Will this year finally, really, truly bring an end to the economic crisis, and a strong, meaningful rebound to growth, job creation and financial stability?
Sure, there are some bits of good news. The U.S. economy has been creating more jobs; the improved optimism can be seen in a strong holiday shopping season. Emerging markets like China appear to have kicked their inflation problem, allowing them to ease money and pursue faster growth, which is good for the global economy overall.
We started 2011 in recovery mode, admittedly weak and unbalanced, but nevertheless there was hope. The issues appeared more tractable: how to deal with excessive housing debt in the United States, how to deal with adjustment in countries at the periphery of the Euro area, how to handle volatile capital inflows to emerging economies, and how to improve financial sector regulation. It was a long agenda, but one that appeared within reach. Yet, as the year draws to a close, the recovery in many advanced economies is at a standstill, with some investors even exploring the implications of a potential breakup of the euro zone, and the real possibility that conditions may be worse than we saw in 2008…Is all hope lost? No, but putting the recovery back on track will be harder than it was a year ago.
It’s no wonder that economists have been steadily lowering their growth forecasts for 2012. For example, Goldman Sachs, one bank that was relatively optimistic a year ago, has turned very negative. It expects global GDP to increase only 3.2% in 2012, down from 3.8% in 2011. The advanced economies, Goldman forecasts, will limp along at 1% growth in 2012, a sharp drop from 1.7% in 2011. The problem, says Goldman, is that we’re still digging ourselves out from the impact of the financial crisis three years ago.
Via Time – Business (The curious Capitalist)
Apparently in the context of the phenomenon of deleveraging the idea would be to have cash immediately. But the economy does not work well, the matter is that if, for example: If a bank loses capital, it must sell assets to balance its solvency reasons.And if everyone sells, asset prices continue to fall, and deepens the vicious circle of hell.
So the idea is not working through simple solutions, the idea is to conceive the complexity of the economic system and how to act accordingly.
Posted by Nestor Chirinos