Frugality and surplus to mark 2011

By Emily Kaiser

WASHINGTON (Reuters)- Call the year feast and famine.

Good number of the world major advanced economies have promised to frugality to 2011 while rapid growth in emerging markets are at risk of overheating. The global economy must bear two forces for growth forecasts.

Merriam-Webster dictionary company ranked "austerity" as his No. 1 of the year 2010 word because people both looked up the definition on the company's Web site at the exploding Europe debt problems. (This was not the first time that the world economy so well featured prominently.) (Two years ago, the top word was "bailout.")

Many of these promises austerity kicked in the next year. Portugal has proposed reductions in remuneration by 5 per cent for public servants. Spain, Parliament approved a budget that includes a reduction of 7.9% of public expenditure. Ireland plans to reduce costs EUR 4 billion.

These fiscal measures are part of the reason why economists polled by Reuters believes that the euro area economy will slow at a rate of 1.5% next year, slightly from already sluggish 1.7% 2010 pace.

The risk is that a synchronized round of budget constraint puts drag more grand than-expected growth.

The international monetary Fund estimates that two years after, a cross-section of 1% of GDP deficit decreased economic output by half a percentage point and raises unemployment a third point.

The United States is facing its own fight austerity as Republicans in Congress push for spending reductions. US economic growth for 2011 appears to be somewhat stronger than Europe but still well away from what is necessary to repair the labour market.

Sung Won Sohn, an economist with the California State University, provides that the 3% growth next year but that lack of jobs remains the "Achilles heel" of the economy.

Sohn, who is also Vice-President of the chain of stores selling clothing Forever 21, said that the poor labour market might compel next year despite the holiday shopping season 2010 amazingly high expenditure of consumption.

"U.s. consumers want to save more debt and put their fiscal houses in best form", he said. "As long as consumers are cautious mood, from part of the image of poor working it is difficult to have a healthy economic growth."

G7, G20 Hello Goodbye

It is no secret that emerging markets increase much faster than the advanced economies. IMF estimates in emerging markets increase by 6.4% next year, nearly three times the rate of developed countries.

Overall, it provides that the global growth of 4.2% for next year, which would be a step in 2010, but much higher rates of recession-hit of the previous two years.

Help support the growth in United States in Europe and Japan strong performances in China, the Brazil and the India boosted global trade.

"At the g-7 review and hello G20!", said Andreas Utermann Company fonds MRC, Chief Investment Officer, referring to the Group of seven developed countries and the club most G20 rich and new countries.

These divergent growth rates have contributed to another zone day and troublesome famine - price of raw materials. Edged closer to triple digit last week oil prices and food prices are also rising, partly due to the strong demand in emerging markets.

China has taken steps to try to cool inflation without putting too much cooling throughout the economy, economists expect much more closer next year.

United States, however, the Federal Reserve has still deflation as a larger than inflation and recently renewed threat to purchase $ 600 billion in assets in an attempt to stimulate more growth.

The US Federal Reserve typically focuses on the "core" inflation which excludes volatile food and energy prices but consumers eat lead and are therefore higher expenses budget. If the price continues to increase, which could curb spending.

Efforts to fight deflation of the Federal Reserve have attracted criticism and abroad that it would be unleashed potential inflationary flood of cheap money into the world economy without doing much to lift us growth or less unemployment.

Utermann de la MRC said "suboptimal investment decisions" create elsewhere dangerous asset price bubbles can cause the US Federal Reserve program.

"We need to find signs of the creation of bubbles... in commodities, emerging market or long-term debt (Government) - property and us prepare you for continued highly volatile capital market conditions."

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