The financial crisis that's constrained credit around the world will slow the global economy considerably and quickly, the International Monetary Fund announced in its October 2008 report. The IMF now expects global GDP growth to slow to 3.0% in 2009, down from 3.9% forecast in its July 2008 report.
Moreover, economists note it's important to highlight the differences in what constitutes a recession in the developing and developed worlds. Because emerging markets/ developing countries are capable of and require higher growth rates, a low GDP growth rate is roughly equivalent to a negative GDP growth rate in developed countries -- i.e. equivalent to a recession. The average of the two means the global economy can be considered to be in recession when global GDP falls below 3.0%, certainly if it falls below 2.5%.
Worst global GDP growth since 2001-2003
Economist David H. Wang told BloggingStocks the IMF's latest forecast points to a global recession, or the closest condition to it.
"It is a somber report, no question. Many developed nations will now record close-to-negative or negative GDP growth for 2009. Add slowing emerging market growth and a credit market that will be in recovery mode for much of 2009 on to high commodity prices, and it's a formula for the worst global economic conditions since the 2001-2003 period," Wang said.
The IMF now expects the U.S. economy to record 1.6% GDP growth in 2008 and just 0.1% in 2009. IMF 2008/2009 GDP forecasts for other key economies are as follows: United Kingdom, 1.0% / -0.1%; Germany: 1.8% / NA; France, 0.8% / 0.2%; Japan, 0.7% / 0.5%; China, 9.7% / 9.3%; India, 7.9% / 6.9%; Brazil, 5.2% / 3.5%; and Mexico, 2.1% / 1.8%.
Further, while almost all policy maker attention is appropriately and justifiably focused on jump-starting credit markets and removing toxic assets from the banking system, after the crisis has been resolved, Wang said policy makers, along with financial service regulation reform, should also address a major flaw in the global economy: those aforementioned high commodity prices, primarily oil.
"Even before the financial crisis reared its head, oil prices had reached economically damaging levels when oil hit $80 then $90 per barrel," Wang said. "Many economic models indicated that adequate U.S. and European growth could not be sustained with oil prices at those levels. However, little was done regarding energy policy, both conservation and production, in the United States to reduce prices. Now the financial crisis has made what had been a weak U.S. economy even weaker. In the United States, the new Congress has to eliminate America's vulnerability to high oil prices."
Economic Analysis: The IMF also urged countries to coordinate policy responses, when appropriate to address the financial crisis, and it estimated that governments globally may have to spend $2 trillion to remove distressed/bad assets from the financial system. Along with recapitalization of selected banks, and maintenance of access to commercial credit, Wang and other economists have cited asset removal as a key to ending the financial crisis.











Reader Comments (Page 1 of 1)
10-09-2008 @ 1:31PM
SethEden said...
So, as you walk out into your neighborhood you encounter not hallways but wide walkways, allies and breezeways lined with trees and plants, schools, hospitals, libraries, theaters, businesses, shops, and restaurants—all within walking distance, or a short elevator ride.
...It's called an Arcology, look up the Wiki on it and learn something new before touting what has already been well defined, studied, built and tested:
http://en.wikipedia.org/wiki/Arcology
Or you could just read my blog and find out what kind of real science is going to be needed to change this world!
http://Blog.SethEden.com
Cheers
~SethEden
10-13-2008 @ 8:19PM
wjlibby said...
Sometimes we have to think outside the political box for ideas and solutions.
Can Sustainable Cities Save The Planet?
By Walter Libby
http://theendpoint.blogspot.com/
Can sustainable cities save the planet? This is a good question and it deserves a good answer. But a more relevant question is, can sustainable cities save the United States? Our rising unemployment rate in the global economy has finally caught up with us—we are out of bubbles and are now a nation at risk. With nine straight months of job losses and a looming financial crisis, our prospects look grim—despite the efforts being made to prop up our financial system.
The problem is we are in liquidity trap. Here, despite low interest rates, the infusion of new blood, the cash that is being pumped into banks will just sit in their vaults as recession forces consumers to cut back on spending forcing firms to cut back on production, investments and workers perpetuating the cycle pushing the economy ever deeper into crisis.
The question now becomes, how do we get out the trap? We can’t look to a turn around in residential construction. But we can look to a turn around in our thinking as we shift from urban sprawl to the development of new cities designed along sustainable lines. So together with their development and the investments in renewable energy they will begin to pull us out of the trap.
The advent of peak oil has convinced venture capitalists to get busy in saving the planet. Now we have to sell the idea of new cities to investors, developers, and the people, and that requires a model that captures their imagination and investment dollars. So following in the footsteps of Ebenezer Howard, here’s how I see cities of tomorrow: clusters of neighborhoods (linked by elevated transportation arteries shared by electric vehicles, bikes, pedestrians and rapid transit systems) will form the city. These neighborhoods are large terraced multi-storied structures sheltering thousands. Here their terraces are reserved for greenhouses and homes and their centers for factories and fully controlled-environment farms.
