Harga Minyak Mentah Dunia akan Meningkat lagi !!!

Hints on what lies in the future

Have a look at this you tube video . Its an interview between Glen Back of Fox news and Congressman Ron Paul. Congressman Ron Paul is known for his relentess opposition to the on going manipulation of America's financial system by a certain group of crooked individuals.

What is interesting is that a few statement made by George Soros, Murdoch as quoted by Beck and Mr Paul himself.

1.Collapse of American financial system is comparable to collapsed of Soviet system. The ends (??)is coming

2. Nations will will be redefine in this period

3. Realignment of USA

4. Attempt to control the world natural resources by certain group

5. One World Government

These statement are made in public by people of high position . These people knows or at least have better ideas of whats coming in near future.

Now Listen to Max Keiser


Bob Chapman - International Forecaster

The Second Wave of Economic Storm

The Coming Economic Apocalypse

By: Roy F GriederJun 28, 2009

Astonishing to me is the fact that no one seems to understand the ultimate result of the current policies and practices of Washington D.C. and the Federal Reserve Bank, the Fed. I have studied our economic situation for about 3 hours per day for the last 8 months and conclude we are bankrupt. Think about the facts.


Certainly most of the automobile industry, the airlines, 37 out of 50 states, are bankrupt. The lending industry, Fannie Mae, Freddie Mac are bankrupt. Insurance giant AIG, bankrupt. The Pension Benefit Guarantee Corporation, or PBGC, the Federal Deposit Insurance Corporation, or FDIC, Social Security including Medicare and Medicaid are rapidly approaching insolvency.
In 1929 personal and corporate debt had risen to 365% of Gross Domestic Product, or GDP, before the Crash. We are now at 375% of GDP. So all of this excessive credit got us into this mess in the first place, right?. And the government and Fed solution to this mess is to print up an extra trillion dollars or so, give it to the lending industry and yell “Lend!, Lend!”. That should work, right?.


Remember TARP?, the money given to the banks and others to remove their “Toxic Assets” (sorry too harsh, let’s rename them “Troubled Assets.) Well, the toxins still remain. They exist in the form of Financial Derivatives, Credit Default Swaps, or CDS, and Collateralized Debt Obligations, or CDO. These financial instruments sound complicated, and they are. They are the inventions of Wall Street wunderkinds, the ones that get paid a couple of millions per year for their “brilliance“. The worldwide market (if you could call it that) or value of CDS is in the neighborhood of 600 trillion dollars, or 10 times the entire Worlds yearly economic output. How the banks and insurance giants are to clear their balance sheets of these toxins is no mystery . They cannot. Was it wise to take TARP money, 20 billion dollars, give it to General Motors when their market cap (the value of their common stock) was 985 million?. Will they pay us back?. No. They are bankrupt. The TARP was a fraud from the start, but it has bought the powers that be some time. Time, time for what?


There is a fever pitch rush to consolidate control over us by the government and the Fed. Look what they are doing to the banks, insurance, lending institutions, auto industry, airlines. Let’s now add health care. By the way, let’s appoint czars and give them power not granted by the Constitution. Why?, what’s the rush? To gain control before we go “out of control”?.


And now 37 out of 50 bankrupt states need to raise fees and taxes, and so does our federal government to pay for “free” healthcare. Raise taxes during a deep recession?, worked great in the early 1930’s, right?. Are these people idiots? Yes they are. Why not have a 2 trillion dollar deficit this year, and run up the national debt to 20 trillion dollars in a few years. Interest on the debt would only be 1 trillion a year at 5 per cent. Chump change. Government borrowing on such a massive scale will compete for the money in the open market and will make overall interest rates rise . Rates already rose a few weeks ago during a large treasury auction. Watch this carefully, mortgage rates will respond by going up. Think what this will do to the already very ill housing market.


