Adopting the more than a century-old tradition of many US presidents-elect, particularly Abraham Lincoln, to travel to the capital for inauguration by train, Obama, reflected on the mammoth crisis that the US is today passing through, saying: "Only a handful of times in our history has a generation been confronted with challenges so vast. An economy that is faltering. Two wars, one that needs to be ended responsibly, one that needs to be waged wisely. A planet that is warming from our unsustainable dependence on oil."
Rhetoric aside, today, America is not what it was: it is no longer a super economic power. It is in the midst of a crisis: the unemployment rate has already reached a 16-year high of 7.2% and is likely to rise further; its banking system is still in distress (despite capital injection by the government, Citi found no alternative but to split itself into two, with the idea of eventually disposing of the Citi Holdings consisting of `bad assets'; nor is it any different with Bank of America which has posted a loss of $2.39 bn for the fourth quarter and is looking at government for fresh capital); domestic demand is in free fall; consumers are unwilling to spend; and car sales have plummeted, throwing General Motors and Chrysler almost out of business. To put it in the words of the President-elect, "It is not clear that the economy's bottomed out."
Nor is the global economy any better: GDP of Eurozone is predicted to shrink by 2% in 2009. The economic outlook for Germany is looking bleak. Its export of capital goods to emerging markets is witnessing poor demand, as is reflected by the fall in export revenue by 12% year-on-year in November. Nor are the economies of France, Italy, Spain and the UK any better.
Till a while ago, Asia appeared better. But the recent data indicate that exports from Japan fell by 27% year-on-year in the month of November. The Bank of Japan's quarterly Tankan index has fallen to a 30-year low, forecasting bleak prospects for the future, which is why pundits have predicted the economy to contract by an alarming 2.9%. That aside, the most disturbing news for global economy is coming from China: its GDP in 2009 is forecasted to grow by 6%—a stunning fall of seven percentage points from the 13% growth recorded in 2007.
Cumulatively, the prospects of recovery from the ongoing global recession, the severity of which has not been witnessed in the last 80 years, appear dim; and it will become still worse if governments across the globe delay initiating aggressive policies to kick-start the economy collectively. |
