An article from the International Monetary Fund recently said that Europe is facing a financial crisis that has started a “dangerous new stage” and has the possibility of paralyzing global economic growth even with the best of circumstances.
Things are only looking worse for Europe with warnings of more instability in the near future causing a breakdown in lending, investment and production that would bring forth a brutal recession in Europe, in contrast of what the IMF is expecting which is a mild recession.
According to the current World Economic Outlook released by the International Monetary Fund, the global economy is expected to grow 3.3% in 2012, a lot more sluggish then four months ago when the IMF anticipated a growth of 4%. It is expected that Global growth will perk up some next year by about 3.9% however, we should not expect more than a 3% growth from developed economies within Europe, North America and Pacific Rim. This small percentage of growth is predicted to continue for at least two years.
The IMF’s predictions are not looked at too strongly. What are heavily looked at are the risks behind the advantages and disadvantages and these are pretty distressing.
In the prediction around bartering the IMF does not consider the European policy makers abilities to avoid a tragic breakup of the euro zone and its ability to pacify any worries regarding sovereign debt and bank balance sheets.
If for some reason this does not occur, the IMF foresees a sequence of events also recognized as an “adverse feedback loop” between sovereign debt and bank funding needs where amplified apprehension regarding debt steers the government into “more front-loaded fiscal consolidation, which depresses near-term demand and growth.”
Front Loaded means to assign costs or benefits to the early stages of a contract, project, or time period. Fiscal Consolidation is a policy intended to reduce deficits and the accumulation of debt. There is a natural postponement for adoption, execution and stabilization between choices and their influence on the revenue deficit.
If the IMF is unable to evade the awful breakup, Europe’s economy would tighten at a 4.5% yearly rate, in contrast to the weak turn down of 0.5% foreseen in the IMF’s baseline forecast. The results of the recession would not be as terrible as the 2008 slump, however it would slash global growth by only 1.3% in 2012.
There are more risks in the forecast for example China’s hard economic landing and our lack in oil supplies. Also any “extreme economic tightening” would cause a decrease in growth for the U.S. The IMF creates a rather depressing picture of the global economy, and with four years behind us since the start of the recession the economy is still looking fragile. Find a decent gold investment company and get started protecting yourself.
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