Saturday, April 12, 2008

" August 2007 has developed into the largest financial shock since the Great Depression," the IMF declared.

According to the IMF the global economy is quickly tanking. Don't believe the hyperbole though and examine the facts. "Economic growth in the United States is expected to slow to a crawl of just 0.5 percent this year, which would mark the worst pace in 17 years, when the country last suffered through a recession", the IMF said. Now folks that statement alone is misleading. A recession is two consecutive quarters of negative growth. While 0.5% growth is not spectacular, it's not negative growth, it's not a recession and it's not even close to a depression. Let's continue with the IMF statements.

"The United States will not fare much better next year (2009); the IMF projected the U.S. economy will grow by a feeble 0.6 percent in 2009, when measured by an annual average." First of all, no one, let me repeat no one can predict what is going to happen a year from now. I recommend you live by the motto, "plan for the worst hope for the best" because US growth is certainly not as strong as it was a few years ago, but tumbling into a recession? Maybe, and if the media had it their way the US economy will plunge right into the toilet. In fact, these things have a way of becoming self-fulfilling prophesies if all of us choose to listen.

The good news in the IMF report is that countries like China and India will remain strong despite a US recession. "Global powerhouse China, which barreled ahead at an 11.4 percent pace last year, would see growth moderate to 9.3 percent this year and then strengthen a bit to 9.5 percent next year. India, which grew by a blistering 9.2 percent last year, is expected to grow by 7.9 percent this year and 8 percent next year. Russia, which logged growth of 8.1 percent last year, will see growth moderate to 6.8 percent this year and then 6.3 percent next year.", the IMF report said.

7.9% growth is still fantastic growth and will propel India's economy upward and create additional jobs. As I have mentioned however, don't believe forecasts that are projecting to know what's going to happen beyond 6 months as their are millions of factors that effect an economy. Moreover, as many of us know, Americans are very innovative and take action when facing a crisis. The Fed has cut rates and the government is providing stimulus checks to its citizens to spend on goods and services. There are a lot more ideas and some are in the works.

As I led off this article, I quoted the IMF proclaiming this to be the worst financial disaster since the US depression. The facts today clearly don't support that assertion and you can bet someone is either trying to make a name for themselves by getting the media to pick up the quote, or financially profiting from the statement in other ways.

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