By Gerri Elder
World leaders met in Washington mid-month to put their heads together and devise a plan to address the sinking global economy. The weekend meeting of leaders of the Group of 20 included the wealthiest countries in the world such as the United States, Japan, Germany, Britain and France. Emerging powers such as China, Russia, Brazil and India were also represented.
However, on the Monday after the weekend meeting, European and Asian markets were clearly not impressed. European stock markets traded slightly lower after a mixed market in Asia. Japan's Nikkei index rose just slightly, despite a report showing the second-straight quarterly decline in GDP, which signals the onset of an economic recession. Major indexes in Hong Kong, Britain, Germany and France all fell following the summit.
According to the Associated Press, analysts predict that it will take more than one meeting to make a difference in a global economy that is currently experiencing its worst disruption in decades.
Credit Suisse Japan analyst Shinichi Ichikawa released a harshly worded report after the meeting saying that "there is little point in trying to figure out ways to prevent a disease once a patient is sick." According to Ichikawa, the meeting of world leaders accomplished very little and came up with no specific solutions to correct the effects of the international financial crisis.
Additionally, T.J. Bond, a Merrill Lynch economist in Hong Kong, noted that investors were disappointed by the lack of an announcement regarding coordinated fiscal stimulus measures.
On November 17, the National Association for Business Economics (NABE) released its new forecast for the U.S. economy, and there is no good news to be found. The overall U.S. economy shrank at an annual rate of 0.3 percent in the July thru September period and is expected to contract at a rate of 2.6 percent during the current quarter.
As the economy continues to wither, the economic forecasts become more depressing. Only one month ago NABE had predicted that the economy would post a 0.1 percent growth rate this quarter.
One reason that business economists have such a negative outlook for the U.S. economy over the next few quarters is the continued worsening of credit markets, according to NABE President Chris Varvares, chief economist at Macroeconomic Advisers.
Despite harsh words about the summit from some economic experts, C. Fred Bergsten, director of the Peterson Institute for International Economics in Washington, said he would grade the meeting a solid B. This is far better than Bergsten has graded many of the annual economic summits of the Group of Eight major industrial countries.
While Bergsten does believe that it will take more than four months for the world leaders to reach any major agreements, he said that a number of good things came out of the discussions and the leaders did devise some solid principles to guide future meetings.
The Group of 20 nations agreed to meet again before April 30, 2009.
The NABE panel of 50 top private forecasters expects the U.S. economy to continue to shrink during the first three months of 2009. They also have predicted that the national unemployment rate, which is currently at its highest point in 14 years at 6.5 percent, largely due to mass layoffs across the country, will continue to rise and reach 7.5 percent by the end of 2009.
An overwhelming majority of the NABE panel also believe that the recession and financial crisis, born of the U.S. housing market collapse and foreclosure epidemic, will engulf much of the global economy.
The NABE panel also made the grim prediction that Britain and much of the rest of Europe, Japan, Canada and Mexico will all have to endure recessions in coming months.