Some “experts” as of late say they see “green shoots”, signs of economic recovery. What they “see” may be self-serving or it could be these people are delusional. The Fed Chief, Treasury Secretary, Congress and the President are lying to us. We are bankrupt and they know it. You can put a bandage on a gangrenous appendage and it looks fine, but if the appendage is not amputated the body will die. A bandage is all that is being applied to this gangrenous economy. Toxic.


So, where are we headed?. I suppose the Fed and the Treasury could just continue to print more money. Right up to the point it becomes worthless. The Weimar Republic of 1930’s Germany tried this. In the end the “money” was used to start a fire in a stove or was used as toilet paper. D.C. is too smart for this, right? Is there another way out of this mess?.
During my research I floated the following question to 10 people of various economic means. “If you were told you had no more debt but got to keep what you had, but also you had nothing in your bank or 401K or stocks or IRA, just start anew” 9 out of 10 replied “That works for me”. Astounding, but very telling. How these people responded, along with my research, and what is unfolding (actually unraveling) leads me to the following.


We are going to wake up one morning and Matt Lauer will inform us of the following. “I’ve got good news and bad news for you, America. The good news, for most of you, is that there is no more debt. No government debt, personal debt or corporate debt. You get to keep what you have, your house, your cars, your flat screen TVs. You owe nothing. The bad news, for some of you, is that there are no assets. Your bank accounts are empty, all stock is worthless, and there is nothing in your 401K or IRA.”


None of our “leaders” in D.C. will want to take the blame for this, and will need an excuse for this. Most people will understand and even forgive how this happened when Matt goes on to say:
“What I have told you is the direct result of a computer virus that has infected the worldwide financial complex that completely melted the balance sheets so that no one knows who owes what to whom anymore. This is why we have to start over. Just think of it as hitting the reset button. Details on the new government monetary system will come out shortly.” Problem solved, all absolved.


When the firestorm arrives, you will be glad you live in New Hampshire. At least here we may have a chance. During the dark days of the 1930’s peoples faith and morality held society together. Not so today sadly. Talk with your family, friends and neighbors. Come up with a plan.Things are about to become ugly. Very Ugly.
MarketOracleUK

Next Financial Storm brewing from mid east

Signs of a new financial storm for September coming from Dubai and Saudi Arabia

by Maurizio d'Orlando

Dubai calls on the Rothschild bank for help, perhaps out of desperation. In Saudi Arabia a Saad Group company defaults. US, European and Asian banks are struggling. The end of Ramadan in September might mark the start of an economic depression worse than that of the 1930s. Milan (AsiaNews) – Rothschild’s Dubai office has been retained by Dubai’s Department of Finance for advice on the US$ 10 billion financial support fund (FSF) the emirate raised on the bond markets.


Nakheel, the property development arm of Dubai World, was the first to benefit, but is likely to be the last of its kind because funds will be handed out on the basis of two criteria: urgency and strategic importance.


In fact government-related corporations deemed essential for the long-term development of Dubai’s economy will be eligible for FSFs. They include firms involved in infrastructure, transportation (ex. the Metro and Maktoum airport projects), aviation, ports, shipping and tourism. Banking might be included and the Rothschild guidelines might be flexible with regard to real estate.


This said Rothschild is not getting directly involved but will act through commercial banks in which it has equity like JP Morgan as well as the Federal Reserve Bank of New York (FRBNY).
By law the latter plays a key role in the Federal Open Market Committee (FOMC) and thus has a crucial role in making key decisions about interest rates and the US money supply.
Through the FRBNY Rothschild is in a privileged position to influence US monetary policy and shaping US monetary supply, crucially important since the US dollar remains the main reserve currency in the world.


Dubai’s choice is also part of a ongoing dispute between the Saudis and the Emirates over the location of the single central bank of the Gulf States and what direction to give it.
The United Arab Emirates (UAE), especially Abu Dhabi, has recently put the breaks on the whole thing, and on the short run no solution seems to be in sight.
The Saudis are considered too close to the United States and thus indirectly to Israel. Gulf States, especially the UAE, favour a Euro-Asian axis that runs from China to Russia that includes Germany, a relationship best illustrated by Opel’s sale to the Austro-Canadian Magna group, which stands in for the Russian state bank Sberbank.


