Green Shoots: More Found.. But

  The rich world's & #160;economic group, the OECD says the free fall in the global economy is over, a senior member of the US Fed says American interest rates will stay low & quot;for some time & quot; and debt markets are fretting.It all sounds a bit contradictory, but it & #160;is real.On top of this, the Bank of Japan has lifted its economic outlook for the country, from gloomy to not so gloomy, as it sees the worst of its terrible contraction passing.In Australia there's more mixed news about the current health of the economy, let alone the next six to 12 months.Canada's finance minister saw & quot;glimmers of hope & quot;, but the UK economy's plunge in the first quarter, while confirmed at a contraction of 1.9%, was shown to be worthy of an economy on the brink of possible downgrading by ratings groups.Standard & #38; Poor's stirred concern on Thursday by suggesting Britain could face a downgrade to its triple-A rating. & #160;The ratings agency cut its outlook for Britain to & quot;negative & quot; as debt nears 100% of gross domestic product.That was picked up, and applied to the US, which is in a similar situation, forcing shares down for a fourth day in a row.For the week, the Dow Jones industrial average & #160;rose 0.1%, while the Standard & #38; Poor's 500 0.5% and & #160;Nasdaq & #160;0.7%.For the year, both the & #160;Dow and the & #160;S & #38;P 500 are in the red -- the Dow is down 5.7% and the S & #38;P is off 1.8% - while & #160;Nasdaq is up 7.3%.The US dollar dropped to a 2009 low as fears grew the United States could be at risk of losing its & #160;triple-A rating, and the Australian dollar hit a seven month high of close to 78.70 US cents.The White House said it did not believe America's & #160;credit rating would be cut, nor did ratings agency Moody's & #160;which issued a statement saying that it was & #160;comfortable with the U.S. triple-A rating & quot;but it is not guaranteed forever. & quot; (Nothing is)Fed chairman, Ben Bernanke, offered some signs of optimism, telling graduates of a law school that & quot;the economy will recover -- it has too many fundamental strengths to be kept down for long. & quot;And his Fed Vice chairman, Donald Kohn said on the weekend that the central bank is likely to keep benchmark interest rates near zero for a while in an economy that is pulling out of a steep decline and appears on course for a very gradual recovery, Fed Vice Chairman Donald Kohn said on Saturday. & quot;The economy is only now beginning to show signs that it might be stabilizing, and the upturn, when it begins, is likely to be gradual amid the balance sheet repair of financial intermediaries and households, & quot; Kohn told a conference at Princeton University. & quot;As a consequence, it probably will be some time before the FOMC will need to begin to raise its target for the federal funds rate, & quot; he said, referring to the Fed's policy-setting Federal Open Market Committee.While encouraging, Kohn's comment should also be seen as an admission that as 'green' as some of the shoots seem in the economy, there's no belief that they will strengthen any time soon into a much stronger recovery.Mr Kohn made clear the Fed is starting to become concerned about the medium term employment situation as sectors in the economy continue contracting, like housing and finance. & quot;The effect of the crisis, the shifting of labour across markets, the effects on productivity have been very much one of the topics at the Fed, & quot; Kohn said in response to questions.This was a topic raised for the first time in the minutes of the late April fed meeting. Mr Kohn said the Fed is looking at how this impacts & #160;productivity in the economy and how those changes may have affected the difference between how the economy grows and its full potential.From what was in the minutes and what Mr Kohn says, there seems to be a growing & #160;belief that labour reallocation issues could restrain both the recovery to trend growth levels and the ability of the economy to reduce the overall unemployment in coming years.According to Reuters, & #160;Organisation for Economic Cooperation and Development (OECD) head, & #160;Angel Gurria, said ratings agencies must & quot;recover their prestige and credibility & quot; after being widely criticized for failing to predict the crisis. & quot;It seems absolutely inexplicable that they want to cut the rating of England and that there is talk they are going to cut the rating of the United States, & quot; he said.Gurria acknowledged there was a risk the crisis could be prolonged without fiscal and credit discipline but that world output could begin to recover by the end of this year. & quot;We're no longer in a free fall, & quot; he said.Three US banks went bust last week, including two in Illinois on Friday night and one in Florida the day before.The biggest failure came Thursday as regulators seized & #160;Florida lender BankUnited FSB & #160;and sold it to private equity firms. & #160;The & #36;US4.6 billion failure was the largest by an American bank this year but there was no sign of panic among customers of bank investors. The failures took the number of collapses to 36 this year compared with 25 in 2008.The big issue though outside banks and debt this week for global markets and the global economy will be the situation at General Motors which seems headed for bankruptcy by next weekend.General Motors Corp's bondholders on Friday said they remained opposed to the company's proposed bond exchange, a position which threatens to send GM into bankruptcy soon, while the Obama administration said it would not extend talks.A day after the automaker reached a preliminary restructuring deal with unions, GM's biggest bondholders, with some & #36;27 billion in unsecured debt, still intend to reject GM's offer for a 10 percent equity stake, a spokesman for the creditors said.Bondholders last month pushed for a 58 percent stake in GM, which President Obama's Auto Task Force has signaled is unrealistic.President Obama said in an interview on the weekend that & #160;he was confident General Motors would thrive after restructuring. But there & #160;was no mention whether the ailing automaker might have to enter bankruptcy to complete reorganization. & quot;Ultimately, I think that GM is going to be a strong company and we are going to be pulling out as soon as the economy recovers and they've completed their restructuring, & quot; Obama said.The question remains for how long, and at what cost. Production, jobs and retail sales will take a huge hit for the next quarter and a half, and possibly more from any bankruptcy of GM.If not handled properly it could push the US back into a deeper slump and kill off those 'green shoots' of recovery.GM also & #160;won a cost-cutting deal from its Canadian union, part of a package of concessions it is expected to take into & #160;US bankruptcy & #160;by the end of this week & #160;in a looming confrontation with bondholders.In Russia unemployment rise to a 9-year high in April and retail sales slump for the third month in a row. (In Canada, retail sales picked up for a second month in a row).In Tokyo, a statement after a two day meeting Thursday and Friday, the Bank of Japan showed some & #160;cautious optimism about the stricken economy's outlook.It & #160;upgraded its view of the ailing economy for the first time in almost three years. The Bank of Japan also kept interest rates steady and said the previous & #160;steep falls in exports and output were leveling out. & quot;Economic conditions have been deteriorating, but exports and production are beginning to level out, & quot; the bank said in a & #160;statement, which was significantly milder than the previous statements which said & #160;the economy had & quot;deteriorated significantly. & quot; & quot;There have been expressions like freefalling or falling off a cliff, & quot; said Bank of Japan Governor Masaaki Shirakawa. & quot;We are no longer in that sort of situation. & quot;The central bank said & quot;the pace of deterioration in economic conditions is likely to moderate gradually, leading to a leveling out of the economy. & quot;  

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