Warning over collapse in capital flows

Source: The Telegraph

Warning over collapse in capital flows
The world economy will shrink this year for the first time since the Second World War, warns the gloomiest forecast yet delivered by a major international institutional.

By Edmund Conway in Davos
Last Updated: 6:26AM GMT 28 Jan 2009

World trade is under pressure as the global economy is set to shrink The Institute of International Finance, the global organisation of major banks, predicted an almost unprecedented collapse in world economic growth and capital flows.

It became the first major global institution to forecast a full-scale global contraction in 2009, predicting that the economy would shrink by 1.1pc.

IIF chief economist Philip Suttle said: "This is the worst period since the interwar years. The global growth backdrop is very difficult. We foresee a contraction in 2009 in the global economy of over 1pc."

He also expects rich economies to contract by 2.1pc – the worst peacetime output since the 1930s.

Private flows of capital into the emerging world are set nearly to dry up in the next year, the IIF predicted, dropping from $928.6bn in 2007 down to $465.8bn in 2008 and then to $165.3bn the following year.

As a result the current account deficits in emerging Europe will more than treble in the coming year, from $30bn in 2008 to $117bn next year.

The forecasts shed light on the likelihood that the current financial crisis transmutes into a severe worldwide recession of the kind that has not been seen since the Second World War. Asia is likely to suffer a worse downturn than during the Asian financial crisis, the report indicated.



Read more: http://www.telegraph.co.uk/finance/economics/4361570/Warning-over-collapse-in-capital-flows.html

have been trying out capitialism for the first time in their citizens lifetimes. If they sour on a Market Based economy, then we could see battle lines being drawn again in Europe over the haves and the have nots.

They have lurched from centralized controled to unfettered, in many case lawlessness, economies that haven't had time to develop on their own. It could lead to unrest.

Just another thought on top of all the other thoughts circulating these days.

I guess the west and the east are set to discover if the old Chinese adage to "May you live in interesting times" is a curse or a blessing.

They don't have enough prisons or military

We foolishly put an idiot in a position to damage the world, and he did so. Big time.

it has proven to literally be a bankrupt one at that.

Just remember that Reaganomics tripled the national debt in 8 years to a whopping 3 trillion, and the US went from a lender to debtor nation during that time.


Borrowing heavily, with no foreseeable way to pay it off, has lead to this situation we now face.


GOPyg grade: f.

Ship goods to US.

Get dollars in payment.

Use dollars to buy mortgage backed securities.

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Ain't happening anymore.