The risk of new, deep economic downturn increases

The world economy began to recover from the worst recession and financial crisis since the Great Depression period in the 30 years noted the famous American economist and professor at the University Nyuyorksiya Nuri Rubies in a publication, published in the online edition of the newspaper Financial Times.

In the fourth quarter of 2008 and first quarter of 2009 the pace of contraction in the most advanced world economies was similar to the state of free fall of their gross domestic product (GDP) in the early stage of depression. A year ago, the politicians finally started using the majority of its weapons arsenal, says Rubin.

These efforts paid off and free fall in economic activity to ease. Now there are three questions that are on the agenda. When the world recession will end? Za what form the economic recovery? Are there any risks of repeated economic downturn?

According Rubies global economy is likely to emerge from recession in the second half of 2009

On the second question there is a dispute between most economists expecting a V-shaped recovery – rapid economic growth following the severe recession – and others like himself Rubin, according to which the recovery of world economy will be U-shaped – anemic and a lower level of total trend at least the first two years. Rubies is of the opinion that it will initially be recorded rapid economic growth for two quarters due to overcharging by the recovery of stocks and production levels similar to those during the Great Depression, then growth will be delayed and will be lackadaisical.

However Rubies warns of growing threat of a new deep downturn in the global economy. The first risk is related to the fact that the governments of many countries are starting to devise strategies to exit the current policy to stimulate and support of national economies. If politicians allow a significant increase in financial deficit, increase taxes, reduce costs and access to liquidity, they will undermine the reconstruction and its economy back to Stagflation (recession plus deflation).

Another reason for the risk of a second economic downturn is that when oil prices, energy and food price growth is a faster pace than projected in the economic fundamentals. The world economy can not withstand the shock of a new rise in oil prices above 100 dollars a barrel, warns Rubies in his article in the Financial Times.

Finance

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