Double-dip recession in U.S

This ought to have been a good week for the American economy. The country’s leaders at last ended a ludicrously irresponsible bout of fiscal brinkmanship, removing the threat of global financial Armageddon by agreeing to raise the federal debt ceiling. Yet far from heaving a sigh of relief, investors are nervous. Stockmarkets around the world have tumbled like anything.

It is not all to do with America: the Euro zone is a mess and manufacturing everywhere seems to be slowing. But America’s prospects have suddenly darkened. Statistical revisions and some grim new figures have revealed a weaker-than-assumed recovery that has all but ground to a halt. America’s recovery from a balance-sheet recession was always bound to be sluggish and fragile. If America does manage to avoid recession and slowly begins to pull out of this mire, it will be testimony to its underlying strengths.

Temporary factors have played some role in this. Soaring oil prices crimped consumer spending. The Japanese earthquake disturbed supply chains. In some industries, notably car production, a rebound is plainly under way. But the overall economy is now so weak that it would take a lot to get growth up to a reasonable rate. And there are some signs that the temporary shocks may have left a more lasting dent on the psyche of firms and shoppers.

(Image source: Strategyoneinsight.com)

Is really the economy improving?

There are now lots of news in the air about economic improvements. How far it is true? We should take a very close look to understand if it is really improving or not. Recently I came across an interesting article in 'Business Recorder' which I have mentioned below and after reading this I want you to take the decision - 'Is really the economy improving?'

On the global economic and financial front, China, the world s third largest economy is in fact booming while other Asian and Far Eastern countries like Hong Kong, South Korea, Australia and several other countries are also following the trail. However, there are fears that this progress is essentially stimulus based as the national treasuries of several countries are fearfully prodigal and are lavishing large sums of monies to prop up their economies beyond normal rationale.

Besides possibly breeding inflation, there is a perceived tendency for the banks to lend monies for investment in equity markets which appear to be moving up without being in sync with the ground realities pertaining to economic growth or rehabilitation. Thus there are fears that asset creation may have been achieved by liberal and often unwarranted and unchecked lending to investors who are not really investing in productive ventures but may be just speculating.

In this context, World Bank president Robert Zoellick has said in a defining statement that already asset bubbles are forming in certain economies and property prices are also rising which should make us more cautious about the future course of economic functioning and restitution around the globe.

Therefore, it would now be reasonable to think that further financial stimuli by the leading economies of the world may create undesirable or harmful liquidity while several countries have already mortgaged the future of its citizens by lending out extravagantly.