World Bank: It's a Global Recession

The World Bank on Sunday delivered yet more bad news that goes well beyond evaporating stock portfolios. The current economic crisis, born in the United States with some dodgy home mortgages, has grown into "the first global recession since World War II." The resulting credit crisis is wreaking havoc on the developing world, threatening to "turn back the clock on poverty reduction by years," the Washington Post reports. Making matters worse, the World Bank acknowledges that the aid needed to help the world's poorest through this crisis could be asking too much of struggling rich countries. According to the New York Times, the assessment put forward by the World Bank is worse than private analysts' already-dire projections. "The World Bank warned that the financial disruptions are all but certain to overwhelm the ability of institutions like it and the International Monetary Fund to provide a buffer," the newspaper writes.

Two of the worst-hit regions are Asia and Latin America, the Financial Times writes, citing a new report out today by the Asian Development Bank. The plunge in asset values in Asia (excluding Japan) topped $9.6 trillion last year, and in Latin America it was $2.1 trillion. "Even as Asia and Latin America have diversified their investment and trading partners, the effect of the slowdown on exports, finance and investment is earthshaking," the FT quotes the report as saying. And what about Japan? Today, the world's second-largest economy reported its first current account deficit in 13 years, the Wall Street Journal writes, "due to plunging exports and a big decrease in its overseas financial earnings."

Another element in this perfect storm is a more recent occurrence—the resurgent dollar and renewed demand for the seemingly only reliable investment in town, U.S. government bonds. The Chinese love them. According to the NYT in a separate article, "the tilt of money toward the United States appears to be exacerbating the crisis elsewhere." It is low-income countries feeling the most pain right now. "This is the third wave of the financial crisis. Low-income countries are getting hit very hard. The flow of private capital to the emerging market has dried up,” said Eswar Prasad, a former International Monetary Fund official.

Closer to home, there is new evidence that despite all the taxpayer-funded relief given to the financial sector, banks are again reluctant to loan out money. According to the WSJ: "[T]he credit markets are seizing up again amid new anxieties about the global financial system." The WSJ cites the Libor, or the benchmark London interbank offered rate, which has been creeping upward for the past two months, "reflecting banks' concerns about being paid back for even short-term loans." The message is clear, the newspaper writes: "The markets are open only to the strongest companies."

The Obama auto task force is off to Detroit today on a field trip that will seek to "clarify an array of lingering questions surrounding the [GM and Chrysler] rescue plans, which many analysts have criticized as overly optimistic," writes the WSJ. Treasury Department advisers Steven Rattner and Ron Bloom will tour production and engineering facilities at both companies and will hold potentially bruising talks with the United Auto Workers union, where they'll gauge the union's willingness to consider "deep compromises over wages, staff cutbacks and funding for its retiree health plan." Those talks will probably be enlightened by news that the Canadian Auto Workers union yesterday agreed to wage, pension, and health benefits concessions with GM Canada that could prompt Canada's government to offer up $6 billion in financial aid to GM and Chrysler, the NYT reports. The Canadian deal will see GM pare back on pension payments and wage increases and have employees contribute to specialist health plans but avoid base wage and pension cuts. The negotiations over GM's and Chrysler's survival come against a foreboding political backdrop. Yesterday, Sen. John McCain joined other key Republicans in calling for both automakers to go bankrupt, writes the Detroit News. "The best thing that could probably happen to General Motors, in my view, is they go into Chapter 11," McCain told Fox News on Sunday.

This week looks set to see Bernie Madoff's fraudulent activities take center stage once more. Reuters reports that the disgraced financier is expected to waive an indictment and plead guilty to criminal charges, including securities fraud, wire fraud, mail fraud, and money laundering, when he appears in court on Thursday. Meanwhile, the WSJ reports that one of Madoff's long-time aides "instructed two assistants to generate trading tickets, now believed to be bogus, for Mr. Madoff's investing clients." This latest revelation underlines investigators' belief that Madoff could not have pulled off his estimated $50 billion scam all by himself. "Prosecutors' approach so far has been typical of other large fraud investigations: begin with lower-level employees to find out what they knew about the work of their supervisor or other managers, then continue to climb up the ladder," writes the WSJ. Once Madoff has pleaded guilty, the scope of the investigation is expected to widen and focus on other senior members of his staff.

And, finally, the economy may be tanking, but these are good times at CNBC—strange, as the nearly 20-year-old financial-news cable network ordinarily loses viewers during economic downturns. But, according to the NYT, for the first two months of 2009, ratings at CNBC are up year-on-year and vastly improved on the 2007 period. How are they doing it? The formula, it seems, is to tone down the journalism and tone up the political punditry and criticism. "When they are all sitting around the table it’s hard to tell a business pundit versus a reporter," observes Tom Rosenstiel, the director of the Project for Excellence in Journalism. But who cares? the thinking may go. Ratings are up. Boo-yah, as Mad Money host Jim Cramer might say.