Business News : app6" href="http://news.independent.co.uk/business/news/article315144.ece">Independent
Bitter disagreements over global economic policy broke out into the open yesterday as the French Finance Minister claimed that Alan Greenspan had admitted America had "lost control" of its budget while China warned the US to drop demands for radical economic policy changes. In an extraordinary revelation after a meeting between Thierry Breton and Mr Greenspan, M. Breton told reporters: "'We have lost control,' that was his [Mr Greenspan's] expression.
"The US has lost control of their budget at a time when racking up deficits has been authorised without any control [from Congress]," M. Breton said. "We were both disappointed that the management of debt is not a political priority today. The situation that is creating tension today on the currency market ... is clearly the American deficit." MORE
FT.com
Finance ministers and central bank governors of the world's leading industrial countries have warned of economic disruption from high oil prices and and vulnerabilities in financial markets. The mood at the International Monetary Fund and World Bank annual meetings was downbeat, with senior politicians and officials airing their fears that global economic expansion may have peaked and that more challenging times lie ahead. Jean-Claude Trichet, president of the European Central Bank, said that high oil prices were having a "very significant impact" on growth and inflation.
The communiqué of the international monetary and financial committee - the ministerial board that oversees the IMF - said: "Global growth is expected to continue, although downside risks to the outlook have increased, especially high and volatile oil prices, recently exacerbated by the effects of Hurricane Katrina, increasing protectionist sentiment and the possibility of tighter financial market conditions."
A senior US Treasury official said: "We freely acknowledged the things that we worry about - do interest rates appropriately reflect the risks?"
[...]
Gerard Lyons, chief economist at Standard Chartered, said the global economic cycle had peaked, pointing to rising interest rates, the potential for slower growth in the US and China and the fact that the Japanese and eurozone economies were not in a position to take up the slack. "The next six months will be a challenging time, dealing with the high oil price, and global imbalances loom. The global economy has peaked and liquidity conditions are set to tighten. When things turn around you can have significant fallout." MORE
Interest rates will rise and as they do the housing price bubble will collapse, consumers will be saddled with mortgages that will not pay off upon selling the homes. Foreclosures will skyrocket, bankers will acquire property like mad. Mortgage equities, largely owned by pension funds will crash. The pension fund crisis will be universal.
Is there any question who Bush's base is? It's not the homeowner. It's not the small business owner. It's not the wage or even salary earner. It's those folks who live off of investments. Thats where the lions share of tax cuts occurred. Wage and salary earnings have stagnated for the past four years. Federal tax cuts have effectively been offset by social security and property tax increases.
Now to maintain the safety nets for the poor, the only people to pay are the wage earners and the salaried. Obviously the poor will not get all they need. Without health care, tens of thousands will die unnecessarily. The economic disaster will make Katrina look like a rehearsal for the real thing. This story has been foretold for the past year.
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