Article Review #3

In this article, David Stockman returns to the idea that the economy is spinning out of control, even going as far as to claim that the global economy is drifting into the next recession. He claims that because of the deflation in commodities prices, an idea that we have seen discussed in past article reviews, along with capital spending (a business spending money on fixed assets, or assets that are not likely to be quickly converted into cash), the economy has gone into a tailspin. He also mentions that world trading has led to this economic disarray, something I found confusing as world trade is generally seen as a good thing. As discussed in the Mankiw book, trade can make all parties involved better off, and more specifically speaking, trade can help countries attain goods they are unable to produce in exchange for goods they are able to produce, making all countries involved better off. If this is true, then my question is why does Stockman argue that world trade is leading into a global recession? Next, Stockman argues that it is the “credit binge” that has led us into this looming recession. This argument makes more sense, in that the credit binge entails individual households essentially borrowing money they may not have from banks in the form of credit on credit cards. This credit frenzy has led to a huge amount of debt in recent years.