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Turning Point
for
World's Economy?
by
Michael A. Snyder
What does this decisive year hold? Read here the surprising answers!
T
HE W ESTERN INDUS–
TRIALI ZED
nations
are coming off 1984
from a welcome year
of moderate to amazing eco–
nomic growth.
But what will 1985
bring?
These nations have ridden oui an
18-month upward cycle since the
deep recession. Sorne economists
now look for economic downturn.
Others expect 1985 to continue eco–
nomic growth, though not at tbe
explosive levels in the Gross Nation–
al Product (GNP) seen in 1984.
Why conflicting predictions?
Because economists and finan–
ciers do not understand the real
causes of today's financia! troubles.
They are looking to material expla–
nations only- and often to the
wrong material sources for their
decision making.
This year harbors both potential
ills and explosive progress. Will the
worldwide economy lustily expand?
Or will we see crippling recession
begin again in the last two fiscal
quarters?
Nineteen eighty-five will also
February 1985
mark the time when the United
States once again becomes a
debtor
nation, owing more to other nations
than is owed to it. Since 1914, U.S.
banks have s toked the financia! boil–
ers of Europe and Asia with hefty
loans. What will happen now to the
United States with twin towers of
massive national deficits and nega–
tive balance of trade payments hov–
ering ominously overhead?
As Paul Volcker, chairman of the
U.S. Federal Reserve, declared last
May, "The net [positive] investment
of the United States overseas, built
up gradually over the entire postwar
period, will in the space of only three
years-1983, 1984 and 1985-be
reversed. The richest economy in the
world is on tbe verge of becoming a
net debtor."
To help us understand the con–
fusing financia! times we live in, let
us first look at 1984-a year of
stunning financia! growth.
What Happened in 1984?
Embarrassed economists quietly
pul doom-saying predictions in the
trash. U.S. consumers, contrary to
the same projections, led a surging
economy that rippled throughout
the world. U.S. production soared,
housing orders kept construction
crews busy and consumers enjoyed
a real rise in income.
However, outside U.S. borders
things were not so rosy as many
nat ions enjoyed only moderate
growth.
The Germans watcbed the
deutsche mark shrink to record lows
against an interest-fueled U.S. dol–
lar. Bri tons sighed as the pound–
once the world's economic standard
of exchange- bottomed out at a
mere fraction of its former worth
against the same U.S. dollar.
Europeans watched America
continue its economic turn toward
the Pacific nations of Japan, I ndo–
nesia, Australia and New Zealand.
The Socialist COMECON na–
tions-the Soviet counterpart of the
European Communi ty- enjoyed
modest economic growth, but the
Soviet Union in particular continued
to worry about its agricultura! ability
to provide food for more than 268
million people. Weather has brought
a mixed blessing for Soviet crops in
recent years.
Even the Latín American debt
crisis seemed to take a needed
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