The Rothschild family has have been closely associated with the Zionist Movement. The 1917 Balfour Declaration was in fact addressed to Lord Rothschild in which the British government committed itself to the establishment in Palestine of a national home for the Jewish people.
By choosing this banking group, Dubai is distancing itself from the other emirates, perhaps out of desperation.


But the Saudis too are facing their own serious problems. The Saad Group, which is linked to The International Banking Corp (TIBC) and the Ahmad Hamad Algosaibi & Brothers Co, is in difficulty.


Saudi Arabia’s central bank has frozen all the accounts of Saad chairman, Saudi billionaire Maan al-Sanea, who owns 2.97 per cent of the HSBC Holdings Plc, Europe’s largest bank based in London.


Once known by its full name of Hong Kong & Shangai Banking Corp., HSBC Holdings Plc is also one of Asia’s main banks.


The decision by Saudi Arabia’s central bank comes after an Algosaibi-owned company defaulted on a billion dollar debt. Maan al-Sanea’s Saad Investment Co. had also received a US$ 2.82 billion loan from a group of 26 European, US, Asian and Arab banks in 2007. Such troubles might be a sign of more bad things to come for the banks, especially those in Europe and to a lesser extent in Asia.


Conversely, although US banks were hit by the subprime credit crisis in real estate, they are not that involved in emerging markets and eastern Europe.


As in the spring of 2008 when the first signs of the coming September financial storm were visible, today’s signs, albeit not front page news, might herald another major storm this fall.
But this year’s crisis could be worse than last year’s because of the multiple points of origin. In addition to the weak situation of the US Federal Reserve, whose financial commitments in support of the US banking system are equal to the total US GDP, European banks could go in tilt because of their exposure to emerging markets whilst those of Asia (especially Japan’s and China’s) could suffer because of Asian economies’ heavy reliance on now declining exports.
As for Dubai real estate values in the city-emirate have dropped by 50 per cent since before the crisis[i]; insolvencies here and across the Gulf region are rising.


At the same time two contradictory trends appear to be coming together. On the one hand, we see that “creata ex nihilo”[ii] e-money might lead to hyper-inflation; on the other, collapsing prices in real goods could lead to deflation and an economic depression worse than that of the 1930s.

Indeed in Dubai many expect the next storm to hit at the end of Ramadan, 21 September.

(full link click here)

Russia begin to ditch Dollar as Reserve Currency.

It is expected to happen. China and Russia began to make strategic moves to protect their foreign reserve at the expense of the dollar. Will this weaken the dollar and signal a troubling end of USD?


The US dollar is not Russia’s basic reserve currency anymore. The euro-based share of reserve assets of Russia’s Central Bank increased to the level of 47.5 percent as of January 1, 2009 and exceeded the investments in dollar assets, which made up 41.5 percent, The Vedomosti newspaper wrote.

BREAKING NEWS

The dollar has thus lost the status of the basic reserve currency for the Russian Central Bank, the annual report, which the bank provided to the State Duma, said.


In accordance with the report, about 47.5 percent of the currency assets of the Russian Central Bank were based on the euro, whereas the dollar-based assets made up 41.5 percent as of the beginning of the current year. The situation was totally different at the beginning of the previous year: 47 percent of investments were made in US dollars, while the euro investments were evaluated at 42 percent.


The dollar share had increased to 49 percent and remained so as of October 1. The euro share made up 40 percent. The rest of investments were based on the British pound, the Japanese yen and the Swiss frank.


The report also said that the reserve currency assets of the Russian Central Bank were cut by $56.6 billion. The losses mostly occurred at the end of the year, when the Central Bank was forced to conduct massive interventions to curb the run of traders who rushed to buy up foreign currencies. The currency assets of the Central Bank had grown to $537.6 billion by October 2008. Therefore, the index dropped by almost $133 billion within the recent three months.
The majority of Russian companies, banks and most of the Russian population started to purchase enormous amounts of foreign currencies at the end of 2008. The dollar gained 16 percent and the euro 13.5 percent over the fourth quarter. The demand on the US dollar was extremely high, and the Central Bank was forced to spend a big part of its dollar assets, experts say.


