Daily View: What are the biggest dangers for the economy?
After sharp falls in stock markets around the world, commentators suggest what the biggest dangers for the global economy are.
that unlike three years ago, the biggest problem right now is that policy makers continue to disagree:
"So, for example, the Fed was split on whether to take action on Wednesday, just as Congress was split before it on the debt ceiling (with much more disastrous consequences, namely the US debt downgrade). In the UK, the Bank of England's MPC remains split over quantitative easing (and there are signs now too of fissures in the Coalition over the Chancellor's rigidity on Plan A). Internationally, the eurozone can't agree on how to respond to its sovereign debt woes.
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"People always disagree, of course, but that the splits show no sign of closing suggests consensus is some way off. The result is the sort of half-measures we continue to see presented as solutions to financial instability and economic despondency."
the international disagreement runs even deeper:
"The G20 still does not even appear to know how to diagnose the disease, let alone unite around a treatment. The harm done by strife between countries and continents, and within parliaments, is being played out in the gyrations on financial markets, which abhor political uncertainty."
However, it is too late for policy makers to make a difference:
"It is probably too late to avoid a double-dip recession even if policymakers were to agree this weekend to shore up European banks, to take the steps needed to prevent the euro imploding and, by some miracle, conjure up a credible plan for jobs and growth. The real concern is that three years after Lehmans the global economy's problems have proved so intractable. It is not just the tough winter ahead that politicians need to worry about. It is the risk of a lost decade as the whole world goes Japanese."
Concentrating on the splits in UK, that it is becoming clear that projections Chancellor George Osborne have been working to are too optimistic about tax revenues and welfare costs, giving him a dilemma:
"If he presses ahead with spending cuts he will create the first major fracture in the Coalition. Vince Cable - viewed within No 10 as a renegade loudmouth - is already mutinous, discontented and privately agitating for an alternative economic strategy. At some point, probably not far off, he will resign as Business Secretary, perhaps returning quietly to the Lib Dem backbenches, more likely forming a tacit alliance with Ed Miliband and Labour.
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"But if Osborne doesn't press on, the dangers are greater. So far, Osborne has been a strong Chancellor who carries genuine credibility in the City of London. That credibility is of fundamental importance because it means that, unlike Italy or Spain, we can finance our national debt at cut-price rates in international markets - the essential point which the expansionary shadow chancellor, Ed Balls, fails to understand. If Osborne loses that credibility, it is not just the Coalition that is sunk - Britain is too."
Different to the rest of the assessments is the the current crisis, like many in the past, has something to do with the time of year:
"During the summer, when many bankers and speculators are on holiday and their grip on the movements of economic forces are loosened, downward pressures on the markets can develop.
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"Slowly but surely, confidence seeps away. And then, within days of the financial classes arriving back at work, quite suddenly, but utterly devastatingly, the house of cards comes crashing down."
