Home While U.S. Industry Grows in the Face of a Tough Economy, the Federal Government Works Overtime to Fight It

While U.S. Industry Grows in the Face of a Tough Economy, the Federal Government Works Overtime to Fight It

The International Monetary Fund (IMF) provided the world with an updated economic outlook on April 21 that was much more optimistic than what we were hearing last year. Their forecast indicated the world overall would see a 4.2 percent expansion in economic growth compared to 2009 when we experienced a decline in global output of 0.6 percent. The United States will experience 3.1 percent growth in 2010 compared to a disastrous 2.4 percent plummet in GDP for 2009. That is the largest decline since World War II. The growth for the United States trails China, India and many third world countries. The Chinese economy is predicted to grow by more than 10 percent, followed by India at 8.8 percent. Europe, on the other hand, is lagging substantially behind the rest of the world with an economic growth rate of just 1 percent.

There is a truth plainly exposed in these numbers. First, the European Union consists primarily of socialist economies. And they lag behind the rest of the world in recovery from the 2008-2009 global recessions. Hmmm! The Chinese have steadily been moving toward a free market economy with the world’s largest growing middle class. And they are predicted to grow their economy at 10 percent for 2010. Another hmmm! India has a similar story to that of China, and its growth rate is predicted to expand at 8.8 percent. Getting the picture?

The IMF Economic Outlook Report was prepared in advance of the meeting of the G20 to be held on April 23. The Group of Twenty (G-20) Finance Ministers and Central Bank Governors was established in 1999 to bring together systemically important industrialized and developing economies to discuss key issues in the global economy. Likely the group will be applying pressure on Beijing to allow the yuan, its currency, to rise in value against the dollar. American manufacturers complain the yuan is undervalued by as much as 40 percent, giving Chinese manufacturers unfair advantages over the U.S. manufacturers. China, the world’s third largest economy, might not be keen on working toward a global balance. Why would they? My best guess is that they might be keener on seeing an influx of American manufacturers moving operations there.

There is evidence of a migration from the U.S. to more prosperous economies. Wynn Resorts is strongly considering moving its headquarters from Las Vegas to Macau. MGM Mirage is opening a new mega-resort in Vietnam. I know of several architectural firms opening offices in the Pacific Rim area. High-tech development and programming has long been flowing into India for the better part of a decade. This enterprise and innovation migration out of the U.S. is going to continue if the United States executive branch of government doesn’t develop self-discipline and a perceptible grasp on reality. It’s embarrassing that the persons designated to discuss fairness and balance at the G20 are our very own Timothy “Tax Cheat” Geithner and Ben “I Didn’t Know” Bernanke.

The latest maneuver of this dynamic duo was to pressure Congress toward wildly raising taxes on the country’s largest banks to secure $90 billion to pay down the cost of the financial bailout. You don’t suppose that will tighten the credit markets do you? Combined with raising capital requirements for U.S. banks, it’s going to completely cut off the life blood of American business. Fannie Mae and Freddie Mac are much more to blame for our economic difficulties than the banks. The federal takeover of Fannie Mae and Freddie Mac refers to the placing into conservatorship of government-sponsored enterprises Fannie Mae and Freddie Mac by the U.S. Treasury in September 2008. It was a primary factor in producing the ongoing subprime mortgage crisis. And I for one don’t think China is going to continue buying our debt.

Just keep in mind we have a very important election coming up in November.

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