UN report predicts hard landing for dollar in 2009

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From Fazle Rashid
NEW YORK, Dec 1: The annual report on the world economy under the aegis of the United Nations to be released today predicts that the US dollar risks a hard landing in 2009, a report in a reputed paper said. The UN team of economists had earlier prognosticated that the US economy would face a downturn and it would in its sweep "would bring the global economy to a near standstill."
The same report said the US debt position is approaching unsustainable levels. Accelerated fall of dollar, as is being feared by the UN, would further tear apart the global economy now languishing in pain. Investors might renew their flight to safety, though this time away from the dollar-denominated assets thereby forcing the US economy into a hard landing and pulling the global economy into deeper recession, the reputed newspaper quoted the UN report as saying.
The release of the report, a combined effort of the UN department of Economic and Social Affairs, UNCTAD and the regional bodies, has been advanced by a month in the wake of the global economic downturn. The UN report says with the spread of the financial crisis beyond the US there has been "a massive shift of global financial assets into US treasury bills, driving their yields almost to zero and pushing dollar sharply higher". But at the same time US's external debts have risen to new heights prompting fear that it could precipitate collapse of dollar.
The UN report decried the propensity of almost exclusive reliance on the dollar and strongly called for creation of a globally backed multicurrency system. The head of the UN team suggested easing of global economic pain through a well coordinated stimulus packages.
Now that the government has spent nearly $1.4 trillion to stabilise the financial system, economists and policy makers and the President-elect are trying to figure out how much must be invested in a stimulus package to stop recession and what that money should be spent upon, the New York Times (NYT) in a report said today.
The US economy is contracting at 4.0 per cent annual rate. To offset this contraction the economy would require a fresh infusion of at least $400 billion. Even this may not restore the health of the economy, the NYT said. The hope is that the next stimulus package will at least move the economy from the negative to zero growth. Zero Growth: that is the benchmark today, a researcher said.
President-elect Obama has not cited any amount to launch his economy recovery programme but Congressional leaders say it could be anything between $400 billion and $500 billion. If he can get through his plan of creating or saving 2.5 million jobs the US economy would bounce back from 4.0 per cent contraction to 3.0 per cent growth rate, the economists say. This will require adding $1.0 trillion in annual output to economy.