31.10.2012 Post in World Economy

The IMF warns of so-called “dangerous new phase” which reflects instability of global economy and impossibility of long-term planning. Such circumstances as cut of Italy’s credit rating, crisis of 2008, European economy woes, and search for money for French fragile banks make investments unsound way of money use. Investors give up believing in the abilities of major international institutions in their attempts to save the situation during perilous times as they have started to apply non-traditional measures which consequences are hard to predict. The governments are struggling to restore confidence in the budget to save world economy from collapse. Meanwhile, investors lack healthy playing field and they have to look for the signs which will guide them throughout world economy turmoil and help to guess its further direction moves. We will touch upon 5 most important aspects which signify about changes in the world of finance.

1. Rate of Growth for the Third Quarter

Second quarter was a subject to mounting concerns for investors as it could trigger new recession. However, stability in the third quarter is a reason for optimism as it is connected with the peculiarities of May-June data. Automotive industry is bottoming out; price for oil is going down. Thus, we can expect some improvements in global economy. Nevertheless, new crisis began in the third quarter on financial markets; Eurozone debt crisis has hit Great Britain as well and resulted in mass riots. In such a way, encouraging data for the third quarter could initiate economic stabilization but nobody can give a hundred per cent guarantee.

2. Eurozone Debt Crisis

Eurozone debt crisis has started in Greece, which is why the further scenario depends on Greece. Eurozone economy could be forced back into recession. Central bank can cut its interest rate in the short term. In October the ECB will be ruled by a new chairman which will definitely lead to new changes.

3. Central Banks

Currently, central banks do not have that power over economic situation on the whole as they used to have. Central banks of developed countries take a passive approach using their scant tools instead of helping the global economy which is significant of new economical woes.

4. Markets

The markets also reflect the high probability of recession indicating the burning issues. Investors are hesitating putting up the capital.

5. The U.S. policy

It is quite true that the USA has a great power. But even such powerful economic state cannot find the right solution for this teetering situation in the country and worldwide. Barack Obama suggests a new $447 bn plan. In general, it is aimed to trigger some relief and reduce taxes for companies. Nevertheless, the U.S. politics is actively trying to solve global economic problems.