World Bank Releases Forecast for Global Economy, and it's Not Pretty
By: Andrew Hughes December 11, 2008

The World Bank today released its long awaited forecast for the World economic future. "The financial crisis is likely to result in the most serious recession since the Great Depression," said Justin Lin, its Chief economist. The global economy is captured in a downward spiral as never witnessed before. Whereas before, economies were more localized and had more immunity to outside forces, now Globalization has ensured that one big failure in the machine can create a systemic event that brings down all the component parts. The inevitable failure of a few major banks has demonstrated just how much havoc can be wreaked from Alaska to Beijing.

Emerging markets, dependent on mature market consumption, are teetering on the edge of Bankruptcy as Private capital inflow has been drying up and is forecast to reduce by half next year. The volume of world trade is set to decrease by 2.1%, the biggest drop for 33 years. Oil exporting countries from Venezuela to Russia are seeing revenue crash as demand across the world decreases. Poor countries, on the other hand, have experienced a decrease in the cost of living as food and oil prices drop. In an unforeseen twist of fate, Globalization has enriched poorer countries and impoverished richer ones.

Greece is in the throes of a revolution as their people mount a massive protest against the country's history of corruption and economic mismanagement. Originally born of the alleged murder of a 15 year old boy by Greek police, the momentum was maintained by deeply rooted history. Is this a sign of things to come? As economic conditions deteriorate across every continent, blame will be apportioned and it won't be hard to find easy targets. Shortage of food, homelessness, and unemployment are now realities for an ever increasing number of people who have never known a life like this before.

We are watching our own Governments waste the money we could be using constructively to prepare and mitigate for harder times. Attempts to restore the economic activity of nations through liquidity injections into failing banks will achieve nothing when the basics of this same economy rely on a volume of activity that was sustained by inflated wealth through credit. The only reason we bought so much stuff was because we could always pay the bill off later.

So it's no big surprise that "We're almost in an air pocket, where we don't have a new global driver of growth." as said by Thomas Mayer, the chief European economist for Deutsche Bank. Sorry Thomas, we're all tapped out. Unrealistic growth was the problem in the first place. Growth of an economy through a regulated monetary system, consumer saving, profits ploughed back in to production, balanced budgets is one thing, but unhinged consumption and imaginary accounting by the Financial "Industry" to inflate wealth was always destined to arrive at cardiac arrest.

Financial companies are supposed to provide credit to individuals and real industries to grow the economy. When they discovered that there was money to be made giving loans to anyone who could hold a pen, they officially became usurers. When they opened the casino and took bets on anything that could go one way or another, from the economic health of a country to whether interest rates would go up or down, they opened the gates to their own destruction and consequently that of their victims. Even ordinary citizens got caught up in the act as stocks were bought and sold like candy. We have a Stock market that may as well take its cue from the atmospheric conditions on Pluto. It certainly has nothing to do with economic realities on the ground.

Lack of regulation and the quest for short term profit at the expense of long term sustainability has brought the world to its knees. A new paradigm is desperately needed to restore sanity to a world gone mad. As we travel the downside we cannot expect the same failed mechanisms to save us. The actions of Governments the world over so far is to try and blow air into a burst balloon; no matter how hard they blow it will never be able hold its form. It's time to admit that we have overextended the system to the inevitable breaking point and now the remaining pieces must be reassembled into something that does not need wizardry to keep it upright. Pundits the world over are espousing many different analyses and solutions, but in most cases, economic fundamentals play a minor part in the dialogue.

Fortunately there are people like the FDIC chairman, Sheila Bair, who seem to have a grasp on what is actually needed:

We will dig out of this. And when we do, I hope for a back-to-basics society - where banks and other lending institutions promote real growth and long-term value for the economy, and where American families have rediscovered the peace of mind of financial security achieved through saving and investing wisely. We need to return to the culture of thrift that my mother and her generation learned the hard way through years of hardship and deprivation. Those are lessons learned that the current crisis is teaching us again.

The Republicans are playing the 'B' Card

So, Bailout 1 never got a chance and I am so glad for that. The Republicans are playing the 'Blame' card. Why should you or I have to pay for what some bozos on Wall Street and the man down there at 1600 Pennsylvania Avenue are responsible for having put in play? I am not interested in helping anybody that did not have my best interest at heart from the beginning. Show me where Wall Street ever did anything for the man on the street. Show me where all of the middle class jobs went and I will show you where ‘they’ need to go to get the help that ‘they’ need. I am using the word ‘‘they’’ liberally because it is a way of expressing just how far away these people are from me and reality. This situation is 'their' reality check. You can't scare me anymore because I don't believe you anymore.

Here is the cool skinner on how the Bailout went south in the Devil’s hand basket. Bear in mind that the Republican Party in the guise of Phil Graham set all of this up when ‘they’ changed the Commodity Futures Market Act in 2000. That set in motion all of the speculation that sent Enron, WorldCom, and the Electrical Utilities market in a tailspin. The futures market was manipulated and it was apparent to the people on Wall Street and ‘they’ took advantage of it. Everybody made money, bought fancy cars, and big houses in gated communities.

In addition, big business saw that ‘they’ could out-source jobs to wherever. We noticed it as a person that spoke English with a serious accent reading from a script answering the phone and fielding our questions with no idea as to what we wanted. Advanced technology took more people off of the assembly line, further reducing the middle class. With a fine chisel and a never tiring hand big business advanced its assault on our Unions, reducing them to ineffective street crowds. We loss every job that had a value-added tag and Wall Street smiled and said… “This is good”.

Wall Street and Big Business did everything ‘they’ could to strip every dollar from the hands of the very people that were needed to support the American economy. Without money in savings accounts, without people spending money, buying stuff and using stuff, cash flow ceases to exist. What did ‘they’ expect? Didn’t anybody think that this would happen? Drunk with the unbelievable influx of cash, Wall Street and Big Business could care less.

The next area of attack was the housing market. ‘‘they’’ applied the same philosophy to the housing market, giving over-appraised houses to people that wanted to live the American dream, but had no real money to buy into the dream. Mortgage lenders followed the game plan that Wall Street had polished into a money-maker and the boom was on. Everybody that could drag himself into the door was given a fat boy loan.

I say no to the bailout. Let all of those that raked in the big bucks return the favor. Give the money back. Straighten out those loans that you fraudulently put together. Stop the felonious practices that took all of our jobs and sent them overseas.

In response to those that blamed the Democratic Party for the failure of the Bailout to be a reality, let me tell you exactly what happened. The Democrats have enough votes in both the House and Senate to have passed this bill with no problem. The Democrats, and I, believe that since the Republicans are responsible for this mess, ‘they’ should share in whatever method of recovery that was devised. The Republicans would love to see the measure pass, but want no part of the blame if the measure should fail. So, the Democrats had a plan, we will allow so many of our votes to be recorded, but if the Republicans don’t match the vote count, thus insuring bi-partisan support, than we will instruct the rest of the Democratic vote to record a negative vote.

I don’t blame Pelosi for doing what she did. She is nobody’s fool. The Republicans and the ‘lame duck’ down the street had better come up with a plan for saving the economy, or history will not be too kind to ‘them’. The President should stop begging and demand a positive response from his Party!