Global Roundup

On the global economic and financial front, despite the decrease of jobless claims in America and better spending by the consumers, the overall situation remained negative. In the forefront, the financial woes of Ireland have unsettled the entire banking and fiscal system of Europe with pointers that Portugal and Spain are poised to go down the same slippery path. Therefore from Iceland and Ireland to Greece, Portugal, Spain and other countries in the southern periphery of Europe, sovereign debts accompanied by gross mismanagement, speculation and malfeasance have shaken up the Euro, the so-called single currency. Only Germany seems to be floating high.

However, Chancellor Angela Merkel has opinionated that the private sector also has the duty to chip in and help stabilise a highly wayward financial situation in several Eurozone countries. Merkel's proposal has brought lot of criticism. Thus the fiscal fortunes of Europe continue to wobble interminably leaving little apparent hope for even a modicum of social and economic stability in Europe. Now fears have arisen that economic crises presently prevailing in Europe and indeed around the world are threatening to unravel and undo the very foundations of human civilisation itself.

The dollar went up against most of its major counterparts after North Korea and South Korea exchanged artillery fire, encouraging demand for the greenback as a refuge. Last week, China increased bank-reserve requirements following the fastest rise in consumer prices in two years.

(Image source: Worldbunkering.com)

The Next Crisis: Coming in 2011

According to Anthony Tjan who is the CEO, Managing Partner and Founder of Cue Ball (a venture and early growth equity firm investing in the information media and consumer sectors), believes that the next crisis is coming in 2011.

With the Dow reapproaching a five-figure level, we have felt at least some temporary economic reprieve in recent months. But Anthony has talked to many astute people recently (both Democrats and Republicans) who question the stability of the upturn. Some of those who believe that this might be a dead cat bounce, or what economists term a double-dip recession, are pretty damn smart. Among them is Harvard University professor Martin Feldstein, who explained in a recent interview with CNBC that the massive stimulus is supporting the upturn and that support runs out by 2010. We may be in a precarious position by 2011.

Bill Achtmeyer - Chairman and Managing Partner of the Parthenon Group, agrees that macroeconomics eventually win out and we should carefully brace ourselves for what might loom ahead — the next crisis in 2011.

Is global recession coming to an end???

The global slump has reached its low point in the business cycle. Asia’s economies are looking rosier and brighter, buoyed by a spectacular rebound in China, where output grew at an annualised rate of some 16% between April and June. This is obvious good but the picture is still not clear. The boost from restocking will be temporary. And a big source of demand—government stimulus—is unsustainable. Across the globe governments have, rightly, stepped in to counter the economic slump. In America an increase of 12 percentage points in the budget deficit has cushioned the slump in private spending. Around 75% of China’s growth this year will be state-directed, either through public spending or officially induced lending. 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. A solid global recovery demands healthy and balanced growth in private demand. Unfortunately, that still seems far off.