3/12/09

This week has brought more concerns about the global economy.  The heads of the IMF and World Bank both warned that the world is facing a slowdown in growth unseen since the Great Depression as new reports emerge that China’s exports have fallen by a stunning 25% in the last year.  The Obama administration is dealing with the crisis by seeking a global solution for a global problem.  Yesterday, Treasury Secretary Tim Geithner unveiled a proposal to shore up the IMF and ensure that global institutions have the resources they need to help failing economies.  There is still no international consensus on this plan and much difficult work must be done before the upcoming G-20 summit in April.  Unfortunately, rather than addressing these serious issues and helping find a constructive solution, conservatives in Washington are playing politics by railing against earmarks, which make up only 2% of the federal budget.  

Indicators this week show global growth and trade are falling more sharply than expected.  While there were some hopeful signs this week at home, global indicators point to troubles ahead.  World Bank chief Robert Zoellick said yesterday that, “My guess is that growth will probably fall about 1 to 2 percent... We haven't seen numbers like that since World War Two, which really means the Thirties. So these are serious and dangerous times.” Meanwhile, the head of the International Monetary Fund, Dominique Strauss-Kahn, “warned the world on Wednesday it would be gripped by a ‘Great Recession’ and that his earlier forecast for economic stagnation this year was too optimistic,” reports Reuters.  The Washington Post also writes that in a troubling sign, “China's exports plunged 25.7 percent in February from a year earlier, surprising economists and suggesting that the country's recovery might take longer than its leaders had hoped. The trade figures, released Wednesday, are the latest in a string of worrisome signs for the world's third-largest economy. Analysts had predicted that demand would remain stable or decrease only slightly. In addition, the Financial Times reports that “Japan’s economy shrank 3.2 percent in the final three months of last year, revised government data showed on Thursday, confirming the sharpest contraction since the oil crisis in 1974.” [Reuters, 3/11/09. Washington Post, 3/12/09. Financial Times, 3/12/09.]
 
Obama administration seeks global solution to global problem.  In today’s global economy with interconnected markets and global movement of goods, a financial crisis is a global crisis. It cannot be addressed by any nation alone.  This is why, yesterday, Treasury Secretary Tim Geithner “unveiled a sweeping plan that calls on the United States and other nations to offer billions more to bail out economies in crisis and prods a reluctant Europe to prop up the reeling world economy with more aggressive government spending... Geithner said the administration will ask Congress to make $100 billion more available -- nearly doubling the current U.S. commitment -- to the International Monetary Fund to aid struggling nations. U.S. lawmakers said yesterday that they are already bracing for the administration to request hundreds of billions of dollars in more rescue funds for U.S. financial firms, and possibly a second massive economic stimulus package as well. The debate over how to rescue the global economy is setting up a clash of ideas just as finance chiefs are converging in London this weekend to hash out a unified approach to the crisis. Geithner said he plans to press his counterparts from major economies to boost their fiscal stimulus and to sustain that spending for as long as the downturn lasts. ‘Forceful’ actions by the world's leading economies are needed because ‘the global recession is deepening,’ Geithner said.” [Washington Post, 3/12/09.]

Challenges are immense, and conservatives are distracted by petty politics instead of offering solutions.  With the global economy in turmoil, conservatives in congress seem focused on earmarks, which represent “less than 2 percent of the discretionary federal budget... [and] have become a lightning rod for critics who say they waste taxpayer money on projects that are requested more to win votes for lawmakers at home than they are for their merits,”  writes the Washington Post.  Meanwhile, the upcoming G20 Summit will provide incredible challenges for world leaders to address the global financial crisis.  As Reuters reports, “President Barack Obama faces a difficult balancing act at an international summit in London next month to tackle the world economic crisis. In his first major trip abroad as president, Obama will have to tread cautiously in pressing the case for a global fiscal stimulus while European partners try to put the emphasis on revamping international financial regulations. The purpose of the April 2 meeting is to coordinate strategy and actions among the Group of 20 leading developed and emerging countries to come to grips with the worst economic crisis in decades. But it won't be easy to forge a united front.”  In fact, there is not yet agreement on Geithner’s plan to boost the IMF, “in a communiqué yesterday, European financial ministers suggested that they would be prepared to make additional contributions, but they apparently disagree with the United States over how much. They backed a proposal to increase the loans made available to the IMF by $250 billion.  They also called for the burden to be divided fairly among many nations, including those with large currency reserves -- a thinly veiled reference to nations including cash-rich China and Saudi Arabia.”  [Washington Post, 3/12/09. Reuters, 3/11/09.  Washington Post, 3/12/09.]

What We’re Reading

Pakistani police block hundreds of protestors from reaching the capitol and arrested protest leaders.

North Korea gives notice of a rocket launch sometime between April 4-8.

After 43 years, France will resume full membership in NATO.

An Italian court throws out evidence against CIA and Italian intelligence personnel in an extraordinary rendition trial, alleging that prosecutors violated state secrets in presenting the evidence.

President Obama names several high-level diplomats, including: Lt. Gen. Karl W. Eikenberry as ambassador to Afghanistan; Christopher Hill as ambassador to Iraq; and Ivo Daalder as ambassador to NATO.

The Washington Post looks at how in Iraq, “no one values the victims anymore,” analyzing the response to the two recent bombings that together killed approximately sixty people.

The Iraqi shoe thrower receives three years in prison.

The U.S. is still looking for new supply routes for Afghanistan, possibly considering roads through Iran.

China lodges a formal complaint with the Obama administration over passage of a U.S. House of Representatives resolution urging China to “cease its repression of the Tibetan people” and find a long-term solution by working with the Dalai Lama.

The presidential campaign in El Salvador invokes rivalries stemming from the country’s 12-year civil war.

Commentary of the Day

Daniel Doron says Middle East peace can begin with economic integration and growth.

Responding to Chas Freeman’s withdrawal, the LA Times says that pro-Israel opinions cannot be the only voices heard in the U.S. government while the Washington Post argues that Freeman’s withdrawal was not about Israel.

Theodore Postol proposes drone-based missile defense instead of the Bush administration’s system which doesn’t work and antagonizes Russia.

Chrystia Freeland says that despite current stumbles, global crisis leadership will emerge from the United States.

Sonni Efron looks at how the financial crisis hurts the world’s poor and hungry above all others.