So, as you walk out into your neighborhood you encounter not hallways but wide walkways, allies and breezeways lined with trees and plants, schools, hospitals, libraries, theaters, businesses, shops, and restaurants—all within walking distance, or a short elevator ride. And when you go to the first floor, at ground level you find barns (for pigs, beef and dairy cows, and chickens that are harvested next door) opening onto natural habitant mixed with organic farms, orchards, parks, playgrounds, and golf courses. Here, instead of sending our table and produce straps, our unwanted leftovers, dry bread, spoiled fruit to landfills, we recycle them to neighborhood barnyards or to community organic orchards and gardens.
Once there is a sufficient population, a larger central city is built. This is the cultural center of the whole. Here you have universities, the larger hospitals, museums, aquariums, zoos, sports stadiums, theaters for the performing arts, large central parks, plazas, street performers, and so on.
New cities are going to play a significant part in our economic recovery. And they are not going to be connected by super highways but by railroads carrying passengers, cars, trucks, commodities, construction equipment and freight.
New cities, as an alternative to unsustainable urban sprawl, by itself is a strong selling point. Add to that greater efficiency, lower taxes, and a mix of town and country. But its best pitch to the captains of industry is that they are necessary for our national security and confidence in general—for Wall Street and Main Street, and for those in the world who doubt that America can resolve its economic crisis, our ability to bootstrap our economy.
Yet, while the development of new cities will rev up our economy structural problems still plague the global economy—it’s unbalanced and so unsustainable as witnessed by our mounting trade deficits. And given that the financial crisis was brought on by our loss of jobs to the global economy (the housing bubble was the result of the Fed lowering interest rates to rock bottom in a desperate and vain attempt to avoid recession following the collapse of the dot.com bubble), we have to ponder the question, is capitalism collapsing? And this poses challenges not only for America and democracy in general, but for communist China, Russia and Venezuela as well.
China, having taken the capitalist road, has pretty much captured the means production as multinationals, in a race to the bottom, in a race to China to beat their competitors, have left in their wake socioeconomic crisis in their respective countries—notably in the U.S. In the process China has pretty much become the factory to the world. And in doing so have created a contradiction in the global economy—who are going to buy its products? This is a contradiction that threatens China.
And Russia and Venezuela, as oil prices plummet with a global collapse, face economic ruin—along with the rest of the oil producing countries. We need a new global order, a new world agenda.
Mikhail Gorbachev has stated such in The Search For A New Beginning: Developing A New Civilization.
Essentially, Gorbachev is touting sustainable development. Yet, he says “It has been the fond hope of many that the end of the Cold War would liberate the international community to work together to avert threats and work in a spirit of cooperation in addressing the dangerous problems that affect the world as a whole. But, despite the numerous summit meetings, conferences, congresses, negotiations, and agreements, there does not appear to have been any tangible progress… Between the old order and the one lies a period of transition that we must go through—moving toward a new structure of international relations marked by cooperating, interacting, and taking advantage of new opportunities. What we are seeing today, however, looks rather like a world disorder.
It is my belief that today’s policy makers lack a necessary sense of perspective and the ability to evaluate the consequences of their actions. What is absolutely necessary is a critical reassessment of the views and approaches that currently lie at the basis of political thinking and a new combination of player to envision and carry us through to the next phase of human development.”
The next phase of human development is the development of new sustainable cities throughout the world. As a start we should also pursue the moral equivalent of war. The industrialized nations should form an economic coalition to assist the Palestinians, the nations of Afghanistan and Pakistan, and other nations in turmoil, in the development of new cities. Peace through prosperity.
The idea of cooperation didn’t begin with Gorbachev, it began with the atom bomb—war was out and cooperation was in. So after World War II, The World Bank and the IMF (International Monetary Fund) came into existence. Their combined mission is to foster economic growth, high levels of employment, while providing temporary loans and financial assistance to relieve debt.
While that mission remains the same its focus should now be on the development of sustainable cities. The world faces an energy crisis as the production of oil peaks and then declines, as well a looming water crisis exacerbated by the increasing threat of droughts. Their mission should be now to focus on the development of renewable energy to power control-environment farms. And then add on the neighborhoods.
The thing is it may well beyond the scope of the World Bank and the IMF to implement. Therefore we need a summit meeting of the industrialized nations to forge a consensus along with working out just how this is to be accomplished.
