority of the Communist government. “Collapse” is used because while annual economic growth may continue, at a rate of between 3—5%, it will be growth driven primarily by static domestic consumption, and not international demand. Thus, China’s large export industries will have collapsed; the very industries that marked China’s economy as a driver of global industrial economic growth severely diminished. So, China’s section of the global economy will have largely “collapsed,” with the resulting aftershocks.


All this is quite frivolous speculation of course—but it will be interesting to see how things actually turn out. There is a certain logic to the predictions made here, and it will be interesting to see why they turn out to be incorrect—and even more interesting if they actually turn out to be correct.