Will world economy to "touch bottom for 2nd time"? (2)

13:12, August 24, 2010      

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My answer to the question is that there is no inevitability but a possibility; there is little possibility and, if not to handle it properly, the possibility will increase. And what most crucial is the intensity of competing strength between the "touching bottom" and "anti-touching"bottom.

On the side of those for "touching bottom", they say a nearly 1 trillion euro rescue package to prevent Greek sovereign debt crisis was spreading some countries in Europe. Britain recently disclosed that its gross national debt stood at 4 trillion pounds or 6 trillion dollars, four times the figure that has been admitted earlier.

The United States'1.56-trillion dollar deficit this year is estimated at 10.6 percent of its gross domestic product (GDP), and the unemployment rate in the U.S. has surpassed 10 percent, according to figures released y the U.S. Department of Labor recently. Japan has a public debt mountain bigger than any other developed nations, expecting to hit 200 percent of GDP as the government tried to spend it way out of the economic doldrums despite the plummeting tax revenues. The nation's unemployment rate, seasonably adjusted, hovered around 5 percent. So, Japan's risk of "touching bottom"cannot be ignored or overlooked.

As for the people on the side of "anti-touching bottom", they poise to enhance their situational awareness against the crisis. In order to cope with the crisis, European financial ministers have put together an unprecedented loan package that may worth as much as 750 billion euro for debt swamped governments. As American economy remains fragile, the U.S. Congress passed the financial reform bill and the Fed's policy of keeping interest rates near zero is still being implemented. And Japan has approved new, extra budget for economic stimulus package.

There is a systematic paradox lying in rescue packages for the United States and Europe. Global economy has been merged or integrated, but the economic performances of different countries vary widely: Some countries want to increase their exports, and some others want to go in for trade protectionism; some strive to expand their domestic consumption and some others have a serious unemployment problem; some are trying hard to stimulate their economic growth with looser monetary supply, and some have introduced the tight monetary policy to guard against inflation...

Such a predicament exists not only in different countries, but also in the same country or in the same economy. Although an intensity for "anti-touching bottom"is greater than the intensity for "touching the bottom", there is a possibility to change and people should not fail to make it clear in advance.

By People's Daily Online and contributed by Tang Shuangning, executive chairman of the Board of China Everbright LTD., and vice-chairman of the China Society for Finance

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