Sunday, September 25, 2011

Comments from Soros, IMF, U.S. Fed, WTO and Rio Tinto CEO seem downbeat

There was no shortage of negative commentary last week including: 1) billionaire investor George Soros on a double dip recession - “I think we are in it already”, 2) International Monetary Fund managing director Christine Lagarde saying the global economy is entering a “dangerous place”, 3) the U.S. Federal Reserve stating that the U.S. economic outlook contains “significant downside risks”, 4) Tom Albanese, CEO of mining firm Rio Tinto - “It is noticeable that markets are somewhat weaker” and 4) the World Trade Organization reducing its 2011 estimate for global goods trade to 5.8%, down from There was no shortage of negative commentary last week including: 1)6.5%. At the same time, a statement from G-20 finance ministers said: “We commit to take all necessary actions to preserve the stability of banking systems and financial markets as required.”

MY TAKE: While some pundits suggested that the week’s significant market pullback was based on dissatisfaction with the U.S. Federal Reserve’s “Operation Twist”, these observations support a view that global growth is slowing and investment risks persist. Unfortunately, the G-20’s “generic” comment suggests that policy makers remain in a reactive mode and may lack the capacity to address the challenges.

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