Given the lousy economic data that have come out of the U.S. in the past few months, the mood at the World Economic Forum in Davos, Switzerland, is surprisingly cheery.
At panel after panel, the luminaries gathered at this snowy ski resort have said that the U.S. is not in a recession, and that growth will pick up in the second half of the year as long as the Federal Reserve continues to cut rates. The speakers also said they hope the new administration will come up with some sort of fiscal stimulus policy, though the Democrats here say they'd like any tax-cut package to be more progressive than the one proposed by President Bush.
Princeton economics professor - and former Fed governor - Alan Blinder set the tone on Thursday when he put the chance of a recession at just 33 percent. He said he expects U.S growth to come in at around 2 percent this year, and warned that Bush should "follow the example of the last president and try not to talk down the economy."
Others criticized Bush for commenting on the last rate cut, saying that it's important for him to keep silent on Fed moves.
Bush administration officials were noticeable by their absence, prompting wags to speculate that they were afraid to show up because the president has so little experience in foreign policy.
The lack of appointments to the Council of Economic Advisers was another source of comment. The CEA's chair from 1993-95, Laura Tyson, said she hopes that the council can still play an important role in the new administration. In a heated debate with U.S. Representative Jim Leach, (Republican, Iowa), Tyson said the U.S. tax code needs to become more progressive and that any government surplus should be used to strengthen Social Security.
Other economists and bankers said that fears of U.S. household and corporate debt have been largely overblown, but that they expect the stock market to experience continued short-term volatility. Goldman Sachs managing director Abby Joseph Cohen reiterated that the investment bank now believes a number of tech stocks are undervalued and that it is a good time to buy.
The 2,000-plus attendees are largely white males from the corporate world, though a number of government officials are also present. Fearing a repeat of the demonstrations that disrupted the World Economic Forum meeting in Australia last year, Swiss police have cordoned off the tiny, snowy town.
A counter-demonstration is being held in Brazil, but a few sympathizers found their way to Davos. In opening remarks Thursday evening, Brazil's agriculture minister, Marcus Vinicius Pratini de Moraes, blasted the U.S. for pushing developing countries to lower trade barriers while still turning away many Brazilian exports. Similarly, the deputy prime minister of Thailand, Supachai Panitchpakdi, criticized the way the IMF handled the 1997 Asian crisis, saying that the World Trade Organization needs to be more "flexible" in its handling of developing countries.
Story courtesy of The Industry Standard (Australia): http://www.thestandard.com.au