Quote:
Originally Posted by neil0311
I know this falls on deaf ears, but just another sign of improvement. No, everything isn't perfect, but just one more opinion and set of facts that confirms that the anticipated apocalypse will not take place as expected. 
Global Economic Recovery Has Started: IMF Official - Economy * US * News * Story - CNBC.com (http://www.cnbc.com/id/32460791 - broken link) |
Did you really read this article? It is hard to understand how you can say it is a sign of improvement. First of all it is using opinions of the IMF which has a vested interest in an improving economy and slants its bias accordingly, but even so let’s look at what they say.
"The global economic recovery has begun but sustaining it will require refocusing the United States toward exports and Asia toward imports, the International Monetary Fund's chief economist said."
In order for this to happen we have to be able to produce exports at lower costs that the Chinese can produce similar items domestically. Do you think that is a realistic expectation?
"U.S. consumption, which accounts for about 70 percent of the U.S. economy and a large chunk of global demand, would not quickly return to pre-crisis strength as households cope with trillions of dollars in losses from the falling housing and stock markets."
US consumption pre crises was predicated on "bubble" spending with consumers spending more than they were earning. It was a decade of spending on borrowed money based on inflated property values. We are defiantly not going to return to those levels.
"From the point of view of the United States, a decrease in China's current account surplus would help increase demand and sustain the U.S. recovery," he said. "That would result in more U.S. imports which would help sustain world recovery."
But in order for China to boost domestic demand, it will need to provide a stronger social safety net and increase household access to credit, which will encourage its consumers to save less and spend more.
What I am reading here is a whole lot of "if's". And none of those if's are in China's best interest. They have economic concerns of their own to deal with, and it is doubtful they are going to do anything to hurt their own economic growth in order to help us.
"Much of that growth is predicated on fiscal stimulus and inventory rebuilding, both of which will have to come to an end, and the stimulus comes at a cost to future growth.
"In nearly all countries, the costs of the crisis have added to the fiscal burden, and higher taxation is inevitable," Blanchard said."
I really cannot see anything positive here. Growth that has been purchased with fiscal stimulus is ending, but the huge bill for it still exists, and will result in higher taxes, which takes money out of the economy.
"All this means that we may not go back to the old growth path, that potential output may be lower than it was before the crisis," he added.
If the rebalancing toward more U.S. exports and more Asian imports fails, the future looks far more grim. In that case, a weak U.S. recovery would likely lead to intense political pressure to extend fiscal stimulus until private demand recovers.
If officials resist that pressure, the U.S. recovery would be very slow, he said. If they bow to the pressure, high fiscal deficits may persist, leading to doubts about debt sustainability, U.S. government bonds, and the dollar.
Under that darker scenario, the dollar may depreciate "in a disorderly fashion, leading to another episode of instability and high uncertainty, which could itself derail the recovery," Blanchard warned.
As I read this, it says if the Asian’s do not bail us out, we are toast.
Well that makes me feel better.
Maybe there is something to this optimism stuff.
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