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First there was the bursting of the housing bubble-over a year ago. Then, within the past year, the financial bubble followed. And now we are beginning to witness a third bubble bursting that could be the worst of all-a world trade bubble.
The figures are alarming. For January 2009 Japan's exports were down a whopping 47 percent; Germany's exports fell 20 percent; China's exports were down 17.5 percent; and U.S. exports fell 16.4 percent. According to the World Trade Organization, global trade volumes are expected to drop by an average of 9 percent in 2009, the sharpest fall since World War II-that was 70 years ago!
In April 2009 world leaders of the G20 nations met in London, amid some rabid protesters, to discuss the economic crisis and ways to avert a possible trade war. The G20 represent the financial leaders of 19 of the world's largest national economies plus the European Union.
Now comes news of the economic dire straits that Russia and some Eastern European countries are in. Nations such as Austria, Germany and Italy are also deeply exposed financially, having lent to many Eastern European nations that now appear unable to pay them back.
A recent Wall Street Journal article stated: "The economic distress and currency tumbles in Eastern Europe will 'trigger a write-down into the Western European banking system,' says Hans-Guenter Redeker, a currency strategist at BNP Paribas in London. 'The question is how much.' He says a conservative estimate would be about 20% of the total invested by such banks in the region. Moody's estimated the total at $1.3 trillion at the start of 2008" (Marc Champion, Joanna Slater and Carrick Mollenkamp, "Banks Reel on Eastern Europe's Bad News," Feb. 18, 2009).
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