There seems to be pes­simism in the air regarding the eco­nomic prospects of the West and by exten­sion the world. In its recent report, the Orga­ni­za­tion for Eco­nomic Co-​​operation and Devel­op­ment (OECD) revised down­ward its esti­mates of growth for many coun­tries. It low­ered the overall growth rate fore­cast of the Euro Zone for 2013 and 2014 each by 0.5 per cent. For the entire OECD, the fore­cast has been low­ered by 0.6 per cent for 2013 and 0.2 per cent for 2014.

We hear the same pes­simism from econ­o­mists and experts. In his talk at a con­fer­ence hon­oring Stanley Fis­cher at the Inter­na­tional Mon­e­tary Fund, Larry Sum­mers noted that in order to achieve full employ­ment, the interest rate has to be at a “nat­ural level”. How­ever at present, he con­tended, that rate is neg­a­tive. But the Fed­eral Reserve cannot pos­sibly set the nom­inal interest rate below zero. Sim­ilar sen­ti­ment was shown by two Nobel lau­re­ates, Joseph Stiglitz and Paul Krugman, in a recent inter­view with the BBC.

Need­less to say, we are living in a glob­al­ized world and if the United States and the Euro Zone expe­ri­ence eco­nomic stag­na­tion, it will affect other coun­tries around the world. Many economies including China, South Korea, and Japan would be affected by the slug­gish demand for their exports. Sim­i­larly, many devel­oping coun­tries have to rely on export pro­mo­tion at the first stage of eco­nomic growth.

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