Markets have rallied strongly since the start of the new year, encouraged by small improvements in the global economic outlook and a fading of risks threatening the eurozone, US and China. But will the good times last?
Monday, January 28
Economic history suggests that most countries fail in the reform and adjustment process precisely because the sectors of the economy, not to mention individuals, that have benefitted from the distortions are powerful enough to block any attempt to eliminate those distortions. But it is certain that not everyone in China is confident that Beijing will be able to force through the reforms, as reports suggest that nearly 6 trillion dollars left the economy illicitly over the last decade.
Japan’s annual inflation rate slipped by 0.1 per cent in 2012, showed the latest government data on Friday, placing further pressure on its central bank to introduce greater monetary stimulus following the fourth straight year of sliding consumer prices.
British Prime Minister David Cameron announced on Wednesday that he will offer British citizens a vote on whether to stay in the European Union – provided he wins a second term – adding that while Britain did not want to retreat from the union, public disillusionment with the European project was at an “all-time high”.
In a move aimed at pressuring the Senate, which has not debated a budget since 2009, members of the Republican-controlled House are threatening to bring to vote a debt measure to withhold pay for either House or Senate members if the chamber in which they serve fails to pass a budget plan by April.
Unlike the old days, the threat of a looming currency war will not be directly related to trade imbalances and balance-of-payments crises. Rather, the main driver has been major central banks’ pursuit of experimental measures – in order to compensate for policy inadequacies and political dysfunction elsewhere.
Even as warning signs of a looming global financial crisis appeared, Federal Reserve officials were confident that the U.S. economy would be able to withstand the subprime mortgage crisis, grossly underestimating the severity of the current economic slump, released transcripts from 2007 meetings show.
The transcripts, made public last Friday after a customary five-year lag, provide fresh insight on the central bank’s decision making process even as it was on the brink of historic economic crisis.
While chances of a perfect economic storm in 2013 are low, the global economy still faces major risks this year – especially as fiscal austerity continues to spread to more advanced economies, leading to an increased risk of a hard landing in China and the threat of war in the Middle East. Any one of these risks alone will also be enough to stall the global economy and tip it into recession.
The world will need to spend almost $700 billion annually on clean energy and energy efficiency projects if it is to avert worsening environmental damage caused by a reliance on fossil fuels, said a study prepared for the World Economic Forum on Monday, urging governments and the private sector to work in tandem to mobilise funds that will go into combating climate change.
Five years since the start of the global financial crisis, the International Labour Organisation said in a report released Tuesday the net number of unemployed people rose by 4 million in 2012 to some 197 million overall. The United Nations jobs watchdog estimates unemployment will rise by 5.1 million this year and by another 3 million in 2014.
