'Anticipation of Recovery Is Just a Fiction, It Is Not There'

"When in doubt, tell the truth."
--Mark Twain, author

Our best hope of coming to grips with the trouble we are in is to know just what we are up against. In fact, history suggests that being honest during a time of crisis can yield tremendous benefits, including motivating people to alter bad behavior and come up with creative approaches to solving seemingly intractable problems.

Unfortunately, few of those who pull the strings nowadays have figured this out. Instead, they keep feeding us lies and spin. Every once in a while, though, the unvarnished truth manages to slip out. In "Current Market Rebound Not a 'Real Recovery': UNCTAD,"  Agence France-Presse reports on one such occurrence.

A UN think tank on trade has warned that the current financial market rebound is not a "real recovery" and that any world economic growth recorded in 2010 was unlikely to exceed 1.6 per cent.

"The depth of the recession has been so important that of course there will be a rebound ... but we still do not see that this is a real recovery," said Supachai Panitchpakdi, secretary-general of the United Nations Conference on Trade and Development (UNCTAD).

"The actual increase in the commodities prices is mainly driven by appetite for more risk," he added.

This appetite could also be "reversed at short notice, depending on the pace of recovery and financial market sentiment".

Improving economic data including slowing job losses have been heralded by financial markets as green shoots of economic recovery, but UNCTAD poured cold water on the optimism.

Chief economist Heiner Flassbeck said the markets had been fuelled by financial speculation that in turn was driven by expectations of recovery.

"But anticipation of recovery is just a fiction, it is not there," he added.

The UNCTAD report noted rather: "Tumbling profits in the real economy, previous over-investment in real estate and rising unemployment will continue to constrain private consumption and investment for the foreseeable future."

"Against this background, global GDP growth may turn positive again in 2010, but it is unlikely to exceed 1.6 per cent," it added.

The report also slashed its 2009 forecast from a growth rate of 2.9 per cent predicted last September to a contraction of about 2.7 per cent.

Developed economies should post a 4.1 per cent contraction, with Japan showing the deepest shrinkage of 6.5 per cent over 2009.

Latin America is forecast to post a 2 per cent contraction.

Africa and Asia should hold up the overall global economy, with average growth of 1.2 per cent for Africa and 2.6 per cent for Asia.

As countries sought to emerge from the recession, Panitchpakdi pointed out, attempts to tackle climate change represented a "new opportunity for new investment".

"Climate change mitigation does not contradict development goals but is a process of structural change worldwide that offers enormous economic opportunities for enhancing development," said UNCTAD.

This is particularly true for developing countries, which stood to gain if they were able to tap the opportunity to produce their own green products rather than relying on western imports, added Detlef Kotte, an UNCTAD economist.

"It is important to review the concept of climate change mitigation. We can see it not only as a cost but as a process that creates income. There are huge market opportunities in more environmentally friendly goods," he explained.

Comments

[roger]

If by recovery, we mean going back to the old way's
of consumerism, then it's a dam good thing that
recovery is just a fiction.

[HSpencer]

Retail sales figures will probably dictate in the next three months what kind of financial outlook 2010 has for us. It's the holiday sales in particular that matter. We have watched a lot of what were pretty good jobs disappear over the last 12 months (Sep08-Sep09). I am sounding like a broken record on here, but once again, it all just depends on that stereotypical family of four. Are they working? Are they spending? Are they buying a new kitchen remodel, since it is no-doubt hopeless these days they will be able to buy that trade-up home. How safe do mom and dad feel about their jobs (if they have one)? Are they deciding to fix the radiator and muffler and drive that 92 Honda Accord another year? Or do they think its safe enough to buy a new Ford Focus this fall? Are they sound enough to start putting some money in the bank on savings rather than giving it all away to the mall and eating out? Have they learned anything from Sep 08 to present? Or----do they still have deaf ears to all this financial hoo-hoo? When they add up the mortgage payment, home equity loan payment, taxes, insurance, credit card(s) payments, groceries, health care, truck and car payments, cable bills, clothing, dental bills, home and car maintenance costs, and eating out, will there "be" anything but a negative balance to the monthly budget (if there even is a budget)? Does their current cost of living make trading up to a big new McMansion look hopeless? Does sending Jr and Sally to college look hopeless? Does a very bleak financial position bring the "D" word into the marriage? Any talk of "economic recovery" has to get its approval and beginning with the family of four.

[jturner]

I saw this article last night and was very pleasantly surprised to see the candor and insight that this UN report had. Hopefully someone, in addition to Ron Paul, can step up the plate and try to use this report as a template for improved government competency and policy.

[survivalist]

As long as the housing market is bloating with get rich quick schemes, and as long as we have free trade, and as long as the federal reserve ssytem continues to have control of our money - there is no hope of financial recovery.

The cards are stacked against the everyday working person. Its getting impossible to afford a home, mainly because prices keep doubling from get rich quick schemes. Buy a house for 40,000, fix it up and sell it for 100,000. There are only so many times a house can be flipped before it drives up the prices of the houses around it.

No longer can john doe go to work in a welding shop or ship yard and earn an honest living. Mainly because most of those jobs have been shipped over seas.