In March, the OECD was projecting 4% global economic growth for 2015. On Wednesday, it slashed that to 3.1% -- which would be less than the 3.3% growth the world saw last year.
Two of the largest engines of the world economy -- United States and China -- have slowed down.
China simply wasn't able to sustain its incredible growth, and that has had ripple effects around the world. Manufacturing and exports have cooled, and the real estate market isn't the slam dunk that it once was.
In the U.S., the strong dollar has been a drag on growth. American companies are losing money overseas and foreigners aren't buying as many U.S. goods since they appear more expensive. The OECD slashed its U.S. 2015 growth projection from 3.1% to 2%. If that comes to pass, it would be a dip from last year's 2.4% GDP.
If Greece fails to reach an agreement with its creditors, Europe will feel the strain again, especially in business confidence. While Germany's economy remains the lynchpin, overall unemployment is 11.2% in the euro area.
William Pesek talks about China repeating the mistakes of South Korea. South Korea's economy crashed in 1997 under the weight of debts compiled by the country's family-owned conglomerates. The government's strategy for dealing with the fallout consisted of shifting the debt burden to consumers. South Korea household debt as a ratio of gross domestic product is 81 percent. That far exceeds the ratios in U.S., Germany and, at least for the moment, China. As a result, Korea has been particularly susceptible to downturns in the global economy, which is why the country is now veering toward deflation.
South Korea's per capita GDP merely doubled since 1997. If China followed the same path then China's per capita GDP PPP (Purchasing power parity) would go from about $13000 to $26000 and the overall GDP PPP would be about $35-40 trillion.
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