Will we see the Fed substantially increase fiscal and monetary stimulus?
*The Economist, October 9, 2008:
"DEPRIVE a person of oxygen and he will turn blue, collapse and
eventually die. Deprive economies of credit and a similar process kicks
in. As the financial crisis has broadened and intensified, the global
economy has begun to suffocate. That is why the world’s central banks
have been administering emergency measures, including a round of
co-ordinated interest-rate cuts on Wednesday October 8th. With luck
they will prevent catastrophe. They are unlikely to avert a global
recession.
According to the IMF’s most recent World Economic Outlook, published on
Wednesday, the world economy is 'entering a major downturn' in the face
of 'the most dangerous shock' to rich-country financial markets since
the 1930s. The fund expects global growth, measured on the basis of
purchasing-power parity (PPP), to come down to 3% in 2009, the slowest
pace since 2002 and on the verge of what it considers to be a global
recession. (The fund’s definition of global recession takes many
factors into account, including the rate of population growth.) Given
the scale of the financial freeze, the fund’s forecast looks
optimistic. Other forecasters are convinced that a global recession is
inevitable. Economists at UBS, for instance, expect global growth of
only 2.2% in 2009.
The rich world’s economies were either shrinking, or close to it, long
before September. Recent weeks have made a rich-world recession all but
inevitable. America’s economy lost steam throughout the summer.
Temporarily buoyed by fiscal stimulus and strong exports, output grew
at a solid 2.8% annualised rate between April and June. But as the
stimulus wore off, the job market worsened, credit tightened and
consumer spending slid."
*This information is solely a highlight of the opinion of a third-party publication and is incomplete. Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.
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