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The International Monetary Fund has raised its global growth estimates for 2010 to 2.4 pe rcent from 1.9 per cent in April because of stimulus measures taken in recent months, a G8 source who has seen the latest figures said.

The recovery will be gradual, however, and the risks to the outlook are on the downside, the source told Reuters on Thursday, speaking on condition of anonymity.

"The forecast for global growth in 2010 has moved to 2.4 per cent from 1.9 per cent in April," the source said. "The estimate has improved thanks to the impact of stimulus measures taken in recent months."

The source had access to an IMF briefing note for the G8 finance ministers' meeting in Italy this weekend which contained the figures.

In the note, the forecast for the global economy in 2009 is unchanged, with the IMF still expecting a contraction of 1 absolutely free credit report.3 percent, as outlined in its World Economic Outlook published in April.

"The note points to a better performance in the U.S. economy in 2009 and a worse one from Europe" compared to April IMF estimates of a 2.8 per cent fall and a 4.2 per cent drop respectively, the source added, without giving updated figures.

"For 2010, the IMF note suggests an improvement for the United States along with a slight increase in the estimate for Europe" compared with April's expectations of zero growth and a contraction of 0.4 per cent respectively.

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WASHINGTON – Leaders of the White House economic team bellowed about bonuses at bailedout insurance giant AIG Inc. and pledged to stop such payments in the future.

From one Sunday talk show to the next, they tore into the contracts that American International Group asserted had to be honoured, to the tune of about $165 million (U.S.) and payable to executives by yesterday – part of a larger total payout reportedly valued at $450 million – even as the company has benefited from more than $170 billion in a federal rescue.

AIG has agreed to requests from the administration of President Barack Obama to restrain future payments. Treasury Secretary Timothy Geithner pressed the president’s case with AIG’s chair, Edward Liddy, last week.

"He stepped in and berated them, got them to reduce the bonuses following every legal means he has to do this," said Austan Goolsbee, staff director of the president’s Economic Recovery Advisory Board.

"I don’t know why they would follow a policy that’s really not sensible, is obviously going to ignite the ire of millions of people, and we’ve done exactly what we can do to prevent this kind of thing from happening again," Goolsbee said.

Added Lawrence Summers, Obama’s top economic adviser: "The easy thing would be to just say off with their heads, violate the contracts. But you have to think about the consequences of breaking contracts for the overall system of law, for the overall financial system payday loans."

AIG reported this month that it had lost $61.7 billion for the fourth quarter of last year, the largest corporate loss in history.

In a letter to Geithner dated Saturday, Liddy said outside lawyers had informed the company that AIG had contractual obligations to make the bonus payments and could face lawsuits if it did not do so.

Liddy said in his letter that "quite frankly, AIG’s hands are tied," although he said that in light of the company’s current situation he found it "distasteful and difficult" to recommend the payments.

Liddy said the company had entered into the bonus agreements in early 2008 before AIG got into severe financial straits and was forced to obtain a government bailout last fall. The bulk of the payments cover AIG Financial Products, the unit that sold credit default swaps, the risky contracts that caused massive losses for the insurer.

Financial company bonuses have come under harsh scrutiny after the U.S. began loaning them billions of dollars to keep the institutions afloat. AIG is the largest recipient of aid in the current financial crisis.

Goolsbee acknowledged the AIG example could make it harder to sell the administration’s financial plan to Congress. "Yes, you worry about that backlash. But you’re also angry that this would happen at an institution that has been so troubled and you’re trying to save.”

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Trust in business plummeted worldwide last year, as the global economic crisis sent financial institutions pleading for government support, leaving average people to question industry’s ability to bring prosperity, according to a survey released on Tuesday.

Some 62 percent of informed adults aged 25 to 64 told the Edelman Trust Barometer that they trusted businesses less than they had a year ago, with respondents in the United States and Western Europe more suspicious than those in emerging economies.

The biggest drops came in Ireland, where 83 percent of respondents said they had lost trust in business; in Japan, where 79 percent grew more wary; and in the United States, where 77 percent became more suspicious.

Trust evaporated as the world’s most severe economic crisis since the Great Depression caused millions to lose their jobs and wiped out billions of dollars of invested capital.

“This is not 2001-2003; this is not limited to the dot-com New Economy concept companies … This is General Motors; this is your big bank,” said Richard Edelman, president and chief executive of U.S. public relations firm Edelman, which commissioned the survey. “It’s affected you in the pocketbook and also it’s been the mainstays of the economy.”

Last year a downturn that started with investors losing confidence in obscure securities from the U.S. mortgage market snowballed, pushing Wall Street banks including Lehman Brothers Holdings Inc to their knees and even bringing the North Atlantic nation of Iceland to the brink of bankruptcy.

In the United States, just 38 percent of respondents aged 35 to 64 said they trusted business, down from 58 percent a year earlier and the lowest rating in the survey’s 10-year history. The reading is lower even than results in the wake of the dot-com bust and collapse of Enron Corp.

While the survey has been conducted for 10 years, this is the first time questioners have specifically asked whether their trust in business had declined over the past year fast payday loans. The survey has grown to include more countries and a wider age range of respondents over its history.

SUSPICIOUS EYE Toward BANKS, CARMAKERS

Americans were least trusting of the auto and banking industries — both of which last year turned to Washington for billions of dollars to tide them through financial crises.

