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By Nouriel Roubini and Ian Bremmer
Published: July 12 2010 23:18 | Last updated: July 12 2010 23:18
It looks as if the global economy is heading for a serious slowdown this year. Emergency austerity programmes in some countries will put a drag on growth. Inventory adjustments will run their course. The effects of tax policies that steal demand from the future "“ such as the US "cash for clunkers" scheme, tax credits for home buyers or cash for green appliances "“ will fizzle out. Labour market conditions will remain weak. The slow and painful deleveraging of balance sheets and income-challenged households, financial institutions and governments will continue.
The result is governments and consumers that spent too much and now need to deleverage "“ in the US, Britain, Spain, Greece and elsewhere "“ will spend, consume and import less. But those governments and consumers that saved too much "“ in China, emerging Asia, Germany and Japan "“ are not spending more. In a world of excess supply, the recovery of global aggregate demand will be weak, pushing global growth much lower.
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