Creating hurdles, not solutions
Will debt reduction strategies put more hurdles in the way of ports' growth?
The latest G20 meeting resulted in a communique that endorses austerity and debt reduction.
“….There is a risk that synchronized fiscal adjustment across several major economies could adversely impact the recovery. There is also a risk that the failure to implement consolidation where necessary would undermine confidence and hamper growth.
"Reflecting this balance, advanced economies have committed to fiscal plans that will at least halve deficits by 2013 and stabilize or reduce government debt-to-GDP ratios by 2016…..”
And there you have it in black and white. The leading economies of this world have decided that the need for stimulus is over and the need for drastic debt reduction via austerity packages is the way to generate stability, growth and confidence. Smoke and mirrors. This economic strategy will lead the world back into recession. Get out your history books and review the economic policies of the Hoover Administration in 1932-36. Virtually the same as the above and a total disaster resulting in a global depression, saved only by a world war.
Where do we, as consumers, find renewed confidence in higher unemployment and higher taxes? We will also go for debt reduction and stop spending.
The US today has the lowest mortgage rates for decades, is anyone buying houses? No. Consider Ireland or the Baltic states, they chose austerity and fiscal balancing. Unemployment is up, growth is not there.
Our industry will surely suffer if the consequences of these fiscal strategies take effect as they have done in the past. We are seeing the first signs of this. The purchasing managers index in Europe has begun to weaken, it dropped substantially in the US and in China.
Inventory to sales ratios are rising and unemployment figures are not showing signs of improvement. Money remains scarce, hindering industry from growing.
The potential consequence of this fiscal strategy is that global trade to North America and Europe will begin to be impacted in the second half of the year and into 2011 as consumers pull back and prices increase due to VAT increases and higher production costs in China.
There is a risk that confidence will evaporate; ships will no longer be full and ports will not see the growth of the last eight months. I hope that I am wrong.
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