Is heavy public spending helping recovery?
Sunday, 19 April 2009
Fazle Rashid in New York
SOME robust optimists among the analysts say that heavy spending by governments is not only helping to stop the steep and steady downhill slide of the global economy but is also pulling it out of the downturn as well. The International Monetary Fund (IMF) would not share such a rosy forecast. It says the recovery of the global economy from its worst recession will be slow and weak.
The optimism of the analysts is the result of the recovery of the economic health of two of the most ailing US banks, namely, Goldman Sachs and JP Morgan Chase. The two recorded a healthy growth of 5.8 per cent in the first quarter of 2009 from a depressing 2.2 per cent growth rate in the last quarter of 2008.
China, who rest of the world believe, would act as catalyst in rebounding the economy, recorded its worst first quarter growth in nearly two decades. Analysts of course see it as "upturn". The Chinese export decelerated with income falling 17.1 per cent The fiscal stimulus in countries with debt level of 60 per cent or more of the gross domestic product (GDP)( will not yield any benefit, the IMF predicted. Yet even if all the appropriate policy steps were taken, they are unlikely to result in vigorous recovery, the Fund said.
Recessions accompanied by financial crises take longer time to recover. The current downturn is highly synchronised and is associated with a deep financial crisis -- a rare combination in the post war period. Therefore, the downturn will be severe and recovery will be sluggish, the IMF warns The contraction in the eurozone economy is showing no sign of relenting.
Industrial production in the zone shrunk by 20 per cent in February. Hopes of an early recovery in eurozone now seems remote.
The agriculture ministers of G8 meet Saturday (April 18) in Italy. The Group of Eight (G8) has warned that without doubling of spending on agriculture the global food crisis will become structural.
China is mostly self-reliant in rice, wheat and corn. Beijing's response to domestic and global challenges have won plaudits. China feeds 20 per cent of the world population with just 10 per cent of world's agricultural land and about 6.0 per cent of global water resources. The increasing impact of global warming could devastate all efforts to boost farm products. China is already running short of water in its breadbasket north. The rising temperature is damaging wheat, rice and corn production. Famines are caused not by lack of food but by income inequality, said Amartya Sen. The poor must get help in ways that do not undermine food production.
A new idea has surfaced in recent times. Countries with arable lands but without means to till them are outsourcing. Saudia Arabia has invested in Africa and Russia is looking for investors.
Meanwhile, scams, frauds and corruption continue to spiral despite the meltdown. The people who know how to make money via dubious means can do it at all times. Edward Liddy, Chief Executive Officer (CEO) of AIG who now takes a pay packet of $1.0 a year, owns a significant stake in Goldman Sachs, one of AIG's trading partner. Liddy's holdings in Goldman Sachs will be more than $3.0 million, New York Times (NYT) said.
The man leading Obama administration's bid to restructure the auto-industry has been indicted accused of selling access to the fund.
On the political front, a report said CIA under president Bush used brutal interrogation techniques to extract " confession" from Taleban and al-Qaeda suspects. The torture methods included keeping detainees awake upto 11 straight days, placing them in a dark and cramped box or putting insects into the box to exploit fears, NYT reported the other day. Bush had authorised the interrogation methods in 2002 and continued upto 2005.
China has made its intention clear that it is all set to expand and overhaul its naval strength in matching its ambition to reach far beyond its shores. China said it would accelerate steps to develop a new generation of warships, submarines, fighter aircraft and high precision long range missiles to counter the rise in non-conventional threats.
Russia has called for suspension of military exercise in Georgia billed for May. Russia fears the exercise will not be helpful in promoting stability and peace in the region. Russia has written to NATO secretary general asking him to postpone or cancel all upcoming military exercises in the region. NATO said it would go ahead with the exercise beginning May 6 and ending on June first.
SOME robust optimists among the analysts say that heavy spending by governments is not only helping to stop the steep and steady downhill slide of the global economy but is also pulling it out of the downturn as well. The International Monetary Fund (IMF) would not share such a rosy forecast. It says the recovery of the global economy from its worst recession will be slow and weak.
The optimism of the analysts is the result of the recovery of the economic health of two of the most ailing US banks, namely, Goldman Sachs and JP Morgan Chase. The two recorded a healthy growth of 5.8 per cent in the first quarter of 2009 from a depressing 2.2 per cent growth rate in the last quarter of 2008.
China, who rest of the world believe, would act as catalyst in rebounding the economy, recorded its worst first quarter growth in nearly two decades. Analysts of course see it as "upturn". The Chinese export decelerated with income falling 17.1 per cent The fiscal stimulus in countries with debt level of 60 per cent or more of the gross domestic product (GDP)( will not yield any benefit, the IMF predicted. Yet even if all the appropriate policy steps were taken, they are unlikely to result in vigorous recovery, the Fund said.
Recessions accompanied by financial crises take longer time to recover. The current downturn is highly synchronised and is associated with a deep financial crisis -- a rare combination in the post war period. Therefore, the downturn will be severe and recovery will be sluggish, the IMF warns The contraction in the eurozone economy is showing no sign of relenting.
Industrial production in the zone shrunk by 20 per cent in February. Hopes of an early recovery in eurozone now seems remote.
The agriculture ministers of G8 meet Saturday (April 18) in Italy. The Group of Eight (G8) has warned that without doubling of spending on agriculture the global food crisis will become structural.
China is mostly self-reliant in rice, wheat and corn. Beijing's response to domestic and global challenges have won plaudits. China feeds 20 per cent of the world population with just 10 per cent of world's agricultural land and about 6.0 per cent of global water resources. The increasing impact of global warming could devastate all efforts to boost farm products. China is already running short of water in its breadbasket north. The rising temperature is damaging wheat, rice and corn production. Famines are caused not by lack of food but by income inequality, said Amartya Sen. The poor must get help in ways that do not undermine food production.
A new idea has surfaced in recent times. Countries with arable lands but without means to till them are outsourcing. Saudia Arabia has invested in Africa and Russia is looking for investors.
Meanwhile, scams, frauds and corruption continue to spiral despite the meltdown. The people who know how to make money via dubious means can do it at all times. Edward Liddy, Chief Executive Officer (CEO) of AIG who now takes a pay packet of $1.0 a year, owns a significant stake in Goldman Sachs, one of AIG's trading partner. Liddy's holdings in Goldman Sachs will be more than $3.0 million, New York Times (NYT) said.
The man leading Obama administration's bid to restructure the auto-industry has been indicted accused of selling access to the fund.
On the political front, a report said CIA under president Bush used brutal interrogation techniques to extract " confession" from Taleban and al-Qaeda suspects. The torture methods included keeping detainees awake upto 11 straight days, placing them in a dark and cramped box or putting insects into the box to exploit fears, NYT reported the other day. Bush had authorised the interrogation methods in 2002 and continued upto 2005.
China has made its intention clear that it is all set to expand and overhaul its naval strength in matching its ambition to reach far beyond its shores. China said it would accelerate steps to develop a new generation of warships, submarines, fighter aircraft and high precision long range missiles to counter the rise in non-conventional threats.
Russia has called for suspension of military exercise in Georgia billed for May. Russia fears the exercise will not be helpful in promoting stability and peace in the region. Russia has written to NATO secretary general asking him to postpone or cancel all upcoming military exercises in the region. NATO said it would go ahead with the exercise beginning May 6 and ending on June first.