The International Monetary Fund (IMF) said yesterday (Thursday) that the global economic recovery is losing steam because uncertainty in financial markets is keeping businesses and consumers from investing in future growth.
In a revision to its World Economic Outlook released yesterday in Hong Kong, the IMF said worldwide economic expansion will decline to 4.3% next year from 2010's 4.6% pace. The forecast for 2010 was revised upwards by 0.4 percentage points to reflect faster-than-anticipated growth earlier this year.
However, "downside risks have risen sharply," the IMF warned, referring to European governments' debt problems and volatility in financial markets.
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Uncertainty Undermining the Global Economic Recovery
G20 Summit Bogged Down by a Shaky Global Recovery
The Group of 20 (G20) countries concluded their weekend summit with an outline for reducing budget deficits and a delay in global banking reform, but failed to create a unified policy as nations find themselves in different phases of economic recovery.
Leaders pushed decisions on global banking regulations to the agenda of the November session in Seoul, South Korea. The meeting's concluding statement expressed unity in countries' desires to reduce debt, but did little to alter austerity plans and stimulus measures countries have already created.
"With the common efforts of G20 members and the international community, the world economy is gradually recovering, but the foundations of the recovery are still not solid, the process is not balanced and there are still many uncertainties," said Chinese President Hu Jintao. "All this shows that the deeper impacts of the financial crisis have still not been surmounted, and systemic and structural risks to the world economy remain very grave."
The G20 communique underscored the countries' focus on achieving "growth friendly" fiscal policies while acknowledging that leaders must reduce the budget deficits, although policies and budget cuts should be tailored to suit each individual nation.
"The path of adjustment must be carefully calibrated to sustain the recovery in private demand," the G20 nations wrote. "There is a risk that synchronized fiscal adjustment across several major economies could adversely impact the recovery. There is also a risk that the failure to implement consolidation where necessary would undermine confidence and hamper growth."
Analysts said the divergent views on how to sustain economic recovery marked the lack of effectiveness of the G20 forum.
Leaders pushed decisions on global banking regulations to the agenda of the November session in Seoul, South Korea. The meeting's concluding statement expressed unity in countries' desires to reduce debt, but did little to alter austerity plans and stimulus measures countries have already created.
"With the common efforts of G20 members and the international community, the world economy is gradually recovering, but the foundations of the recovery are still not solid, the process is not balanced and there are still many uncertainties," said Chinese President Hu Jintao. "All this shows that the deeper impacts of the financial crisis have still not been surmounted, and systemic and structural risks to the world economy remain very grave."
The G20 communique underscored the countries' focus on achieving "growth friendly" fiscal policies while acknowledging that leaders must reduce the budget deficits, although policies and budget cuts should be tailored to suit each individual nation.
"The path of adjustment must be carefully calibrated to sustain the recovery in private demand," the G20 nations wrote. "There is a risk that synchronized fiscal adjustment across several major economies could adversely impact the recovery. There is also a risk that the failure to implement consolidation where necessary would undermine confidence and hamper growth."
Analysts said the divergent views on how to sustain economic recovery marked the lack of effectiveness of the G20 forum.
Buy, Sell or Hold: Enbridge Energy Partners, L.P. (NYSE: EEP) Brings Some Stability to a Volatile Market
It seems like every week there's a new development that forces investors to rethink their investment strategies.
This week we will see the initial consequences of the weekend's all-important Group of 20 (G20) meeting. A lot of very important issues are up for debate among the world's top 20 countries, as are policies that will shape the intensity and distribution of global growth in the months and years ahead.
The meeting will be fraught with controversy as each economy is proceeding at its own distinct pace of growth and faces its own set of challenges.
China, which recently showed a superlative 50% year-over-year increase in exports, has run out of excuses to justify its undervalued currency. The country also is facing strong inflationary pressures, which include labor strikes by workers demanding higher pay.
This week we will see the initial consequences of the weekend's all-important Group of 20 (G20) meeting. A lot of very important issues are up for debate among the world's top 20 countries, as are policies that will shape the intensity and distribution of global growth in the months and years ahead.
The meeting will be fraught with controversy as each economy is proceeding at its own distinct pace of growth and faces its own set of challenges.
