On-Money

Deeper U.S. Recession Will be exported to the World. The US credit crunch is going global and the US recession could become severe despite the promised benefits of the just-enacted TARP. Indeed, the recession now threatens to go global, with industrial economies on the brink of recession and both trade and financial shocks threatening the developing world. These shocks will help lower inflation and give officials the ability to respond with easier monetary and other policies.

It’s likely the US GDP will contract by 1% or more in the next nine months and the jobless rate will exceed 7%. The freeze in financial markets is getting worse and implementation of TARP is at least a few weeks away.

Global growth is now forecasted to be 2.7% in 2009, down 0.8% from a few weeks ago. Mainly because of trade and financial shocks, technical recessions have hit many industrial economies. Growth in exports is slowing and there is a risk of a downturn in capital spending.

Inflation is less of a bugbear as growth slows and inflationary heat diminishes. This slowing down varies from country to country however. a global slowdown is now forecast. But just how severe and for how long? No one knows and forecasts of interest rates curves have got steeper helping the dollar but this may not last.

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