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Politics : President Barack Obama -- Ignore unavailable to you. Want to Upgrade?

To: LLCF who wrote (52672)	3/29/2009 1:02:41 PM
From: ChinuSFO	Respond to of 149317

Pushing the right buttons to turn the world economy around Vancouver Sun March 11, 2009 International bankers have their fingers on the pulse of the world economy, but are coming up with contrary assessments of its condition. In the past few days, we've heard from the World Bank, the International Monetary Fund and the European Central Bank, and their forecasts range from bust to bullish. The World Bank offered the most dismal prediction of the bunch, foreseeing the first contraction in the global economy and international trade since the Second World War. It offered no specifics, but warned that the financial crisis is likely to overwhelm the ability of the World Bank and the International Monetary Fund to provide a buffer. However, World Bank president Robert Zoellick's catastrophic projection may have had a political purpose. First, he blamed the United States for creating global havoc through junk mortgages, then argued that poorer countries that had nothing to do with them suffered disproportionately as their economies were devastated by falling exports, plunging commodity prices, declining foreign investment and the unavailability of credit. Finally he made his pitch for a "vulnerability fund" that would compel wealthier countries to devote 0.7 per cent of their stimulus spending to developing countries. His outlook is far bleaker than that of most private forecasters, or the International Monetary Fund, and that of the usually pessimistic European Central Bank, which delivered a surprisingly upbeat assessment this week. In its January economic statement, the IMF warned of the risk of economic contraction in the industrialized world, but it officially forecasts global growth of 0.5 per cent this year. Meanwhile, ECB president Jean-Claude Trichet said that the economy is approaching a turnaround point, and low oil prices and measures taken by central banks and governments will soon start to stimulate economic growth. Trichet said observers and market players are underestimating the impact of monetary easing by central banks and the trillions of dollars governments have pledged in stimulus spending. He added that central bankers attending the Global Economy Meeting at the Bank for International Settlements on Monday didn't address the risk of deflation. "It's not something we consider a high probability at all at a global level," he said. Although central bankers are confident the steps they've taken will have a positive outcome, they did discuss additional measures to boost lending. Many developed countries have cut interest rates to near zero and are running out of room to manoeuvre. The Bank of Canada, for example, has cut its overnight lending rate to 0.5 per cent and further cuts are unlikely to yield significant additional stimulus. That's why the bank has given notice in its March 3 news release that it will consider credit and quantitative easing if further monetary stimulus is deemed necessary Quantitative easing is the equivalent of printing money. The bank can't just run off new bills; bank notes it issues account for only a small portion of money in circulation at any one time. But it can influence the amount of money in the economy by participating directly in the money market. To this end, it would create money electronically in its own accounts and use those funds to buy bonds and commercial paper from financial institutions, crediting the value of those purchases to the accounts those institutions hold at the Bank of Canada. The banks can then use the new funding to make loans. The central bank can also buy poor-quality debt and replace it with financial instruments backed by the government, in effect creating new money out of worthless IOUs. In fact, the federal government has already taken action that mirrors quantitative easing by buying mortgage debt from banks to ease the credit crunch. Quantitative easing may well turn out to be the defining jargon of 2009. vancouversun.com