Anthony Hall
The International Monetary Fund split the difference Thursday in a report issued from Hong Kong that said world economies would grow 4.5 percent this year.
The argument the IMF dispatched with efficiency is the pivotal waltz among economic theorists these days: Should governments pull back from stimulus programs to keep debt from escalating further or should someone, anyone -- looking for volunteers, here -- stimulate consumer demand by lowering taxes or putting a pull-out-the-stops spending package together?
In the United States, nearly 21.4 million people are not spending on anything more than the basics or they are cutting back, because they are unemployed -- 6.8 million of those for more than 27 weeks. Some argue the biggest "bang for the buck," as Moody's Analytic Chief Economist Mark Zandi put it, is to extend unemployment benefits, which returns, he said, as a $1.61 boost to the gross domestic product for every dollar doled out. The reason: Unemployment checks get spent. They don't languish in savings accounts waiting for a rainy day.
Why? If you're unemployed, every day is a rainy day.
Put another way: If you want to start money circulating, give it to the poor first. That way, it's sure to get around.
"Supported by accommodative monetary conditions, fiscal actions should be complemented by financial sector reform and structural reforms to enhance growth and competitiveness," the IMF said Thursday in its latest World Economic Outlook.
The report added: "Policies in emerging economies should also help rebalance global demand, including through structural reforms and, in some cases, greater exchange rate flexibility."
The IMF, in short, recommended consolidation of debt in Europe, and reforms that would give consumers in Brazil, India, China and Russia flexibility and purchasing power.
On the positive side, the IMF said the gross domestic product for Asia would grow 7.5 percent this year, up from the April estimate of 7 percent.
China, where exchange rate flexibility is not one of their boasting points, the IMF projects growth of 10.5 percent this year and 9.6 percent in 2011, largely due to the number of unemployed in their customer bases -- Europe and the United States.
Growth in Japan, the second largest economy, is expected to hit 2.4 percent this year and 1.8 percent next year. In the United States, growth was projected at 3.3 percent in 2010 and 2.9 percent in 2011.
The IMF also pointed to severe risks, referring to sovereign debt issue in Europe, "especially in Greece," which has threatened the stability of Europe's banks and undermined investor confidence.
International markets Thursday largely followed Wall Street, where stocks surged Wednesday. In Japan, the Nikkei 225 index rose 2.76 percent while the Shanghai composite index in China slipped 0.25 percent. The Hang Seng index in Hong Kong rose 0.97 percent while the Sensex in India rose 1.03 percent.
In Australia, the S&P/ASX 200 rose 2.4 percent.
In midday trading in Europe, the FTSE 100 index in Britain added 1.38 percent while the DAX 30 in Germany gained 0.4 percent. The CAC 40 in France rose 1.15 percent while the pan-European DJ Stoxx 50 rose 0.72 percent.
