[NYTr] Booming Economy: New York mayor predicts Global economic downturn

[All the News That Doesn't Fit]

AFP - Sep 30, 2007
http://www.afp.com/english/news/stories/070930214802.38kc3hg6.html

New York mayor predicts economic downturn

BLACKPOOL, England (AFP) - New York City Mayor Michael Bloomberg warned
Sunday a global economic downturn was looming, triggered by the
"lunacy" of public debt.

Bloomberg, one of the world's richest people, blamed a crisis of
confidence for what he said would be either a brief dip or a nosedive.

Advocating fiscal conservatism, Bloomberg said governments should build
up a surplus to fall back on during economic slides.

"Being a fiscal conservative means preparing for the inevitable
economic downturns -- and by all indications, we've got one coming," he
told the annual conference of Britain's main opposition Conservative
Party in Blackpool, north-west England.

The founder of financial news and data giant Bloomberg said
administrations had to create the conditions for markets to work and
bore a responsibility to pay their own way.

Bloomberg said this month's "debacle" at troubled British bank Northern
Rock was merely the latest evidence of turmoil in the financial markets.

He said the crisis was only partially due to the collapse of the
sub-prime mortgage sector in the United States.

"The fact is, this is not a mortgage crisis -- it's a crisis in
confidence and we're all in it together," he told delegates.

"It is being driven by rational expectations of a worsening credit
crunch -- which is a self-fulfilling prophecy."

Bloomberg said it was not yet known whether the downturn would be a
"dip or a dive," but governments could not stop the business cycle.

He said fiscal conservatism meant balancing budgets rather than running
deficits the next generation could not afford -- which would make
forthcoming downturns easier to manage by preparing for them.

That depended on improving efficiency, cutting taxes when possible and
"when you run a surplus you save it, you don't squander it."

The tycoon blasted some US conservatives, saying: "Too many of them
want to run up enormous deficits and hope that some way, somehow --
someone else will pay for it. That's not conservatism -- that's
alchemy, or, if you like, lunacy."

The 65-year-old added: "In New York, the economic uncertainty our two
countries face today is beginning to feel similar to the economic
downturn we experienced six years ago -- but this time, the stakes are
higher because more people owe more debt and so do our governments.

"The sun is rising on our borrowing bacchanalia and pretending
otherwise will only make the recovery slower and more painful."

He said his principles of governmental economic management required a
four-part approach.

"First, improve the quality of life that residents and visitors
experience. Second, stick to fiscally responsible principles.

"Third, invest in projects that will unleash and incentivise private
sector investment -- and that will both leverage and diversify the
economy.

"And fourth, provide strong leadership that is based on independent
problem-solving, not partisan politics, and that is not afraid to
tackle the toughest problems."