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The Global Economy Remains Shaky

Posted on May 13, 2013 at 11:00 AM

From US News Blog

Let me start with the good news for 2013. So far, no major tsunamis are anticipated off the coast of anywhere; North Korea has not fired on South Korea; the royal house of Al Saud of Saudi Arabia has not fallen and oil prices have not skyrocketed; we still have enough clean drinking water for now; America seems to be on the mend; the Japanese economy is back in the news; no  big headline news from Egypt, Israel, Palestine, Jordan, the United Kingdom or Brazil; stock markets are booming and Wall Street is back; and the euro zone still has 17 members.

Now for some bad news for 2013: The world economy is slowing down, including China and Germany; Europe is still in decline and has no plan other than to survive its crisis; the American recovery is nowhere near strong enough to carry the world; job creation and income inequality are still in dire trouble in almost every country in the world; the Japanese, much like their American counterparts, have no serious path to budget deficit reduction; we don't know exactly when it will hit us, but we do know extreme weather will come calling; the number of ineffective and bumbling politicians in the developed world seems to be growing; and social insecurity and growth are moving in diametrically opposite directions, as the first is increasing and the latter is decreasing or flat.

Even with the market's new cautious optimism, risk and anxiety have created a "world economy [in which it] is as weak as its weakest link," according to Olivier Blanchard, chief economist of the International Monetary Fund. He also added, "Given the strong interconnections between countries, an uneven recovery is also a dangerous one. Some tail risks have decreased, but it is not time for policy makers to relax."

Confidence is still shaky. So we come into 2013 somewhat battle-weary, knowing that the recovery is still a long way into the future. Now, as we lick our wounds, is the time to get down into the trenches to do some serious work, such as dealing with the tax code and social support systems while trying to restore the confidence of the developed world's embattled middle class.

Major polices have to be enacted. This is not the time for failure of governance. Ambling through is not an option. Real long-term political vision and will is needed to derive real productivity gains and to restore some semblance of social safety for the middle class.

So, in the end, what does all the good and bad news mean for you? Are you "cautiously optimistic" or "cautiously pessimistic"?


Categories: US News Blog