IS THE GLOBAL ECONOMY REALLY OUT OF THE WOODS

Are the greenshoots for real?Are we really out of the greatest financial downturn since The great depression?Should the stimulus package given by the government all over the world be withdrawn?This is the question that is being discussed all over the world by all the economists and central bankers.Although the results shown by many companies in the states may be the green but the important question here is are they due to change in the fundamentals or due to the stimulus package?The headline GDP figure for the U.S in the 2nd quater has been positive but there has been no change in the unemployment rate which is at its peak in last 25 years at 10%.An interesting fact relating to the economy of U.S is that after 2000 the saving rate of Americans has been less than 1% which also was one of the prime reasons of the financial crisis.But now it is pegged at 6% although less than 8%(historically Americans save at that rate).The thing to note here is instead of spending the dollars they are saving it.And that can be one of the very important factor which can delay the global recovery.The Fed has in its latest announcement kept the rates unchanged at almost 0%.All the profit shown by the companies are basically due to the stimulus package given the government.And once the stimulus package is withdrawn then what will happen as there has not been much change in the fundamentals of the companies.Although when we look at the asian countries they seems to be in a better state of health right now. China has posted a growth of around 8% thanks to the huge stimulus package given by the government. But for the asian countries problem is of withdrawing the stimulus and more importantly the timing of the same.China is already facing the fear of an asset bubble formation due to the stimulus package.RBI-the central bank of INDIA has already signalled an exit from the accomodative stance on the monetary policy and yesterday PM also reiterated the same thing .Australia also has increased its rate becoming the first among the developed countries to do it.But even then for the global recovery to take place U.S has to stand on its own feet without the crutches of stimulus package and that seems to be a distant future.