The New Normal

   Major economies in Asia are booming, while those in Europe are stagnating and the U.S. struggles to regain its footing.
   Germany is doing well, for the moment, but weakness in other parts of Europe may infect Germany's export business as others can't afford to buy.
   In Japan, first quarter output grew by a 4.1 percent annualized rate, seasonally adjusted, and "the near-term outlook has improved considerably," according to the International Monetary Fund. And economic performance in China over the past three decades "has been remarkable," the IMF said, with economic growth this year expected to reach 7.75 percent. However, there are "downside risks from both external and domestic uncertainties," according to an IMF report.
   Meanwhile, in Germany, the outlook through 2014 depends heavily on "a gradual recovery in the rest of the euro area" as well as a reduction in uncertainty.
   In neighboring France, the economy "flatlined" in 2012, but there may be a gradual recovery over the rest of this year, the IMF said, even though the French economy may well contract by 0.2 percent this year.
   The hope of recovery, however, is little consolation to those out of work in France, where the unemployment rate is 11 percent and rising, with unemployment among young people rivaling Spain's overall rate of about 25 percent.
   The rate of unemployment throughout the 17 nations that use the euro as a common currency is 12.1 percent, according to Eurostat, the official number-crunchers for the European Union. The savings rate is up and the volume of retail trade is down, along with the rate of business investment.
   What does this say? Those without jobs can't buy stuff, and those who are working, as well as their employers, are cutting back on spending. Governments, too, are listening to a call for austerity.

   Economics 101:  Gross Domestic Product (GDP), the total value of goods and services produced in a country, is calculated by adding up consumer spending, company investment, government spending, and net exports. And consumer spending accounts for about 80 percent of the total.
   So if consumers without jobs can't buy, wary companies cut back on investment in additional production capacity, and exports decline because consumers in other countries are also in financial straits, the result is economic recession. And if governments also close their wallets, the consequence can be disastrous.
   What's the answer? Government spending, since government has the least worry about deficit as a way of spending our way to prosperity. That, of course, is a short term solution, to be used only until the economy recovers. After that, rising tax revenue can pay off the deficit.

   Bottom line: The Western World is trying to deal with a weakening economic environment, while the major economies of the Far East are thriving.
   Keep in mind, however, that much of the Asian economy depends on exports. And if the rest of the world can't afford to buy, we all go downhill.