Bloomberg the Company

Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Follow Us

Industry Products

Businessweek Archives

Name That Bubble


Here’s a little quiz for you. Which of the following quantities grew the most between 1998 and 2007?

A) Market value of owner-occupied U.S. homes

B) Dollar amount of debt owned by U.S. households

C) Dollar value of global trade

Answer below. Don’t peek.

The answer, of course, is C.

According to the International Monetary Fund, the dollar value of global trade rose by 150% from 1998 to 2007

Over the same period, the market value of owner-occupied U.S. homes rose by 132%, and the dollar amount of household debt rose by 135%.

I could twiddle with the start and end dates to make the rankings come out a bit different, but the point would remain. Global trade rose at roughly the same amazing pace as household debt and housing.

We had a credit and housing bubble--does that mean we had a global trade bubble? I think so. Here's a chart of global trade as a share of global GDP.

As of October 2008, the IMF was forecasting global trade as 33% of the global economy in 2008, up from 23% in 1998. That's too big a jump.

If the 'correct' number is closer to 28%, then global trade needs to fall by roughly $3 trillion to get back into line.


The Aging of Abercrombie & Fitch
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus