Economy: Worse Before Better in 2010


Sometimes I don’t feel like writing. At others, I do, but can’t.  Regardless, every day I  sift through reports and save links to articles of interest.  If they get subsequent play, I usually ditch them. When they fade from sight in the MSM,  I generally post them.

A couple weeks ago, such a story appeared.  I dutifully filed it. Weightier discussions of the day got in the way–in this case, I think  the Palin/Letterman feud was the media distraction du jour–anything to keep us from paying attention that which really matters.

According to the International Monetary Fund (IMF), epic measures by the American Government to salvage its  gasping economy and related industries should indeed bear fruit, but  things will get worse before they get better.  Improvements should be seen by mid-2010. Before that time, however, leading indicators will continue to point toward poor performance.  GDP, GNP, productivity, unemployment, consumer confidence and commodity futures will continue to flounder before meaningful gains occur.  Downturns in labor, housing starts, construction and elevated foreclosures coupled with related homelessness/poverty will not dissipate overnight.

The Guardian Reports that

“The combination of financial strains and ongoing adjustments in the housing and labour markets is expected to restrain growth for some time, with a solid recovery projected to emerge only in mid-2010,” the IMF said at the conclusion of annual discussions with the US.

It pencilled in a contraction of 2.5% in GDP this year, with a muted expansion of 0.75% in 2010. Those forecasts are better than its April projection of a 2.8% slump this year and zero growth next year.

It said Washington’s fiscal boost would lift US GDP by 1% in 2009 but only by a quarter as much next year. It warned that the outlook for the US economy was marked by an “unusual level of uncertainty”, while a recovery could be clouded by further home foreclosures and falls in house prices along with rising unemployment.

The Obama Administration intends  to consider additional fiscal measures measures should current low interest rates, considered key to the improvement of America’s economy,  appear to be threatened.

The average federal budget deficit is expected top be 9% of GDP in the near term, doubling the national debt to 75% of national income.

The federal budget deficit should average 9% of GDP over the next couple of years and the national debt would double to 75% of national income.  While not paltry, experts consider it manageable.  At the recent G8 conference, IMF managing director  Dominique Strauss-Kahn, said that after the worst world financial crisis since the `30s, conditions are “stabilizing.”

Their stance is that we are beginning to see some green shoots but nevertheless we have to be cautious. The large part of the worst is not yet behind us.”

European Central Bank qualified the IMF’s optimism, mentioning that its members would likely probably need to take a  further $283bn (£174bn) reduction through 2010 to adjust for bad loans and securities. These “toxic assets and securities from 2007 through 2010 is estimated at $218bn. Bad loans account for another $431bn, making the total write-down a whopping $649bn.  An estimated $366bn has already been announced.

Financial risk increased in the last six months as a both industries and families found it increasingly hard to make ends meet.

“The contraction of economic activity and the diminished growth prospects have resulted in a further erosion of the market values of a broad range of assets.”

A steep decline from its biggest exporter, Germany, who is mired in a recession,  had a profound impact on Eurozone.

The respected Kiel Institute reports that the esteemed World Economy’s Global Economic Symposium (GES) is calling for “a new age of global co-operation  to follow what it has dubbed “the age of globalization.”

While free markets have wrought stellar economic growth in recent decades by addressing extreme poverty,  according to the GES, these same approaches are ill-suited to address problems like Global Warming, the wide disparity between the richest and poorest of nations, food shortages, global emergency response, food shortages and energy stability.

According to Professor Dennis Snower, president of Kiel Institute and director of the GES, “We have succeeded in exploiting the magic of markets, but we often fail where those markets fail.”

Update here.

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3 Responses to Economy: Worse Before Better in 2010

  1. Pingback: Economy: Worse Before Better in 2010 « New World Odor | Youth Political Blog

  2. Jess says:

    Instead of generalizing the economy as a whole, the gov should just look around and see that people are still struggling to make payments and unemployment has not ceased to decline. Two recent polls asked Americans if they were confident in the bouncing back of the economy. One poll answered positively the other negatively. I think the difference was in the geographical location.
    Check it out:

  3. Paul Sonderman says:

    True that and thanks for the link. And the other indicators are just as confusing/disappointing/volatile. Thanks for reading and commenting.

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