That said, however, the first condition of the summit should be that loans or direct investments tied to the development of natural resources in the developing countries require that their leaders will channel their revenues into the development of sustainable projects while ensuring the workers receive wages sufficient for the necessities of life along with low interest loans to purchase their new homes —this means that the enlightened nations will only support democracies and work together to convince dictators and corrupt officials to rethink their positions.
There is also something that all nations should consider: that it is in their best interest that they shift to a global economy where trade is no longer a zero-sum game, but a sustainable end game where everyone wins--it's about cooperation and balancing trade
There is a huge amount of work (enough to keep us all busy) to make the transition to would-be sustainable cities throughout the world, and that requires that nations with a trade surplus, who are shifting their economies (their workers) to the development of new cities, turn to those nations with a trade imbalance--an imbalance in employment--take their foreign reserves and invest in or directly trade for whatever is necessary to facilitate and expedite the building of their cities.
Thinking that pressuring China to revaluate its currency as a solution is wrong-headed. It will only create unemployment for China and inflation for others.
And for those who think that the conflict Marxism and liberal democracy as inevitable, they should think again—think about where sustainable are heading.
Sustainable cities are on built on three legs: they have a source of renewable energy, produce their own food, and have the ability to manufacture their own necessary consumer goods. Today we have the technology for the first two and eventually tomorrow’s technology will replace low-wage workers with robots as the final assemblers in fully automated factories--automated factories that can be scaled to provide the necessary consumer goods on a local level—eliminating middlemen and transportation costs.
When that day comes their will no be longer a struggle over the means of production and we’ll find ourselves at the end of history—the end of the historical ideological battle between liberal democracy and Marxism. And when that day comes we’ll also see the world’s population stabilizing just as in the industrial nations populations have stabilized (the U.S. the notable exception—but that works as it allows us build new cities) as they modernized and urbanized.
Here, Marxism finds its final resting place in the dustbin of history. Seeing history as written in stone—seeing conflict as the final solution—is a bad idea.
On other hand it is democracy, freewill, that puts forward the ideas to meet the challenges that a fast changing presents. But here too we have an ideology based on self-interest that is false and cowardly. Self-interest rightly understood is a collective-free-market-will that puts aside the issues that divides us and focuses on the ideas that insure the integrity of whole. The “invisible hand” as it guides ”the butcher, the baker, the brewer” has to be replaced with the hand of reason—hopefully enlightening those who subsist on corruption and greed
Humanity was conceived ignorance. As such Gorbachev reflecting on the past tells us ”Conflicts and wars have been an organic part of history.” Another way of saying it is that “there will be trials and tribulations.”
So we have choice, on both sides, continued conflict, continuing ignorance, or emerging cooperation. If conflict remains in place there’s another determinism to be considered—the historical determinism of weapons—best expressed by the dialectics of Marxism. The United States (the thesis) was followed by the rise of the Soviet Union (the antithesis) who together cannot exist without constantly revolutionizing the means destruction and exchange—nuclear weapons and ICBM’s. Eventually their numbers will reach a critical mass, and a great leap occurs, leading not to a synthesis, but the victory of matter over mind, the end of all history. This was “the backbone of perestroika.” It is why the Soviet Union was allowed to collapse. It is why Gorbachev posits a new world order. As I see it, a new world order where sustainable cities mark the beginning of a new epoch that not only saves the planet, but also saves us our from ourselves.
Footnote
Controlled-environment farming: In a world facing the challenges of severe droughts and extreme weather, looming worldwide water shortages, along with rising oil costs and rising food prices controlled-environment farms are being touted as the answer. While there are variations of indoor farming, they all are pretty much based on hydroponics and tout the same economic efficiencies. They all can be located within cities or neighborhoods. They all run on electricity, require no pesticides, herbicides nor fertilizers (all derived from fossil fuels). They produce crops year around, and depending on the technology, use from one-tenth to one-twentieth the water of conventional farms. They not only use less water, they can use recycled water from the surrounding communities.
One up and running venture was the Phytofarm (re: Discover magazine December 1988, The Green Machine: Indoor Farming). This is a fully enclosed farm fed by artificial lighting where one acre can produce 100 times the yield of conventional farms (day or night). And while it was geared to produce leafy greens and herbs, there is practically nothing that cannot be grown indoors—albeit it would require a shift to growing some food in composted earth pots. Yet, while the project had a successful run, producing sought-after high quality crops, for a number of years, in the end it lost out due to high-energy costs and closed its doors in the early 1990s.
Today, vertical farms are being touted along the same sustainable lines. Essentially these are high rises with greenhouses stacked on one another. Yet, they have not attracted any investors and so their technology remains in doubt. But phytofarms are a proven technology and they too can be stacked on one another. And they can start producing with the completion of the first floor. As such, the investment here can play its role in a sustainable economic recovery.