Global Investing

CHAPTER 2The GlobalEconomy

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Global Economic Evolution

If we go back only 20 years or so to the turn of the century, the total value of goods and services produced around the world (gross domestic product, GDP) stood at the equivalent of US$33 trillion. The world economy has tripled since then and is expected to exceed US$100 trillion in 2022.¹ That is an enormous increase, and it is even more impressive when you consider the fact that we suffered three global recessions during that time: the tech bubble, a global financial crisis, and a global pandemic. Admittedly, a majority of the growth in GDP has resulted from the seemingly endless liquidity provided by central banks around the world that has served to drive interest rates lower and help sustain economic growth. In fact, of the $67 trillion increase in world GDP since 1999, an estimated $44 trillion resulted simply from rising prices (inflation), whereas the remaining $23 trillion could be considered “real” economic growth coming from actual increases in production.² The infinitely complex workings of a world economy driven by the interactions of nearly 7.8 billion people creates a massive pool of investment opportunities, not to mention an equal number of potential hazards for an investor's portfolio. This chapter gives the reader an overview of the global economy, where it is going, and what the implications are for investors. As we look to the future and try to gauge where the global economy is headed, ...