OECD Chief Economist, Pier Carlo Padoan has said “Recent high-frequency indicators point to a slowdown in the pace of recovery of the world economy that is somewhat more pronounced than previously expected” and that policy makers may need to extend or bolster stimulus programs.
This comes as governments around the world wind down stimulus measures in a hope that a previous unsustainable economy can be corrected by simply throwing more money at it and without fixing the underlying problems.
For example, when the U.S. government removed a government tax credit supporting the housing market a couple of months ago, existing home sales fell a record 27.2% in July, to the lowest level in 15 years, while inventories surged to its highest level in a decade.
CNBC’s David Streitfeld writes :
Over the last 18 months, the administration has rolled out just about every program it could think of to prop up the ailing housing market, using tax credits, mortgage modification programs, low interest rates, government-backed loans and other assistance intended to keep values up and delinquent borrowers out of foreclosure. The goal was to stabilize the market until a resurgent economy created new households that demanded places to live.
Some economists are now wanting governments to stop wasting money and let the market crash. Anthony B. Sanders, from George Mason University says “Housing needs to go back to reasonable levels, If we keep trying to stimulate the market, that’s the definition of insanity.”
» Housing Woes Bring New Cry: Let Market Crash – CNBC, 6th September 2010.
» Global economic recovery is slowing, OECD warns – The Sydney Morning Herald, 9th September 2010.
» OECD Says Economy Slowdown `More Pronounced’ Than Anticipated – Bloomberg, 9th September 2010.
» World slowdown steeper than anticipated: OECD – Marketwatch, 9th September 2010.