US economic decline takes a turn for worse

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From Fazle Rashid
NEW YORK, Dec 04: The world of knowledge and letter are feeling the pinch of the economic downturn which is not likely to end anytime soon. Beige Book which offers the economic scenario based on anecdotal evidence said "overall economic activity weakened" since its last report. The previous report also offered a grim outlook.
Biege Book said spending fell broadly across the nation. Manufacturing activity declined noticeably. The volume of export decreased. Business and consumer lending activity continued to slow. Credit conditions remained tight.
Harvard University, one of the best and richest in the world in letters sent to its deans said the university's $36.9 billion endowment fund has lost 22 per cent of its value in the last four months and could decline as much as 30 per cent by the June 30 next year. Harvard depends 35 per cent on its endowment fund. Random House, the world famous publishing company announced a sweeping reorganisation aimed at trimming cost, the New York Times (NYT) has reported.
Once booming IT sector and outsourcing companies in India are going through a downturn. They have reduced hiring, freezing perks and salaries, delaying new investments and laying off thousands of software programmers and call centre operators.
The economic decline in the US took a turn for the worse. It remained gloomy throughout October. The problems deepened in November. Cash-poor Americans fearful for their jobs and victims of a steep decline in stock prices pulled back on spending. Companies laid off workers, cut wages and reduced hours , the NYT said.
The chairman of China's sovereign wealth disclosed yesterday that it has no further plans for investments in western financial institutions nor did it have any plans to save the world through economic policies. This was in direct response to US treasury secretary Henry Paulson's demand that China should make an upward revision of its currency renminbi. Henry Paulson is now visiting China.
If China can do a good job domestically that is the best thing it can do for the world, said Lou Jiwei Chairman and Chief Executive of the China Investment Corporation. China suffered huge losses because of the collapse of Morgan Stanley, Black Stone group and British bank Barclays. China has no further appetite for new purchases. Western economists have hoped that China will try to take the lead in rekindling economic growth around the world with heavier spending.
China's State Council, the country's cabinet, yesterday announced measures to stimulate lending. The cabinet said it would work to ensure there was sufficient liquidity in the banking system, a reputed paper said. Financial markets are braced for large interest rate cuts across Europe today amid mounting evidence of a sharp slowdown in the leading global economies, the same paper said.
A complete overhaul of banking regulation is needed in the wake of the global financial crisis and one of its aims should be to insulate the real economy from the effects of future banking crises according to some of the world's top economists. A newspaper quoted Robert Solow who won Nobel prize for economics in 1987 saying, "I would like to see a regulatory system aimed at insulating the real economy from the financial innovations insofar as that is possible.
The reforms should put restrictions and discourage banks from indulging in excessive financial innovation. 'The biggest challenge we face now is for governments to stand up to the vested interests of the big beasts of the financial system', a researcher commented. The economists suggested forging of an international consensus on banking regulation by the group of 20.