For months, experts and commentators have been preparing us for the notion that the global economy is standing right before a downturn. They say that in the US a recession threatens, in Europe there is a clear deceleration of growth, and in China, too -- although partially willed by politicians -- the times of double-digit growth rates will soon be over.
What the bankers of the US Federal Reserve have to say about their latest interest rate decisions does not exactly sound comforting either: the tense situation in the money markets, the paralyzing property market and the raised energy costs were weighing on the global economic condition, the Fed explained. Furthermore, they say the financial markets remain under clear pressure. The situation in the US job market is also fraught, they say. With 5.7 percent, the unemployment rate in July climbed to its highest level since March 2004. The former head of the US Federal Reserve, Alan Greenspan, is even more pessimistic. He warned in the Financial Times newspaper of the crisis of a century and prophesized that scores of banks would not survive this crisis.
At the moment there is no shortage of pessimistic voices on the economic situation in the USA. And when the economic situation in the largest national economy weakens, it is well-known that the rest of the world gets a cold. Skeptics do not even consider positive signals that indicate that everything does not have to end so badly. Yet, after initial calculations, the American economy has grown by 1.9 percent in the second quarter of 2008. A recession is looking different.
But this growth is just a tax present from the Bush government that is billions in debt, say the pessimists. This consumer spending could soon fizzle out and then the consumers in the credit and property crisis would be hit directly.
So is the glass half full or half empty? The International Monetary Fund has all the same raised the growth prognosis for the largest national economy in the world from 0.5 to 1.3 percent, in light of the unexpectedly strong consumer demand in the US. To speak of recession in the face of such forecasts already borders on negligence.
Relief is especially coming from the other side. The crude oil and energy prices that have made for worldwide bursts of inflation have been crumbling considerably for some time now. That allows the central banks of this world once again to hope that the price pushes of the past were a passing occurrence and that they are not opening up into so-called second-round effects. The decision by the US Federal Reserve should not be seen as anything other than a move to leave the key interest rate in the USA unchanged. In a meeting on Aug. 14, the European Central Bank will also be taking precautions to further slow down the paralyzing growth strength with a new increase in the key interest rate.
There is no question: every upsurge will come to a standstill. Sometimes the pessimists have an economic boom. But to speak of a recession in light of the many contradictory signals is irresponsible. Whoever constantly warns of a crisis and a looming recession unsettles consumers and businesses -- and in the end they keep talking about it until after the crisis itself has passed. A downturn that everybody is talking about and that everybody is expecting is like a self-fulfilling prophecy: consumers save, businesses postpone their investments, jobs are cut, and goods wait on the shelves.
But it does not have to get that far. Former German economics minister and federal chancellor, Ludwig Erhard, once said that 50 percent of economy is psychology. If that is right then sympathetic psychologists should not tell their patient that he is sicker than he really is.
Rolf Wenkel is a business editor at DW-RADIO (ah)