The change of the structure of the currency portfolio of the Bank of Russia has not affected the official peg of the dual currency basket, which includes $0.55 and 0.45 EUR.
The investments of the Bank of Russia in state securities of foreign issuers have been considerably increased, the report said. About a third of Russia’s international reserves are based on US Treasury bonds.


Russia became one of the largest creditors of the US administration last year, the US Department of the Treasury said. Russia increased its investments in the debt securities of the US Treasury from $32.7 billion as of December 2007 to $116.4 billion as of December 2008

The Final Bubble Before the Total Collapse of Capitalist System

Yonker Tribune – May 13, 2009 The biggest financial bubble in history is being inflated in plain sight, said Gerald Celente, Director of The Trends Research Institute. "This is the Mother of All Bubbles, and when it explodes," Celente warns, "it will signal the end to the boom/bust cycle that has characterized economic activity throughout the developed world." Either unwilling or unable to call the bubble by its proper name, the media, Washington and Wall Street describe the stupendous government expenditures on rescue packages, stimulus plans, buyouts and takeovers as emergency measures needed to salvage the severely damaged economy. "All of this terminology is econo-jargon," said Celente. "It's like calling torture 'enhanced interrogation techniques.'


Washington is inflating the biggest bubble ever: the 'Bailout Bubble.' "This is much bigger than the Dot-com and Real Estate bubbles which hit speculators, investors and financiers the hardest. However destructive the effects of these busts on employment, savings and productivity, the Free Market Capitalist framework was left intact. But when the 'Bailout Bubble' explodes, the system goes with it." The economic framework of the United States has been restructured. Federal interventionist policies have given the government equity stakes, executive powers and management control of what was once private enterprise.


To finance these buyouts, rescue and stimulus packages – instead of letting failed businesses fail and bankrupt banks and bandit brokerages go bankrupt – trillions of dollars are being injected into the stricken economy. Phantom dollars, printed out of thin air, backed by nothing ... and producing next to nothing ... defines the "Bailout Bubble." Just as with the other bubbles, so too will this one burst. But unlike Dot-com and Real Estate, when the "Bailout Bubble" pops, neither the President nor the Federal Reserve will have the fiscal fixes or monetary policies available to inflate another.


With no more massive economic bubbles left to blow up, they'll set their sights on bigger targets. "Given the pattern of governments to parlay egregious failures into mega-failures, the classic trend they follow, when all else fails, is to take their nation to war," observed Celente. Since the "Bailout Bubble" is neither called nor recognized as a bubble, its sudden and spectacular explosion will create chaos. A panicked public will readily accept any Washington/Wall Street/Main Stream Media alibi that shifts the blame for the catastrophe away from the policy makers and onto some scapegoat. "At this time we are not forecasting a war. However, the trends in play are ominous," Celente concluded. "While we cannot pinpoint precisely when the 'Bailout Bubble' will burst, we are certain it will. When it does, it should be understood that a major war could follow."

Full link (click here)

Incoming Storm

Profits mask coming storm
By W Joseph Stroupe

Contrary to surface appearances such as the recent stock market rally and "glowing" first quarter profitability statements from certain Wall Street banks, multipronged risks for renewed, considerable turmoil in the US financial sector are mounting. The recent six-week rally on Wall Street, led mostly by banking and other financial shares, isn't based on any concrete turnaround in the deeply worrying fundamentals of the financial sector. Instead, it is based largely on the fact that the new administration has trotted out into public view multiple and very large government programs aimed at cleansing the banks' balance sheets of huge sums of toxic assets, unlocking the persistently seized credit

markets, stemming the swiftly mounting foreclosure rate, creating jobs, and otherwise stimulating an early economic revival. None of these aims and goals has been accomplished yet, not even in part, but investors were heartened by the raft of government programs that has been announced, and they have responded by bidding up banking and other shares on Wall Street, hoping that the bottom of the crisis in the financial sector has already been reached. However, that bottom hasn't been reached, and is still nowhere in sight, despite the recent quarterly profit reports by a few of the largest US banks. It should come as no surprise that Wall Street financial institutions that have been in receipt of massive sums of bailout money and have been targeted by varied "liquidity" operations from the government are suddenly able to report a "profit".


