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Vanishing patience

(China Daily)

14:26, September 24, 2011

Worldwide financial panic and a rising tide of anger on both sides of the Atlantic indicate that public faith in a lasting global recovery is wearing out faster than expected. Therefore, policymakers from Europe and the United States can no longer avoid taking their fundamental economic and financial problems by the horns.

The annual meetings of the International Monetary Fund (IMF) and World Bank in Washington is a chance the international community has got to review the progress made, if any, in fighting the global slowdown. More importantly, it is time to drive home a badly needed sense of urgency among global policymakers that a double dip would become imminent if they do not do enough to stimulate real and sustainable growth.

On Thursday, stocks plunged about 5 percent across Europe and more than 3 percent in the US. Though the situation in developing markets is better, they are showing high levels of stress.

Perhaps global investors have begun losing confidence in the "ease answers" Western policymakers have come up with. Financial gimmicks, such as quantitative easing, may have eased some pain but they have failed to boost job-creating growth in developed but debt-laden countries.

The strike in Greece against the government's fiscal austerity measures and the protest in Wall Street against greedy capitalists have exposed how unjust the quick fixes are. Massive bailouts using public funds have saved big banks on both sides of the Atlantic, but now the public, especially the poor, are being made to bear the brunt of their governments' deficit cuts.

The unjust "ease answers" will add to the domestic difficulties of policymakers in rallying enough public support to overhaul their troubled financial and economic systems with necessary and shared sacrifice from everyone.

Worse, some politicians in the debt-laden developed countries have irresponsibly blamed other countries for their domestic economic woes, further undermining global efforts to tackle the financial crisis through coordinated international action. In the latest example, some US senators unveiled a legislation bill on Thursday to punish China for its alleged currency manipulation.

At a time when the world economy is "entering a dangerous phase", such China-bashing will do nobody any good. Instead, it will spark fears among investors and the public about the dim prospects of global growth, especially if relations between two of the world's largest economies worsens.

On Friday, a few days after the IMF lowered its forecast for global growth, the World Trade Organization revised its estimate for this year's growth in global goods trade from 6.5 percent to 5.8 percent. Hence, further loss of public confidence will cause more harm to export growth prospects worldwide.

The turmoil in the markets and on the streets should be enough to galvanize global policymakers into taking urgent and coordinated action to prevent a double dip.


Leave your comment2 comments

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Ming Yu-han at 2011-09-25175.144.194.*
How many billions do we stand to lose if Greece and Portugal default? It will be interesting to see if that happens. Then perhaps we will have to find who"s accountable and ask him or her to resign.
Canada at 2011-09-2570.36.49.*
I listen to Canada’s Business News network [BNN] until 1 p.m. during the day. Basically guests and economists look to the growth in China’s economy, also Brazil, to save Western economies from a meltdown. If China said they predicted the growth in GDP was predicted to drop to 2%, it would likely result in a stock market crash. On one hand China is correctly viewed as the engine of world economic growth, yet the U.S. uses China’s currency as the scapegoat to hide their own mismanagement and greed.

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