Of late, the world seems to have been carried away by the ‘green shoots’ appearing worldwide especially in America (thanks to President Obama) – ‘healthy’ bank profits and rising consumer spending in the US, the positive effect of the Chinese stimulus package, surging demand for industrial commodities and oil, a resumption of global trade (as seen in the recent spurt in the Baltic Dry Index), etc. And the latest in the Indian context, the suddenly ‘intelligent’ Indian voter returning the Congress to power with a veritable ‘sweep’.

All fine observations when taken individually and made more noteworthy by the gloom hanging over the world till a couple of months ago. However, it seems that in their optimism, everyone has missed the forest burning all around these ‘green shoots’.

US: US banks’ unexpected return to ‘profitability’ just before the stress tests has been exposed as the most egregious financial engineering (with the explicit approval of the Obama administration). Almost 8 million jobs have been lost and millions more (excluding those are GM and Chrysler) will be on the chopping block in the next few months. Home foreclosures are continuing unabated. Consumer credit has fallen off a cliff. Losses from credit cards, vehicle finance and mortgages are threatening to blow a hole in those ‘stress-tested’ balance sheets. And did I mention the murky, $600+ trillion world of OTC derivatives.

Asia: Trade has shuddered to a standstill with all major ports seeing 50% declines in traffic. China’s ‘export cities’ are shutting down ouright forcing millions to return to their rural homes. Growth which was expected to bottom out at 6.8% in Q4’08 slipped further to 6.1% in the first quarter of this year. Corporate profits in Japan are at their worst in more than a decade with even the likes of Toyota and Sony reporting full year losses. Singapore, Malaysia and Thailand may all see double digit GDP decline this year.

Europe: The UK and Spain were the first to feel the pinch due to the bubble in their construction industries. Germany, which was the region’s powerhouse has faltered with output registering its largest ever fall since WWII and the government not able to sell its own debt. With surging unemployment and falling tax receipts, the costs of maintaining the welfare state have not even started figuring in public dialogue.

India: The RBI’s claims and the SBI’s misleading 8% home loans not withstanding, corporate and consumer credit remain pretty tight. Which explains the stock market’s recent runup: with bank credit unavailable, IPOs and FPOs fueled by a surging SENSEX are now the only source of capital. WPI numbers may be moderating but CPI numbers tell a different story while the IIP continues to remain horrendous.

And to add just that extra bit of spice to this mix, another global pandemic is spreading across the planet. The ‘green shoot’ experts are saying that H1N1 is less virulent than expected and may be brought under control soon. But isn’t that what was said when H5N1 reared its ugly head a few years ago.

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