Additionally, much of the "profit" reported for the first quarter resulted from one-off events that have little or no chance of seeing a repeat. In these most recent quarterly statements, the accounting and reporting methods have been altered so as to put a better face on their operations and fiscal position. Their already notoriously "fuzzy" math, which permitted banks to arbitrarily designate which assets are included in their profit statements and which ones are not, now also conveniently permits them to arbitrarily decide which losses are "temporary" and can be excluded from the statement altogether.


Consequently, "fuzzy" has now gotten even fuzzier. Why? And, why now? Wall Street financial institutions have suffered a gross loss of investor confidence in this crisis and have seen their share values ravaged as a result. Hence, there is a concerted and vigorous effort underway on their part to bolster that collapsed confidence, with the aim of driving the value of their shares back up. Remember, these big institutions all participated in one way or another in the grossly deceptive schemes and practices that created and artificially inflated fundamentally risky investment assets, grossly overstated their creditworthiness, and sold them on to unsuspecting investors - the massive swindle that brought us into this crisis in the first place, a crisis that emerged right on Wall Street itself. Hence, it is nothing for such firms and their accounting and credit rating accomplices to engage once again in spin, deceptively cooking the numbers to make their position look much better than it really is, so as to attract investors and drive up share prices. Sovereign wealth funds around the globe, having suffered huge losses on their investments in US banks, can be described by the adage "once bitten, twice shy".


Many have decided to largely divest themselves of their holdings in US financial shares. Why? They no longer trust the banks to disclose their true financial position fully, accurately and honestly. The savvy investor will keep such facts very close in mind. Now, with the May 4 deadline for releasing the government stress test results bearing down on us, Wall Street institutions have much greater reason and motive for spinning their financial position (propagandizing investors) - none of Wall Street's big banks wants to take a renewed hit as a result of being portrayed by the stress tests as being in a less-than-desirable financial condition.


Therefore, the Wall Street spin machines are operating at full speed, striving to portray the 19 banks involved in the stress tests as profitable, stable, healthy and vibrant. They are doing everything they can to maintain, and bolster, the fundamentally frail investor confidence they have regained in the past six weeks, and they are trying to position themselves to massively capitalize on the release of the stress test results if they can, or at least to minimize their potential ill effects. The entire idea of the stress tests has come under fire as a bone-headed scheme that was aimed at restoring confidence but will almost certainly accomplish the exact opposite. If the results paint a rosy picture for all 19 banks, then investors will pan the stress tests as having no credibility, and their suspicions and fears that the banks and the government are lying about their true condition will probably skyrocket. If any of the 19 banks get less than flying colors in the stress test results, then those banks will likely see their shares take a renewed pounding as investor confidence collapses again.


There may well be depositor runs on such banks, depleting their capital and bringing on a renewed crisis. If the government and/or the banks themselves do not release meaningful data on May 4, then investors will conclude that the results were too grim, and a new crisis of confidence will result. But if too much information is released, then the same thing could likely be the result because a number of respected experts warn that the US banking system is fundamentally insolvent. The government and the banks do not want investors at large to see hard data that only bolsters that dismal assessment.


The Barack Obama administration has thus painted itself into a potentially very grim corner with the stress tests. Almost no matter what is done on May 4, the risks of a new crisis of confidence in the US financial sector are significantly rising. Why such a bleak assessment here of the current fiscal position of the US financial sector? First, as noted above, the US financial sector is not providing a clear and true picture of its fiscal position.