China, which recently showed a superlative 50% year-over-year increase in exports, has run out of excuses to justify its undervalued currency. The country also is facing strong inflationary pressures, which include labor strikes by workers demanding higher pay.
United States Fears Economic Stimulus Measures Will Choke on Europe's Drastic Budget Slashing
While U.S. President Barack Obama will be gunning for more economic stimulus measures at this weekend's Group of 20 (G20) meeting in Canada, European lawmakers continue drastic efforts to rein in spending.
The coordination of global efforts to promote economic recovery will be the main issue at the weekend's meeting, which was set to spotlight the value of China's currency before Beijing announced Saturday that it would allow the yuan to appreciate. The United States and Europe's differing views on the most effective strategies to maintain global economic growth and slash bloated government budgets are increasing tensions between leaders.
"There is a need to move toward rebalancing," Stewart M. Patrick, a senior fellow at the Council on Foreign Relations in Washington, told CNN. "But every country has different domestic political demands, and that is what drives decision making."
President Obama is worried that drastic austerity measures in Europe will choke global growth and collapse a fragile recovery.
The coordination of global efforts to promote economic recovery will be the main issue at the weekend's meeting, which was set to spotlight the value of China's currency before Beijing announced Saturday that it would allow the yuan to appreciate. The United States and Europe's differing views on the most effective strategies to maintain global economic growth and slash bloated government budgets are increasing tensions between leaders.
"There is a need to move toward rebalancing," Stewart M. Patrick, a senior fellow at the Council on Foreign Relations in Washington, told CNN. "But every country has different domestic political demands, and that is what drives decision making."
President Obama is worried that drastic austerity measures in Europe will choke global growth and collapse a fragile recovery.
Buy, Sell or Hold: TransCanada Corp.'s (NYSE: TRP) Low Risk and High Dividend Yield Break the Waves of Uncertainty
The U.S. stock market has been choppy these past few weeks and it's no secret why.
The European debt crisis is taking center stage and eliciting strong policy responses from key European governments. And while those policy responses have moved in the right direction, we're still waiting on sustainable progress.
In addition, we are dealing with the uncertainties related to the oil spill in the Gulf of Mexico, which could have very important economic and financial implications. As if this were not enough, we saw an escalation of the rhetoric in the seemingly endless animosities between North and South Korea, and Hamas and Israel. And Iran continues to pursue a nuclear arsenal.
The European debt crisis is taking center stage and eliciting strong policy responses from key European governments. And while those policy responses have moved in the right direction, we're still waiting on sustainable progress.
In addition, we are dealing with the uncertainties related to the oil spill in the Gulf of Mexico, which could have very important economic and financial implications. As if this were not enough, we saw an escalation of the rhetoric in the seemingly endless animosities between North and South Korea, and Hamas and Israel. And Iran continues to pursue a nuclear arsenal.
This Weekend's G-20 Meeting Won't Bring Any Answers on Financial Regulation
Finance ministers from the Group of 20 (G-20) nations this weekend will attempt to reach a compromise on the implementation of stricter banking regulations at a meeting in Busan, South Korea. However, significant changes to financial regulation will come slow, if at all.
The meeting will start late Friday and will involve discussions about how to reduce deficits and prepare financial institutions for a wider set of rules.
"Sustaining world economic growth is the most important item on the G-20 agenda this weekend," said U.K. Chancellor of the Exchequer George Osborne. "Countries with high budget deficits must show that they can deal with them. Equally, surplus countries, such as China, must show that they too can support economic growth going forward."
The meeting will start late Friday and will involve discussions about how to reduce deficits and prepare financial institutions for a wider set of rules.
"Sustaining world economic growth is the most important item on the G-20 agenda this weekend," said U.K. Chancellor of the Exchequer George Osborne. "Countries with high budget deficits must show that they can deal with them. Equally, surplus countries, such as China, must show that they too can support economic growth going forward."
Buy, Sell or Hold: Deere and Co. Thrives on Strong Global Trends and Flawless Execution
Deere & Co. (NYSE: DE) beat earnings estimates by a mile last week. It reported $1.58 earnings per share, beating most analysts' estimates by 50 cents! In addition, the company raised its earnings outlook.
