Global Economies Decline, Danger Ahead

Global Economies Decline, Danger Ahead

$DIA, $SPY, $QQQ, $VXX

The International Monetary Fund (IMF) continues to call for action to forestall a global economic decline warning of the increasing risks ahead.

IMF Deputy Managing Director David Lipton said that there is danger ahead in that that policymakers worldwide have either exhausted their options for boosting growth or have lost their will.

He said, leaders must expand efforts, including fiscal and monetary stimulus and urgently needed structural reforms, to support growth.

Fiscal policy, government spending and tax breaks, “has to take a more prominent place in the policy mix,” Mr. Lipton told a conference of the National Association for Business Economics.

“The burden to lift growth falls more squarely on advanced economies” which have fiscal room to move, he said.

“The downside risks are clearly much more pronounced than before, and the case for more forceful and concerted policy action, has become more compelling,” he said in his statement.

The IMF’s most recent projections for growth may no longer be applicable due to a pullout of capital from emerging economies and a sharp contraction in global trade.

The downturn in global markets is a reaction to worries that policymakers have run out of tools.

“For the sake of the global economy, it is imperative that advanced and developing countries dispel this dangerous notion by reviving the bold spirit of action and cooperation that characterized the early years of the recovery effort.”

Possibly most disconcerting, he added, “is that the rise in global risk aversion is leading to a sharp retrenchment in global capital and trade flows.”

He warned countries against trade protectionist and weak-currency tactics to boost their growth, calling those “Zero sum economic policies” that, over the long run, “will make all countries worse off.”

In February the IMF warned that the world economy is highly vulnerable and called for action from the G20 leading economies. But G20 finance chiefs, meeting in Shanghai, disagreed over any action, with Germany rejecting further fiscal and monetary efforts to spur economic activity.

The worries were boosted by data from China Tuesday showing sharp falls in exports and imports in February.

US major stock markets finished Tuesday’s session at: DJIA -109.85 at 16964.10, NAS Comp -59.43 at 4648.82, S&P 500 -22.50 at 1979.26

Volume: Trade was heavy with over 1.1-B/shares exchanged on the NYSE

• NAS Comp -7.2% YTD
• Russell 2000 -6.0% YTD
• S&P 500 -3.2% YTD
• DJIA -2.7% YTD

Stay tuned…

Paul Ebeling

HeffX-LTN

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