G20 and Beyond: “Signs of Green Shoots Raise Hopes”
by Efin Advisor | April 4, 2009
At the site of the G20 Summit, the Financial Times of London reports that “Scattered signs of green shoots in the global economy are raising hopes that the recession could bottom out later this year, paving the way for economic recovery in 2010.”
However, the signs remain tentative. Economists warn that recessions rarely proceed in straight lines and false dawns are common before recovery finally takes hold.
Surveys of business sentiment round the world, particularly in the manufacturing sector, suggest conditions are less bad than they were a few months ago although still bad by historical standards.
In the US, economists point to surprisingly solid retail sales, which suggest consumer spending grew by more than 1 per cent in the first quarter. US home sales look to be bottoming, although house prices remain in rapid decline at least on some measures.
Gordon Brown, UK prime minister, host of the summit, said the meeting marked the emergence of a “new world order”, as he unveiled what leaders claimed was a $1,100bn package of measures to tackle the global downturn, including support for lower income countries and a $250bn plan to boost the international money supply.
The G20 agreed to allow the IMF to create $250bn of Special Drawing Rights, its own currency, comprising dollars, euros, yen and sterling, boosting the foreign exchange reserves of every country. Most of this will go to the big economies, but poorer countries facing budgetary strains will gain new cash.
World leaders also agreed to boost trade finance in a package that Mr Brown said over two years could facilitate an additional $250bn of trade.
In China, the official purchasing manager’s index moved back into positive territory in March, provoking lavish celebrations among officials under instructions to be optimistic.
A million German consumers have taken up the offer of a €2,500 incentive to trade in old cars for new, more fuel efficient vehicles, providing a strong, if short-lived, boost to output.
Even in Japan, where the latest Tankan survey showed a big decline in sentiment to a record low, there are some hopes the world economy may be some way through an inventory correction that began in the fourth quarter of 2008.
“I am seeing green shoots,” says Jan Hatzius, chief US economist at Goldman Sachs. “Not in terms of the current quarter but in terms of the prospects for a quarter or two down the road.”
I sure hope these initiatives work, for all our sake. People need to realize that this is a global problem, not just a U.S. problem, and all our bailouts and stimulus programs could work and we would STILL be mired in an economic crisis. I just read an article today about how Iceland is essentially a hedge fund rather than a country. China, which was poised to become a world economic power, he begun to seriously stall. I know that these people know more about macroeconomics than I do, but I get a sinking feeling that they are being a bit too optimistic about the plans that they’re putting in place here…
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What a relief. I must admit, while I do some investing I am not terribly educated on exactly what all of this economic stuff means, but from the looks of it, it sounds like things are getting better. A couple months ago, I was frightened stiff about what the ensuing years would look like. But now, it appears as if the storm clouds are lifting and we might be getting back to business as usual sooner than we all thought. This is a great day for the economy, for America, and for the world, and I for one am glad that our government have worked so hard and done so much to make sure that we get out of this recession as quickly as possible.
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I hate how every time we have an economic problem in the world, they hold a summit and we’re supposed to believe everything will get better. Make no mistake, these leaders are on the phone every single day talking with each other about new ways to improve the global economy; they don’t need to wait for a grand summit like they probably used to. These events are usually constructed solely to instill confidence in the general population and give the illusion that world leaders are getting “serious” about solving these problems. In reality, they probably sat around playing poker for a day and then announced economic developments that have been in the works for months as if they were new.
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It’s not just about economics. There are serious problems all over the world that have to do with a lot more than money. Look at Pakistan, my home county. It’s in turmoil! Why aren’t these leaders devoting more time to solving problems of corruption, violence, and other such things in some of the less fortunate places in the world? People are dying, and it’s not all because of poverty or economics. I wish these governments would do something to truly help the world rather than holding a convention designed to line their pockets.
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Mariam: of course there are other problems in the world. No one is denying that. But this is the problem that our leaders consider to be the most pressing. Believe me, we all have relatives in countries that are facing serious problems (my family comes from Mexico, and we all know about what’s been going on down there lately). But those are problems that will take different measures to solve, and bluntly, they don’t concern most of the world. Our leaders are trying to solve the big problem of the day, and once that’s been taken care of, they can start to focus on other things.
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I’m glad these politicians are paying attention to smaller economies as well as bigger ones, but in the grand scheme of things, won’t this whole problem be solved by funnelling lots of money in the U.S.? I mean, this whole mess started in the first place because of things that happened in the U.S. and had a ripple effect on the rest of the world. So if we fix the U.S. economy, won’t that just fix everything? Why would we worry about poor economies when pouring money into those countries does nothing for the rest of the world?
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