I believe I have wrote this and I’ll repeat this again – United States is still the world’s largest economy nation in the world and when she sneezes, every nation in this globe catches cold. With a whopping US14.3 trillion worth of GDP (gross domestic product), China is nowhere near this nation and only constitute less than one-fourth of United State’s GDP. Take away Japan and toss in European Union’s largest economy powerhouse Germany and new kid on the block India plus the Asean countries and you still can’t move this giant United States. Of course Japan’s economy goes hand-in-hand with United States’ prosperity and is now struggling not to sink.

It takes lots of courage to announce, no matter how silly it was that an export-oriented country such as Malaysia will not enter recession. And it’s amusing to hear out-dated story that Malaysia will attract foreign investors to relocate their manufacturing plants to the country because of the cheap labour cost. Heck, have they forgotten Vietnam or Cambodia? It’s sad that after so many decades all we can sell is our cheap labour, not being able to move up the value chain. Maybe that’s the reason why fresh graduates today can only command almost the same salary their father was asking decades ago. No wonder corruption is rampant, most probably because they need to put foods on the table *I think*.

The prosperous Germany is having serious problem because it depends on China of which in turn depends on United States. So U.S. feeds China which in turns feed Germany. In other words U.S. has trade-deficit of about $708 billion in 2007 and most of it went to China ($262 billion surplus) and Germany ($288 billion surplus). It was outrages to hear people screaming that everything is alright because the China and India’s economy engine is running so it’s perfectly OK for United States to go into recession. Make no mistake about it – China and India is not backup engine that could take over U.S. economy, at least not yet.

Countries such as Malaysia would be in deep trouble if the cash-cow such as EPF (Employee Provident Fund) is mismanaged. Thank God it is still in good health but it’s because private sector is generating good amount of income in terms of taxes to the coffers. Germany system was such that a whopping 45% of its people dependent on government. The country has multiple taxes ranging from 15% – 45% income taxes and social securities such as retirement, unemployment, health insurance and nursing care and this list continues. The taxes can be so high that there’s little motivation to work. Instead it’s more lucrative for Germans to rely on government benefits so if you’re unemployed then go and claim your benefits.

Did I hear people said the economy is recovering because the global oil prices went above $40 a barrel? The oil prices were up because of Gaza conflict and it’s just a temporary jump. It won’t goes beyond $45 because if it’s sensitive enough the production cuts of more than 4 million barrels per day by OPEC would have shown its magic, wouldn’t it? The fact is everybody is waiting for data to be released by various U.S. agencies going into the New Year. And this is one area that you should pay attention because the data are reflection of how U.S. economy is doing. The superstitious Chinese is predicting a recovery in 2009 simply because it’s a Bull Year. Well, there’re 12 months in 2009 so even if the stocks recover on the 12th month, they still can be right. But that would be another article for another time. For the time being forget about the stocks and prepare to celebrate the coming 2009 New Year, shall we? Happy New Year folks!

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December 30th, 2008 by financetwitter

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