Global Leaders Gather in Switzerland Amid Uncertain Economic Future Worldwide.
The outlook for the global economy this year is decidedly dour, but leading economists at the World Economic Forum in Switzerland had mixed views Wednesday about the possibility of a global recession.
Economists from Asia and the United States and government ministers from India and China said the U.S. economy was on a downward course. "If there is a tremendous slowdown in the U.S. economy, then we must be worried about it," said Yu Yongding, director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, as concern grew over market turmoil and a possible U.S. recession. He said China's growth could help it weather any slowdown as the nation expands trade with countries outside the United States.
Stephen Roach, chairman of investment bank Morgan Stanley in Asia, said there would be ramifications for world markets should the globe's largest economy falter. Asked by a Mexican businessman if his country would be spared if the U.S. goes into recession, Roach was blunt. "My good friend from Mexico, you're in trouble," Roach said. "Mexican exports to the U.S. account for 25 percent of your GDP. Same number for Canada. How can the U.S. go into recession and Mexico be fine?"
Nouriel Roubini, chairman of New York-based Roubini Global Economics, cited the maxim that if the U.S. economy sneezes, the rest of the world catches a cold, but said this time the diagnosis in the U.S. was worse. "In this case the U.S. is going to have a protracted case of pneumonia," he said.
The impact of the sluggish U.S. economy, and what it may portend for other nations, hung over the event, even after the U.S. Federal Reserve Bank cut its benchmark refinancing rate to 3.5 percent from 4.25 percent in response to the latest worldwide market downturn.
Economists also split over the role of central banks and whether institutions like the Fed were equipped to steer the global economy out of danger. John Snow, the former U.S. Treasury secretary, said central banks have performed remarkably over the last two decades -- better than any time in history, perhaps -- and continue to make the necessary adjustments. "The issue of whether central banks are capable of vigorous action, bold action, was answered yesterday," Snow said, referring to the Fed's interest rate cuts. "They can't see the world ahead perfectly, but who can?"
But Joseph Stiglitz, the 2001 Nobel Prize winner for economics and a critic of free market champions, and billionaire philanthropist George Soros, disagreed. "What we have now are the foreseeable consequences of bad economic management," Stiglitz said.
Lawrence Summers, former Harvard University president and Treasury secretary under U.S. President Bill Clinton, said central banks have lost their way. "I think it's hard to give central banks a very high grade over the last couple of years on recognition of ... bubbles and the ability to address them," he said. "I think it's hard to give a high grade over the last 6 months when the bubbles have been bursting and (the banks) have been behind the grade."
The Forum, now in its 38th year, will touch on other issues affecting the world including terrorism, a workable peace process in the Middle East and how technology is ushering in a new age of social networking without borders.
U.S. Secretary of State Condoleezza Rice and Afghan President Hamid Karzai were scheduled to address the opening reception later Wednesday. Rice is also expected to meet with Pakistan President Pervez Musharraf and Karzai in closed-door sessions. Her meeting with Musharraf will be the first since the assassination in December of opposition leader Benazir Bhutto, an event that pushed the nuclear-armed Pakistan into near chaos.
In a nod to concern about climate change, Rajendra K. Pachauri, chairman of the U.N.'s Intergovernmental Panel on Climate Change is to speak. Al Gore, who shared the 2007 Nobel Peace Prize with the panel, is also participating in the five-day meeting.
A year ago, Davos attendees foresaw a strong economy. The credit crisis brought on by massive exposure to subprime mortgage securities has changed that. "It's not about a soft landing or a hard landing," Roubini said, but "rather how hard a landing it will be." "We're seeing a financial system that is under severe stress," Roubini said. "The Fed cannot prevent this recession from occurring."
Klaus Schwab, founder and executive chairman of the Geneva-based forum, said the meeting's "unique combination of the world's top business and political leaders, together with the heads of the world's most important NGOs, and religious, cultural and media leaders allows us to approach the problems that face the world in a systematic way and with an eye to tackling the major issues that face us all."
The meeting itself will feature participants from 88 countries, including British Prime Minister Gordon Brown and Microsoft Corp. co-founder and chairman Bill Gates.
