Pace of decline slows, but downside risks still persist
Sunday, 26 April 2009
From Fazle Rashid
NEW YORK, April 25: The finance ministers and central bank governors of the seven richest countries in the world who are in Washington for the joint annual meeting of the World Bank (WB) and the International Monetary Fund (IMF) were encouraged to pronounce that the "pace of decline has slowed" but with a caution that "downside risks persist".
Deep malaises in the financial sector particularly in banks were seen as the root cause of the worst economic downturn since the great depression.
The Group of Seven (G7) leaders agreed that the banking system needs a cleansing and praised China for promoting a more balanced growth. Banks must realise that they cannot go back to business as usual.
The signals were clear. The concept of free market economy is sure to get an axing, however, partially it may be. Banks will be brought under some regulations to prevent them from taking undue risks that precipitated the total collapse of the global economy.
The US wants G7 nations to act upon their stimulus package pledges. US also wants IMF to monitor the efforts to ensure that the nations do not fail on their promises. Europe fears that the US and the UK might backtrack on their commitments for regulatory reforms The G7 meeting will be followed by a joint meeting of G20 and the IMF. There have been a flurry of activities in private surrounding the global economic meltdown.
Meanwhile, former US treasury secretary Hank Paulson and Federal Reserve chairman Ben Bernanke had put pressure on Bank of America to acquire Merrill Lynch without telling the investors about bank's sinking condition. Both however denied the charges. Goldman Sachs and JP Morgan Chase two US banks that took $45 billion from the government to shore up their capital base now want to repay the money in order to avoid "tight restrictions" on executive pay that Capitol Hill imposed on Troubled Asset Relief Funds (TARP) recipients. Pay cuts of the executives was one vital point that the Congress insisted upon before passing the tarp.
Nomura, Japan's biggest broker, suffered a net loss of $7.3 billion. Its downhill slide began after it acquired the Asian, Middle-East and European operations of the failed US company Lehman Brothers. Samsung Electronics, the biggest maker of memory chips and liquid crystal display revealed a 72 per cent fall in the first quarter profit. The South Korean company ruled out any boost in its income in the forseeable future.
Valeo, the French car equipment maker reported a net loss of $211 million as the global auto industry has been hit by a steep decline in demands of cars. The company makes windscreen wipers and head lights.
Volvo AB world's second largest truckmaker reported a loss of $523 million. Truck orders have fallen by 65 per cent. Microsoft is the midst of a severe downturn and it expressed deep gloom about the prospect for the rest of the year. In an unusual move, JP Morgan Chase and Citigroup, both in bad financial shape themselves, have agreed to cut $3.75 billion from the total amount they get from automaker Chrysler. General Electric has agreed to sell 81 per cent share in its airport security business to Safran French manufacturer of aviation gear for a cost of $580 million.
There is no sector of economy which has not been hit by the global turndown including aviation, hotel business, casinos, brothels, pubs, taxi and cinema. There has been a change in match making as well. Brides parents are now searching for grooms who are government officials rather the previous craze for business executives with fat pay packets. This new trend is more visible in Indian marriage market.
NEW YORK, April 25: The finance ministers and central bank governors of the seven richest countries in the world who are in Washington for the joint annual meeting of the World Bank (WB) and the International Monetary Fund (IMF) were encouraged to pronounce that the "pace of decline has slowed" but with a caution that "downside risks persist".
Deep malaises in the financial sector particularly in banks were seen as the root cause of the worst economic downturn since the great depression.
The Group of Seven (G7) leaders agreed that the banking system needs a cleansing and praised China for promoting a more balanced growth. Banks must realise that they cannot go back to business as usual.
The signals were clear. The concept of free market economy is sure to get an axing, however, partially it may be. Banks will be brought under some regulations to prevent them from taking undue risks that precipitated the total collapse of the global economy.
The US wants G7 nations to act upon their stimulus package pledges. US also wants IMF to monitor the efforts to ensure that the nations do not fail on their promises. Europe fears that the US and the UK might backtrack on their commitments for regulatory reforms The G7 meeting will be followed by a joint meeting of G20 and the IMF. There have been a flurry of activities in private surrounding the global economic meltdown.
Meanwhile, former US treasury secretary Hank Paulson and Federal Reserve chairman Ben Bernanke had put pressure on Bank of America to acquire Merrill Lynch without telling the investors about bank's sinking condition. Both however denied the charges. Goldman Sachs and JP Morgan Chase two US banks that took $45 billion from the government to shore up their capital base now want to repay the money in order to avoid "tight restrictions" on executive pay that Capitol Hill imposed on Troubled Asset Relief Funds (TARP) recipients. Pay cuts of the executives was one vital point that the Congress insisted upon before passing the tarp.
Nomura, Japan's biggest broker, suffered a net loss of $7.3 billion. Its downhill slide began after it acquired the Asian, Middle-East and European operations of the failed US company Lehman Brothers. Samsung Electronics, the biggest maker of memory chips and liquid crystal display revealed a 72 per cent fall in the first quarter profit. The South Korean company ruled out any boost in its income in the forseeable future.
Valeo, the French car equipment maker reported a net loss of $211 million as the global auto industry has been hit by a steep decline in demands of cars. The company makes windscreen wipers and head lights.
Volvo AB world's second largest truckmaker reported a loss of $523 million. Truck orders have fallen by 65 per cent. Microsoft is the midst of a severe downturn and it expressed deep gloom about the prospect for the rest of the year. In an unusual move, JP Morgan Chase and Citigroup, both in bad financial shape themselves, have agreed to cut $3.75 billion from the total amount they get from automaker Chrysler. General Electric has agreed to sell 81 per cent share in its airport security business to Safran French manufacturer of aviation gear for a cost of $580 million.
There is no sector of economy which has not been hit by the global turndown including aviation, hotel business, casinos, brothels, pubs, taxi and cinema. There has been a change in match making as well. Brides parents are now searching for grooms who are government officials rather the previous craze for business executives with fat pay packets. This new trend is more visible in Indian marriage market.