Instead, it is seeking to paper over its fundamental insolvency with quarterly reports that are long on spin and short on hard, uncooked data. Why? The answer is quite simple. Full disclosure of its true position would not be in the interests of reviving America's fundamentally flawed model of "securitization", which has experienced a massive collapse and to this day has not been revived. Can it be revived? At what cost? Remember that there are two fundamental camps with respect to the answer to the question of what lies at the root of the present crisis.


One camp holds that America's new generation of financial assets that resulted from the recently invented financial process known as "securitization" are fundamentally sound in value, and that an over-reaction on the part of investors to the subprime crisis has resulted in a panic-induced collapse in their valuations. This camp believes that the securitization model can and should be revived, and that when investor confidence is restored in financial assets now seen as "toxic", then all will be well again, almost magically, as toxic assets become valuable and attractive once again. All that need be done, it is believed, is for the government to work with Wall Street to jump-start securitization, a model this camp vehemently denies has failed, even though many trillions of dollars both spent and committed already have so far failed to get securitization's heartbeat going again. The other camp believes that the toxicity is inherent in the very nature of the newly developed financial assets themselves, and that once investors recognized this fact, then that is why their values collapsed.


This camp sees the securitization model as fundamentally flawed, based as it is upon artificial inflation of assets, the shortsighted growth of serial asset bubbles created by an unholy de facto alliance of government, big Wall Street banks and credit-rating agencies whose credibility and integrity were profoundly compromised, and unsustainable negative real interest rates (the creation of a massive credit excess), without which the securitization model simply won't run.


This camp sees no future for assets that have gone toxic. It sees the collapse that began in late July 2007 with the emergence of the subprime crisis as one that massively discredits the model itself. This camp believes that a revival of securitization will come at the cost of a dollar crisis only a moderate distance down the road, and that even if the model is revived, it won't be able to avoid a second, massive crash. The US government and Wall Street are laboring feverishly to get securitization's heart beating again. That is fundamentally what is behind all their efforts. Crucial to this task, they believe, is restoring investor confidence in the model itself and in the innovative financial markets and modern financial assets it has created.


Much like producers and sellers of tainted wine who've been found out and who've watched their product prices collapse as buyers shun the wine for its toxic risks, they're in cooperation again, minimizing the taint and trying to sell the sparkle as they did before this crisis broke. It is unlikely to succeed in attracting investors on the scale needed to revive securitization. But even if it does, the currency is being set up for a massive collapse when the proverbial bill soon comes due. Therefore, essentially, on the level of the model itself, the US financial sector is headed for a more massive collapse than we've seen already, even if revival efforts were to somehow succeed in breathing life into the sector temporarily.


The second reason that this assessment here of the current fiscal position of the US financial sector is so bleak is because real events on the ground, occurring as we speak, demand such realism. Many times I have drawn attention to the simple concept of the self-reinforcing downward spiral that has come to life within this ongoing crisis, a downward spiral that encompasses both the financial and economic sectors. Turmoil in the financial sector creates both a seizure of credit and higher costs for credit of all kinds, which feeds directly and indirectly down the line into the economic sector, translating into losses for business and individuals. Those losses result in rising business failures, job losses, foreclosures and bankruptcies, and collapsing spending, investment and asset prices.


These developments feed back, in turn, into the financial sector as banks and other institutions suffer greater losses and as the list of their toxic assets grows by leaps and bounds. This, in turn, causes the credit seizure to persist and to tighten, which feeds directly down the line into the economic sector again, and the downward spiral continues and gains momentum. Though simple in nature, this downward spiral has been profoundly resistant to all the trillions of dollars thrown at it so far in an effort to break its grip.