In typical fashion, Deere continues to be conservative in guidance. And as I will explain below, the agricultural cycle this year is poised for a large upside surprise, as it is at the very beginning of a prolonged secular pickup.
The bottom line of Deere's performance last quarter is a prelude of things to come. Agriculture is zooming, and thus machinery in that sector is - and will continue - to command premium pricing. At the same time, global inflation is picking up slightly, but is still very subdued, which will help margins some more.
In typical fashion, Deere continues to be conservative in guidance. And as I will explain below, the agricultural cycle this year is poised for a large upside surprise, as it is at the very beginning of a prolonged secular pickup.
The bottom line of Deere's performance last quarter is a prelude of things to come. Agriculture is zooming, and thus machinery in that sector is - and will continue - to command premium pricing. At the same time, global inflation is picking up slightly, but is still very subdued, which will help margins some more.
The Greek Debt Crisis Will Slow the Yuan's Advance
Poor Tim Geithner.
Pushed by angry U.S. legislators anxious to brand China as a "currency manipulator," the U.S. Treasury secretary tried to strong-arm China into revaluing the yuan - all because of an assumption that the Asian giant wasn't allowing its currency to appreciate.
Unfortunately for Geithner, those efforts were stymied by a flood of data that actually demonstrates that China's currency has significantly appreciated against the already-wheezing greenback.
Pushed by angry U.S. legislators anxious to brand China as a "currency manipulator," the U.S. Treasury secretary tried to strong-arm China into revaluing the yuan - all because of an assumption that the Asian giant wasn't allowing its currency to appreciate.
Unfortunately for Geithner, those efforts were stymied by a flood of data that actually demonstrates that China's currency has significantly appreciated against the already-wheezing greenback.
To find why China should not revalue the yuan, please read on...
India and Brazil Join U.S. in Pressuring China to Let Yuan Appreciate
President Barack Obama's efforts to pressure China to let the yuan appreciate gained momentum Thursday when the central bank presidents of Brazil and India both spoke out against China's exchange rate policy. Speaking ahead of a Group of 20 (G20) meeting scheduled for this weekend in Washington, the Indian and Brazilian central bank heads surprised […]
IMF Proposes "Fat Cat" Taxes on Banks to Pay for Future Financial Crises
The International Monetary Fund (IMF) is proposing that Group-of-20 (G20) nations levy two separate taxes on banks, including a "Fat Cat" tax on profits and compensation to pay for the costs of any bailouts resulting from future financial crises.
"Expecting taxpayers to support the [financial] sector during bad times while allowing owners, managers and/or creditors of financial institutions to enjoy the gains of good times misallocates resources and undermines long-term growth," the IMF wrote in a briefing paper for the G-20 industrialized and developing countries, obtained by The Wall Street Journal.
The report proposes a tax - called the Financial Activities Tax (FAT) or "Fat Cat" tax - that would be levied against financial institution balance sheets, profits and compensation. It would be paid into a nation's treasury to help finance the broader costs of a financial crisis, The Journal reported.
"Expecting taxpayers to support the [financial] sector during bad times while allowing owners, managers and/or creditors of financial institutions to enjoy the gains of good times misallocates resources and undermines long-term growth," the IMF wrote in a briefing paper for the G-20 industrialized and developing countries, obtained by The Wall Street Journal.
The report proposes a tax - called the Financial Activities Tax (FAT) or "Fat Cat" tax - that would be levied against financial institution balance sheets, profits and compensation. It would be paid into a nation's treasury to help finance the broader costs of a financial crisis, The Journal reported.
Buy, Sell or Hold: BHP Billiton is Poised to Pick Up Big Gains on the Back of a Global Commodities Bull
Face it, commodity prices are in a secular rally - and there are three big reasons why.
- Loose Monetary Policy
- Growing Demand in Emerging Markets
- And the Congruent Devaluations of Major CurrenciesWe've already profited from this inflationary trend in the Money Map VIP Trader. And - just like I did with the broadband revolution - today I am presenting you with a stock that stands to benefit from these developments - BHP Billiton Ltd. (NYSE ADR: BHP).