{"id":1848,"date":"2012-01-26T18:52:19","date_gmt":"2012-01-26T18:52:19","guid":{"rendered":"http:\/\/www.itmtrading.com\/blog\/?p=1848"},"modified":"2013-01-25T14:05:35","modified_gmt":"2013-01-25T21:05:35","slug":"financial-crisis-and-anaccident-prone-economy-2","status":"publish","type":"post","link":"https:\/\/www.itmtrading.com\/blog\/financial-crisis-and-anaccident-prone-economy-2\/","title":{"rendered":"Financial Crisis And An Accident Prone Economy"},"content":{"rendered":"

\"\"<\/a>The financial crisis in Europe has commenced a \u00e2\u20ac\u0153perilous new phase\u00e2\u20ac\u009d that could handicap global economic growth even with a best case scenario, so said a report from the International Monetary Fund on Tuesday.<\/p>\n

To make matters worse, the threat is growing that Europe\u00e2\u20ac\u2122s difficulties could become even less stable, leading to a failure in lending as well as investment and production that would cause a severe recession<\/a> in Europe, as opposed to the mild recession that the IMF<\/a> is now predicting.<\/p>\n

In the latest World Economic Outlook, released by the IMF, the global economy is anticipated to grow 3.3% in 2012, much slower than just four months ago when the IMF was expecting 4% growth. Global growth should improve a bit next year to 3.9%, but developed economies through Europe, North America and the Pacific Rim in all likelihood will keep bumping along with growth rates under 3% for the next two years.<\/p>\n

Forecasts by the IMF\u00e2\u20ac\u2122s are usually taken with a pinch of salt. The real interest lies in the examination of the upside and downside risks, and that\u00e2\u20ac\u2122s where it gets alarming.<\/p>\n

In its baseline forecast, the IMF takes for granted that European policy makers will be able to steer clear of a fatal breakup of the euro zone and will be capable of calming any concern about sovereign debt and bank balance sheets.<\/p>\n

If, for whatever reason that turns out to not be the case, the IMF sees a series of events known as an \u00e2\u20ac\u0153adverse feedback loop\u00e2\u20ac\u009d between sovereign debt and bank funding needs where increased unease about debt drives governments into \u00e2\u20ac\u0153more front-loaded fiscal consolidation, which depresses near-term demand and growth.\u00e2\u20ac\u009d<\/p>\n

\u00e2\u20ac\u0153Front Loaded\u00e2\u20ac\u009d means there will be more of the pain up front. \u00e2\u20ac\u0153Fiscal Consolidation\u00e2\u20ac\u009d is about reforms (think increases) in revenues (taxes, etc.) and reforms (think cuts) in expenditure (entitlements, etc.). There is an inherent time delay for adoption, implementation and stabilization, between decisions and their full impact upon the revenue deficit.<\/p>\n

In the advent that the IMF cannot avoid the dire breakup, Europe\u00e2\u20ac\u2122s economy would contract at a 4.5% annual rate, as opposed to the mild 0.5% turn down predicted in the IMF\u00e2\u20ac\u2122s baseline forecast. The ensuing recession wouldn\u00e2\u20ac\u2122t be as bad as 2008\u00e2\u20ac\u2122s downturn, but it would cut global growth to just 1.3% in 2012.<\/p>\n

There are other foreseen dangers as well from an economic hard landing in China to a cut-off in oil supplies. Plus any \u00e2\u20ac\u0153excessive fiscal tightening\u00e2\u20ac\u009d in the U.S. would probably result in lower growth.<\/p>\n

The IMF report paints a gloomy picture on the global economy, and even four years after the beginning of the recession things remain in a very fragile state in our ongoing financial crisis.<\/p>\n","protected":false},"excerpt":{"rendered":"

The financial crisis in Europe has commenced a \u00e2\u20ac\u0153perilous new phase\u00e2\u20ac\u009d that could handicap global economic growth even with a best […]<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1207],"tags":[45,58,82,107],"class_list":["post-1848","post","type-post","status-publish","format-standard","hentry","category-blog","tag-debt","tag-global-economic-crisis","tag-imf","tag-recession"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/posts\/1848","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/comments?post=1848"}],"version-history":[{"count":4,"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/posts\/1848\/revisions"}],"predecessor-version":[{"id":12801,"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/posts\/1848\/revisions\/12801"}],"wp:attachment":[{"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/media?parent=1848"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/categories?post=1848"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/tags?post=1848"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}