Grinding to a Halt

This morning, Morgan Stanley put out a note with a downgrade of, well, planet earth.  The firm’s look at the prospects for global growth this year makes for a very sobering read…

From Bloomberg:

Morgan Stanley cut its forecast for global growth this year, citing an “insufficient” policy response to Europe’s sovereign debt crisis, weakened confidence and the prospect of fiscal tightening.

The bank estimates expansion of 3.9 percent, down from a previous forecast of 4.2 percent, according to an e-mailed report dated today. Morgan Stanley cut its China growth forecast for next year and Deutsche Bank AG reduced its estimates for the nation for 2011 and 2012.

The threat to the global economy from the debt burdens of developed nations from the U.S. to Europe has roiled world markets this month and wiped trillions of dollars off the value of equities. At the same time, slowing expansions in countries including Germany, the key driver of European growth, are hurting confidence.

The U.S. and Europe are “dangerously close to recession,” Morgan Stanley analysts including Chetan Ahya said in the note.

I view this as a massive failure of central bankers from Europe to the US.  The programs they’ve embarked on have meant nothing and cost us everything.  The best we can hope for is to bump along at 1 or 2% growth in the US and avoid recession.  In Europe, the best they can hope for a continuance of the masquerade that a currency union without taxing authority or a standing army is even possible.  As for China, they better pray that their best customers don’t fall too hard.

Source:

Morgan Stanley Lowers Global Growth Forecast (Bloomberg)