The World Bank issued its biannual Global Economic Prospects report Tuesday, sharply downgrading its forecast for economic growth from its previous report released last June. The Washington-based international lending agency projected an expansion of the world economy in 2013 of only 2.4 percent, down from its forecast six months ago of 3.0 percent.
The bank said the global gross domestic product (GDP) grew by 2.3 percent in 2012, downwardly revised from its June estimate of 2.5 percent. It predicted that the world economy would grow by 3.1 percent in 2014 and 3.3 percent in 2015. These projected rates, lower than the bank’s June estimates, are insufficient to significantly reduce near-Depression-level jobless rates in the US and much of Europe or stem the spread of poverty.
The report demonstrates that more than four years after the September 2008 financial meltdown on Wall Street, there is no end in sight to the economic crisis. It points as well to the extent to which the economic policies pursued by governments and central banks around the world have benefited the wealthiest social layers at the expense of working people.
Moreover, the measures taken to avert a descent into deflation and financial chaos, such as printing trillions of dollars and other major currencies, are further undermining the monetary foundations of world trade and investment, fueling currency and trade wars, and inflating new speculative bubbles that are bound to implode.
China’s growth outlook was downgraded to 8.4 percent from 8.6 percent, and India’s was reduced to 6.1 percent from 6.9 percent.
In its concluding remarks, the report states: “While there are signs that growth is picking up in developing countries, the world continues to face a bumpy and uncertain recovery. The pace of recovery in high-income countries is likely to remain disappointing.”
These are rather soothing words to describe a crisis of the world capitalist system that is, in fact, deepening and lurching toward new financial shocks and eruptions.
World unemployment could top record levels this year and continue rising until 2017, the International Labour Organization (ILO) said on Tuesday in its annual employment report.
2009 currently stands as the worst recorded year for world unemployment, with 198 million people across the globe without work.
In its 2013 Global Employment Trends report, the ILO forecasts unemployment numbers will rise by 5.1 million in 2013 to reach 202 million, topping 2009’s record.
Nouriel Roubini: Political tensions, economic and financial tensions, like currency wars, can lead eventually to protectionism.”
Nouriel Roubini of Roubini Global Economics and Ian Bremmer of Eurasia Group appeared on “Bloomberg Surveillance” today from the World Economic Forum in Davos. Roubini said that “problems are global, but policies are national” and that “coordinating among different countries is going to become increasingly difficult. Political tensions, economic and financial tensions, like currency wars, can lead eventually to protectionism.”
First, Germany is worried that the Eurozone could end up being the last one to “play it fair.” The ECB’s strict inflation mandate limits its actions to support growth, actions that would have also weakened the currency, as in the case of the Fed and the BoE. Its commitment to a market-driven exchange rate prevents it from directly or indirectly manipulating the Euro, while its full independence makes any comments from European politicians about the Euro almost irrelevant, in contrast with the case of Japan recently.
As a result, if all other central banks target, directly or indirectly, a weaker currency, the Eurozone will end up with the strongest currency, which would be far from a market-driven level. The final outcome will be a weaker Eurozone economy, which could eventually threaten the ECB’s independence.
Second, Germany’s recovery depends to a large extent on China and could suffer from a weak JPY. To a large extent, Germany and Japan target similar markets, with seven out of their top-20 trading partners being the same (Table 1). Moreover, Germany is Japan’s fourth most important export market, while Japan is Germany’s 10th most important export market. China in particular is the third most important export market for both Germany and Japan.
Even more important, despite Japan’s export share to China being much larger than the one of Germany (Chart 5), exports to China has been a driving force for Germany’s recovery since the global crisis of 2008-09, contributing to growth much more than in other major advanced economies (Chart of the Day and Chart 6). The latter suggests that a further weakening of the JPY could reduce the power of a key growth engine for Germany, at a time when its recovery remains weak and the Eurozone is still in recession – for the same reasons, Germany, and as a result the Eurozone, would be affected negatively by a hard-landing scenario in China.
Chinchilla, 53, has called capital inflows from developed markets seeking higher yields “weapons of mass destruction” against the nation’s economy. Her government submitted a bill to Congress this week that would raise taxes to 38 percent from 8 percent on foreign investors who transfer out of the country profits from capital inflows.
The 2013 annual gathering at Davos of elites belies the media’s contrived optimism for the global economy. This article conveys the dark mood at this year’s annual gathering.
from Zero Hedge:
Spanish and Greek youth unemployment surged to yet another new record as joblessness among the under-25 cohort is now above 55% for both of these troubled nations. “We haven’t seen the bottom yet,” one analyst notes as theBBC notes that the youth unemployment in these nations is more than double the euro-area average. As we have noted many times, this ludicrous state of affairs (in nations that proclaim the worst is past) is by far the most-concerning for European stability. Even Frau Merkel opined this morning in Davos that:*MERKEL SAYS EU YOUTH UNEMPLOYMENT BIGGEST BURDEN, NEEDS TACKLED Yet, there is nothing being done. Across the 27-nation bloc, there are 5.8 million people aged under-25 that remain long-term unemployed. This has always and forever led to extreme events and social unrest, as we warned here (must read). As the year warms up, which nation will ‘spring’ first?
Today 40-year veteran, Robert Fitzwilson, warned, “The West went over the spending cliff decades ago.” He also states that “Those who want a fighting chance at surviving and prospering,” need to own physical gold and silver. Fitzwilson, who is founder of The Portola Group, wrote the following piece exclusively for King World News.
Below is Fitzwilson’s exclusive piece for KWN:
“The functioning of a computer is a beautiful thing when compared to our ever-changing world. It dutifully performs whatever task is required of it. There is no good or bad task to a computer, just tasks. A key part of the programmer’s job is to instruct the computer to do the good tasks as desired.
Another critical aspect is to anticipate every conceivable keystroke combination that could trigger a bad task that the computer would follow as instructed. Failure to allow such unintended keystroke combinations often would result in what used to be humorously called BSD, the “Blue Screen of Death”….
Have we passed the point of no return?Bank of America issues `bond crash’ alert on Fed tightening fears
The US lender said investors face a treacherous moment as central banks start fretting about inflation & shift gears, threatening a surge in bond yields. & triggering a string of upsets across the world, Bank of America has warned.