The outlook for the global economy this year is decidedly dour, but leading economists at the World Economic Forum in Switzerland had mixed views Wednesday about the possibility of a global recession.
Economists from Asia and the United States and government ministers from India and China said the U.S. economy was on a downward course. "If there is a tremendous slowdown in the U.S. economy, then we must be worried about it," said Yu Yongding, director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, as concern grew over market turmoil and a possible U.S. recession. He said China's growth could help it weather any slowdown as the nation expands trade with countries outside the United States.
Stephen Roach, chairman of investment bank Morgan Stanley in Asia, said there would be ramifications for world markets should the globe's largest economy falter. Asked by a Mexican businessman if his country would be spared if the U.S. goes into recession, Roach was blunt. "My good friend from Mexico, you're in trouble," Roach said. "Mexican exports to the U.S. account for 25 percent of your GDP. Same number for Canada. How can the U.S. go into recession and Mexico be fine?"
Nouriel Roubini, chairman of New York-based Roubini Global Economics, cited the maxim that if the U.S. economy sneezes, the rest of the world catches a cold, but said this time the diagnosis in the U.S. was worse. "In this case the U.S. is going to have a protracted case of pneumonia," he said.
The impact of the sluggish U.S. economy, and what it may portend for other nations, hung over the event, even after the U.S. Federal Reserve Bank cut its benchmark refinancing rate to 3.5 percent from 4.25 percent in response to the latest worldwide market downturn.
Economists also split over the role of central banks and whether institutions like the Fed were equipped to steer the global economy out of danger. John Snow, the former U.S. Treasury secretary, said central banks have performed remarkably over the last two decades -- better than any time in history, perhaps -- and continue to make the necessary adjustments. "The issue of whether central banks are capable of vigorous action, bold action, was answered yesterday," Snow said, referring to the Fed's interest rate cuts. "They can't see the world ahead perfectly, but who can?"
But Joseph Stiglitz, the 2001 Nobel Prize winner for economics and a critic of free market champions, and billionaire philanthropist George Soros, disagreed. "What we have now are the foreseeable consequences of bad economic management," Stiglitz said.
Lawrence Summers, former Harvard University president and Treasury secretary under U.S. President Bill Clinton, said central banks have lost their way. "I think it's hard to give central banks a very high grade over the last couple of years on recognition of ... bubbles and the ability to address them," he said. "I think it's hard to give a high grade over the last 6 months when the bubbles have been bursting and (the banks) have been behind the grade."
The Forum, now in its 38th year, will touch on other issues affecting the world including terrorism, a workable peace process in the Middle East and how technology is ushering in a new age of social networking without borders.
U.S. Secretary of State Condoleezza Rice and Afghan President Hamid Karzai were scheduled to address the opening reception later Wednesday. Rice is also expected to meet with Pakistan President Pervez Musharraf and Karzai in closed-door sessions. Her meeting with Musharraf will be the first since the assassination in December of opposition leader Benazir Bhutto, an event that pushed the nuclear-armed Pakistan into near chaos.
In a nod to concern about climate change, Rajendra K. Pachauri, chairman of the U.N.'s Intergovernmental Panel on Climate Change is to speak. Al Gore, who shared the 2007 Nobel Peace Prize with the panel, is also participating in the five-day meeting.
A year ago, Davos attendees foresaw a strong economy. The credit crisis brought on by massive exposure to subprime mortgage securities has changed that. "It's not about a soft landing or a hard landing," Roubini said, but "rather how hard a landing it will be." "We're seeing a financial system that is under severe stress," Roubini said. "The Fed cannot prevent this recession from occurring."
Klaus Schwab, founder and executive chairman of the Geneva-based forum, said the meeting's "unique combination of the world's top business and political leaders, together with the heads of the world's most important NGOs, and religious, cultural and media leaders allows us to approach the problems that face the world in a systematic way and with an eye to tackling the major issues that face us all."
The meeting itself will feature participants from 88 countries, including British Prime Minister Gordon Brown and Microsoft Corp. co-founder and chairman Bill Gates.
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