From the mind of JPMorgan economist Jim Glassman:
"The housing, credit debacle was supposed to be a US issue. So, how come virtually every economy on the planet is downshifting—and has been since last winter—and by proportionately similar amounts? The rhyme.
Two reasons in particular stand out. First, the speculative surge in oil prices—how else can a $100
dollar plunge in the per barrel price of petroleum since July 15 be explained?—hit everyone, everyone who consumes more oil than they produce. If the price of oil were a reflection of fundamental demand, then a drop in the price of oil would cushion but not boost demand. But if the price is the reflection of outside—financial speculation—it’s a different matter.
Second, the transformation of manufacturing in this past decade that “outsourced” many factory jobs to east Asia meant that economies like China that have specialized in the assembly business have inherited the natural volatility of the goods-producing economies, reflected in inventory behavior. In other words, the outsourcing of factory jobs also outsourced the natural volatility of good to the developing economies. The slowdown in the developed economies then radiates through the developing economies as well."
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