Additionally, its dramatic influence over where we're headed is too often minimized or forgotten altogether, until unfolding events bring a painful reminder. In this respect, the first-quarter results of the Bank of America, announced on Monday, April 20, contain such a reminder - despite showing a "profit", credit losses are swiftly mounting as the quality of credit continues to deteriorate rapidly, without any reprieve. The Dow lost nearly 300 points that day, led by a fall in financial shares. Just ahead, there exist strong indications of the real possibility of renewed, much deeper turmoil in the financial sector, in addition to what we're already seeing.


The upcoming release of the stress test results may well provide a trigger for such renewed turmoil, which will feed once again down the line into the real economy, the economic sector, and only strengthen the downward spiral that exists between those two sectors. We may see Wall Street rallies like the one that began six weeks ago, but they won't resolve the fundamentally grim picture for the US, which is firmly in the grip of forces that it unleashed upon itself. The US government and its Wall Street accomplices lack the insight, power, ability and integrity to break the downward spiral anytime soon. Thus, it will run its own course, just as it has been doing for many months already.


W Joseph Stroupe is a strategic forecasting expert and editor of Global Events Magazine online at www.globaleventsmagazine.com (Copyright 2009 Global Events Magazine, All Rights Reserved

Long Recession on the way?

The news are getting louder and louder, The IMF said that long recession is on its way. My earlier posting cited Ron Paul saying US is facing a 15 year recession. Now if this is really happening I doubt our little stimulus can do very much. Singapore economy is shrinking by as much as 20% so far. Though Malaysia has so far managed to navigate itself, I doubt if we can withstand the onslought if the world economy continue going south next year.

The US is facing another round of collapse, this time it is the commercial property market turn. Somebody predicted something BAD is going to happen this week (click here).

WASHINGTON, April 16 — The current global recession is likely to be unusually long and severe and the recovery sluggish because it sprang from a financial crisis, the International Monetary Fund said today.

New IMF analysis shows recessions tied to a financial crisis, like the current one that has its roots in reckless lending for the US housing market, are more difficult to shake because they are often held back by weak demand.

Worse still is that today’s recession combines a financial crisis at the heart of the United States, the world’s largest economy, with a broader global downturn making it unique, the Fund added.
“The analysis suggested that the combination of financial crisis and a globally synchronised downturn is likely to result in an unusually severe and long lasting recession,” the IMF said in chapters of its World Economic Outlook, which is to be released in full on April 22.
It said counter-cyclical policies can help shorten recessions but its impact is limited in the presence of a financial crisis.

Fiscal stimulus can be particularly effective in shortening the life of a recession though not appropriate for countries with high debt levels, it added. In its most recent forecast, the IMF said the world economy will shrink in 2009 by between 0.5 per cent and 1.0 per cent, the largest contraction since the Great Depression. With advanced economies all in recession and growth in emerging market economies slowing abruptly, the IMF has urged countries to move quickly to clean up their financial sectors, in particular remove toxic assets from bank balance sheets, which would allow the economy to mend.

The IMF said dealing with the current global recession will require coordinated monetary, fiscal and financial policies. In the short term, aggressive monetary and fiscal policy measures are needed to support demand. Still, the IMF said restoring confidence in the financial sector was vital for economic policies to be effective and for recovery to take hold.

Emerging market stress

Turning to emerging economies, the IMF said the current level of financial stress in emerging market countries has already hit peaks seen during the 1997-98 crisis.

It said abrupt slowdowns in capital inflows have typically had dire consequences in these countries. The extent of the spillover from advanced to emerging economies is related to how closely their financial sectors are linked.

Using a new financial stress index, the IMF said current stress levels in advanced economies suggest capital flows to emerging economies, especially flows related to banking, will decline sharply and will recover slowly.

The latest reading from February 2009 shows that the steepest decline — an annual contraction of 17.6 per cent — was recorded in central and eastern Europe, the region hardest hit by the crisis. Even countries with lower current account and fiscal deficits, and higher foreign reserves, cannot escape financial the spillover from advanced economies, the IMF said.

However, as a recovery takes hold, those with smaller current account and fiscal deficits can make a quicker comeback than those with bigger deficits, it added. — Reuters