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IMF estimates, the economy and that stuff..politics…

The new IMF estimates about the economic condition on a global scale are telling a story where the word “recession” may not be explicitly mentioned, but “subprime crisis” makes the headlines.

Overall, there is a contraction of 0.3%, from a former 4.4% growth rate to the actual 4.1% (and a 4.9% in 2007…), given the impact of the crisis from the “Gekko” dashboard to the real economy. The US economy, unsurprisingly enough, bears the premium of a further reduction, -0.4% over the latest forecast, to a mere 1.5% of, say, organic growth, which will be coupled with some “spill-over” from 2007 to rise the US economy by2.2%.

Europe will be massively hit by the crisis, considering a reduction from Autumn’s forecast by 0.5 percentage points, an overall 1.6%, and a sliding off path more marked during the last quarter (same thing apply to the US, for consistency purposes!!). China and all emerging markets will slow down a bit, the Dragon will slip back from an initial 11.4% to a current 10%, allowing some overheating pressure over the economy to ease, but more notably the African countries will augment their positive impact on a global scale, posting a nice 7% growth, one percentage point above 2007 results. We saw that coming, supported also by Far East investments and “petro-dollars”. However, the IMF notes that

the deteriorating economic conditions could exacerbate pressures on major financial institutions that have already suffered big losses from the subprime crisis.

A nice warning, but quite off-timing I dare say… we are all wandering what actually is the work done to align risk management practices to the Basel 2 requirements..

Still.. if we apply what happened in the US, and the potential spillover of the subprime crisis to the credit environment (potential??? The Amex results yesterday – 10% decline in net income and some “$438m set aside to cover bad loans” stated the Financial Times) are chanting that story for a supposed above-par marketplace, nevermind the rest…) is it possible that another financial black hole may open up in East Europe??

Quite interestingly, the current Italian political turmoil, according to the IMF, should not affect the overall performance, set over a “healthy” path and stressing that all political conditions are “a worry” but all forecast are made on a pure economic evaluation… as if the two aspect, in a modern ans systemic socio-economic ecosystem, are totally separated and with no area of cross-over and influence!!!

It is so incredibly short-sighted not to consider the “system” as the real ruler of all human interactions and the main pillar for a viable and “effective” future… we may need to see a shift in global power and importance towards the East and the South of the World before realising we have missed a chance..

OK, stepping into far too complicated realms to be addressed in a short blog post, yet if anybody is at all interested I am more than happy to take it to an higher level!!!!

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