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No relief seen in global economic crisis
(Agencies)
Updated: 2008-11-21 10:29

Job Losses, Long Downturn

A US government report showed the number of workers filing new claims for jobless benefits last week surged to the highest in 16 years. More than 4 million Americans were receiving jobless benefits in the week ended November 8, the highest since December 1982.

Stock brokers go about their business at the stock exchange in Frankfurt on November 5. Recession fears deepened on new data showing a surge in US jobless claims. [Agencies] 

To give troubled US mortgage borrowers some relief, Fannie Mae and Freddie Mac, the largest US home loan finance companies, announced a hiatus in foreclosures of occupied homes until January 9 while easier borrowing terms are worked out.

Leading economies will likely be in recession for around a year, a Reuters poll of around 250 economists showed. The survey across the Group of Seven nations showed economies faced recession for as much as five quarters.

"All developed economies will contract in 2009. It's the worst we have had in a century. But to say it's going to look like 1929 again for all these economies is a bit excessive, it's too pessimistic," said Marco Annunziata, chief economist at UniCredit in London.

The Federal Reserve said on Wednesday the US economy would contract through the first half of 2009.

"No end in sight," ING economists said in a note on Thursday, a sentiment widely shared by investors.

Analysts said now the fear may be for a deadly economic problem: deflation, marked by steadily falling prices and economic stagnation.

"Once you get into a period of deflation, it's important to get the economy turned around as soon as possible," said Lyle Gramley, a former Fed governor who is now an analyst with the Stanford Group in Washington.

The Philadelphia Federal Reserve's monthly business survey said a key component of inflation, the prices paid index, fell to its lowest level since the survey started in 1968.

IMF to the Rescue?

Trade and foreign ministers of Pacific Rim nations and regions meeting in Lima on Thursday called for new free trade deals as a way out of the worldwide crisis. They will recommend the summit of leaders of the Asia-Pacific Economic Cooperation trade group, which includes the United States and China, avoid raising tariffs and deepen economic cooperation.

Japan's exports to Asia fell in October for the first time since 2002, suggesting the fallout from the credit crisis has spread to neighbors such as China.

With investors looking increasingly to governments and other authorities to stop the rot, the IMF moved to prop up both Iceland and Turkey. It approved a $2.1 billion loan for Iceland, battered by a severe banking crisis, as part of a $10.2 billion package. Sources in Turkey told Reuters the IMF was ready to approve a precautionary standby agreement of $20 billion to $40 billion.

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