GLOBAL growth for 2013 and 2014 has been downgraded ‘significantly’ by the Organisation for Economic Co-operation and Development (OECD), because of the crisis in the US and the dangers of a collapse in emerging markets such as Brazil and India.
Global GDP this year is now expected to grow by 2.7%, down from 3.1% forecast in May.
The OECD added that while signs of improvement were ‘particularly apparent’ in the UK, monetary policy is likely to remain ‘appropriate’ for some time, echoing Cameron’s permanent austerity statement at the London Lord Mayor’s banquet.
The OECD also revised down its global growth forecast for 2014, which it now estimates at 3.6%. In May, it had forecast 4%.
The OECD pinpointed the ‘weakness’ in the banking system as the ‘major drag’ on growth in the euro area.
It added that the ‘potentially catastrophic crisis’ over the debt ceiling in the US and a ‘strong’ panic market reaction to suggestions that US quantitative easing would be cut back has ‘also unsettled confidence’.
OECD chief economist Pier Carlo Padoan said: ‘Brinkmanship over fiscal policy in the United States remains a key risk and uncertainty’ that could ‘knock the US and the global recovery off course’.
He pleaded with Obama that quantitative easing, to the tune of $87bn a month life support for the banks, should remain ‘accommodative for some time’.
Padoan further advised that the world economy would act as an ‘amplifier’ for negative shocks from a ‘stronger slowdown’ in emerging markets.
He further observed that: ‘Downside risks dominate and policy must address them,’ with high levels of public debt in Japan creating risks.
Padoan’s watchword was ‘no complacency’ because of the minor ‘recovery’. He advised all those who thought the 2008 collapse could never happen again that ‘Policy inaction or mistakes could have much more severe consequences than the turbulence seen to date, and jeopardise growth for years to come.’
In its ‘Economic Outlook’ report, the OECD desperately pleaded for the impossible – that the US debt ceiling be abolished, and be replaced by ‘a credible long-term budgetary consolidation plan with solid political support.’
The report noted the ‘surprisingly strong’ reaction by investors to the possibility that the Federal Reserve will soon start to reduce its asset-purchase quantitative easing programme. This led the OECD to consider the following scenario of ‘concerns about developing economies’, followed by a ‘catastrophic’ crisis precipitated by negotiations over the US debt ceiling.
These negotiations are due to resume next February.
The report stressed that even if it creates turbulence and damages other economies, the Federal Reserve should nonetheless wind down its asset purchases next year.
This is despite the danger that a permanent binding US debt ceiling would catapult the US economy into a ‘deep recession’, and the world with it.
It is glaringly obvious that the world crisis of the capitalist system is still deepening and is set to massively explode once again, driven by a renewed US debt limit crisis and the impact of the end of quantitative easing on the world banking system.
This developing crisis will be the real content of the next 3-4 months. It will drive the class struggle and the world socialist revolution forward worldwide.
The US is now the centre of the world crisis. Its deepening will pitch the EU into its greatest banking crisis ever, and destroy the economies of the BRIC states.
One of its features will be the way that the Stalinist bureaucracy, which rules the deformed Chinese workers’ state, will be left holding worthless US IOUs totalling trillions of dollars.
There is only one way out of this world crisis of the capitalist system.
This is to build sections of the International Committee of the Fourth International in every country to smash world capitalism and imperialism through organising the victory of the world socialist revolution, replacing capitalism with worldwide socialism.