by Heath Breneman

Created on: January 15, 2009   Last Updated: January 25, 2009

The global effects of the financial crisis continue to disrupt economies around the world. Even nations with relatively well-regulated or isolated economies such as Canada, Australia, Lebanon, India, China and Brazil, after weathering the initial volatility of the financial markets last year, are now beginning to succumb to secondary and tertiary effects as global trade slows down and their exports drop. The World Bank and the International Monetary Fund have both signaled an increasing reluctance to provide assistance to some of the more precarious countries. Worldwide shipping has dropped dramatically as demand and purchasing evaporate, and the UN's International Labour Organisation predicted 20 million jobs will be lost worldwide in 2009 as a result of the global recession.

As aftershocks from the liquidity crisis continue to percolate throughout the world economy, many pin their hopes on the incoming Obama administration to set things right. How much can the new administration's initiatives help to stave off further catastrophe in the short term?

Perhaps very little indeed.

The ambitious agenda has much to recommend it. It proposes a strategic approach to handling the current crisis by financing development of the fundamentals of the US economy, including education funding, infrastructure projects, green upgrades to homes and government facilities, and tightening financial regulation to increase transparency into financial markets. There is even a modest middle class tax cut a la Bush, to stimulate consumer spending. Overall it lays firm groundwork to soften the next economic downturn. In the short term, however, it offers little to change events on the ground, and offers even less solace to the rest of the world.

But on the heels of the January 8 unveiling of Bailout 2.0, Moody's noted that two-thirds of the Federal Home Loan Banks may be unable to meet their minimum capital requirements, and could follow AIG into conservatorship in 2009. The next day, the Bureau of Labor Statistics released their updated unemployment numbers tracing the spreading ripples of the economic slowdown: 632,000 new unemployed, a total of 11.1 million, bringing the US unemployment rate in December to 7.2%, up 2.3% over the last 12 months.

As effects rebound worldwide, the deficiencies of the US economy continue to fade in significance against the swell of bad news. Falling home prices worldwide, loss of personal and corporate equity, and the resultant drop in global demand across

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