Saturday, July 25, 2009

Rebalancing global growth: A long way to go

"Governments can prop up economies temporarily, but rising budget deficits are not a route to sustainable growth. Eventually burgeoning debt will limit the room for fiscal manoeuvre, and politicians may balk at renewed stimulus long before then. Worries about the budget deficit are already weighing on political debate in WashingtonA solid global recovery demands healthy and balanced growth in private demand. Unfortunately, that still seems far off. "

And an interesting comment from "sebouh":

"Indeed a long way to go

This week the number of Americans filing for jobless benefits rose by 30,000 in the week ended July 18, the Labor Department reported Thursday. The total for the week was 554,000With nearly 15 million peolpe out of work, according the official figures, and 6.5 million jobs having been eliminated since the recession begain in December of 2007, this week's initial claims report spells increasing social misery for millions of workers.Wall Street, however, responded to the jobless claims report, along with better-then-expected corporate earnings and a slight increase in June existing home sales, by pushing Dow Jones Industrial Average up 188 points, ending the day above the 9000 mark for the first time since last November.The diverging fortunes of workers and corporate elite are the result of ruthless cost-cutting by big business, which is taking advantage of the recession to slash jobs and wages and drive up productivity worldwide. The banks and big corporations are being abetted by the policies of the Obama administration.In other words, this disperity does not lead to healthy recovery prospect and this further widens the risk for another round of economic contraction.

It is this increased expoitation of workers and the prospect of a permanent reduction in wages and benefits that Wall Street is celebrating. The implications for the working class are nothing short of catastrophic.Meanwhile the banks, which have benefited from hundreds of billions in bailout cash and trillions more in other subsidies, at taxpayer expense,are flaunting their good fortune by ramping up salaries and bonuses to levels high or higher than those prevailed before last year's crash.Moreover, according to Washington Post reported Thursday,"So far top six US banks have set aside 74 billion USD to pay their employees, up from 60 billion USD in the corresponding period last year." As the newspaper points out, this windfall will go disproportionately to top executives and traders, in the form of multi-million dollar compensation packages.

To conclude my statement, the world economy is showing some tentative signs of economic recovery due to massive government stimulus packages and bailouts in most developed nations. These government measures, however, will be "unsustainable" in the long run.In addition, the consumer demand will not come back as unemployment is continuously on the rise in most developed and developing countries."


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