The U.S. government has already paid out more than $270 billion through its Troubled Asset Relief Program to prop up financial institutions including Bank of America Corp, Citigroup and American International Group, and has made multibillion-dollar loans to automakers General Motors Corp and Chrysler LLC.

Respondents in emerging economies were the least likely to say they had their confidence in business shaken.

Just 21 percent of Brazilians said they had lost confidence in business last year, while 32 percent of Indonesians grew more doubtful and 49 percent of Indians and Russians reported a loss of faith in business.

“In the developing world the consensus would be: ‘Business has brought us prosperity,’ and I think America would be in that camp until this year, until Madoff and Lehman Brothers,” said Edelman, referring to the disgraced money manager who is accused of running a $50 billion fraud. “America has now moved into the realm of business skeptics.”

Still, unease with business could spread to the developing world as large corporate scandals begin to erupt there, he noted, saying: “I wonder if we did the study today in India how optimistic they would be after Satyam.” 

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U.S. factory orders tumbled in August and the number of workers seeking jobless benefits rose in the latest week to a seven-year high as trauma in financial markets threatened to accelerate a deep downturn in the world’s largest economy.

Thursday’s reports were just the latest in a series of grim economic news, and follow Wednesday’s data showing factory activity shrank in September to its lowest level since the 2001 recession, according to the Institute for Supply Management.

“You add it all up, with the jobless claims and yesterday’s ISM, and it’s pretty damn clear we’re in a recession,” said Robert Macintosh, chief economist at Eaton Vance Corp in Boston.

The data heightened anxiety in financial markets, sending stocks sharply lower as investors feared the economy was increasingly vulnerable to the multiple blows this year from high energy prices and severe constraints on credit.

The number of people filing initial claims for jobless benefits was 497,000 in the week ended Saturday, the highest since the weeks following the September 11, 2001 attacks, the Labor Department said in a weekly report http://savingpaydayloans.com. Wall Street economists’ had forecasts 475,000 initial claims.

The Labor Department estimated that the effects of Hurricane Gustav in Louisiana and Hurricane Ike in Texas added approximately 45,000 claims to the total.

Even without that, claims would have been well above the level of 400,000 that many economists associate with a recession.

Weekly claims are one of the most up-to-date indicators, and the bad news is that even they probably do not fully reflect the effects of the heightened credit turmoil of recent weeks. 

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When Barack Obama or John McCain takes over the presidency in January, he will inherit a stable U.S.-China relationship. Part of the credit will belong to someone who gets few kudos for his foreign-policy initiatives: George W. Bush.

The president, who travels to China for the fourth and last time of his presidency this week to attend the Olympic Games in Beijing, “leaves a relationship that is basically in good shape,'' says Kenneth Lieberthal, who was director for Asia on the White House National Security Council during Bill Clinton's presidency.

Since taking office 7 1/2 years ago, Bush has personally eased tensions over Taiwan. Henry Paulson, his Treasury secretary, stopped Congress from escalating trade disputes; Robert Zoellick, his former No. 2 diplomat, invited China to play a bigger role internationally. Meanwhile, the administration enlisted China's support to fight terrorism and persuade North Korea to begin dismantling its nuclear program.

China's leaders “will miss him after he steps down,'' says Shen Dingli, director of the Center for American Studies at Fudan University in Shanghai.

Bush will bequeath his successor a base to work from in dealing with a country that owns more than $500 billion in Treasuries, is the top source of U.S. imports and is on track to become the world's second-biggest economy in a decade.

Explosive Issues

To be sure, Bush, 62, will hand some potentially explosive issues to the new president as well. Both Democrats and Republicans have criticized him for not putting enough pressure on China to improve its human-rights record. The U.S. trade deficit with China — a record $256 billion last year — may increase calls in Congress to impose tariffs. And the U.S. will have to goad China into doing more to combat global warming.

When he took office in 2001, Bush signaled he was ready to take a hard line, labeling China a “strategic competitor'' in contrast to the Clinton presidency's description of a “strategic partnership.'' He also vowed to defend Taiwan if it were threatened. In April that year, China held the crew of a U.S. spy plane for 11 days on its southern Hainan island after a midair collision with a Chinese fighter jet forced the aircraft to make an emergency landing.

The Sept. 11 terrorist attacks forced Bush to engage China more closely. The U.S. needed Chinese influence with Pakistan to help push that country to cooperate in rooting out al-Qaeda from Afghanistan and overthrowing the Taliban government there. In 2002 the U.S. declared a separatist group in China's Xinjiang region to be terrorists, a move China supported.

Minimizing Tensions

Once engaged in Afghanistan and then Iraq, the administration worked to minimize tensions elsewhere, including in the Taiwan Strait and North Korea.

Sept. 11 was “a turning point,'' says Yan Xuetong, director of the Institute of International Studies at Tsinghua University in Beijing. Bush learned “to deal with China.''

Bush brought then-Chinese President Jiang Zemin to his Texas ranch in October 2002, where they discussed Iraq and North Korea. He later called Jiang to request help in defusing the Korean crisis.

By April 2003, the U.S. and China were holding discussions with North Korea in Beijing, and China helped persuade Pyongyang to participate in the so-called six-party talks, also including Japan, Russia and South Korea. When Kim Jong Il's regime conducted a nuclear test in October 2006, China stepped up the pressure.

Personal Diplomacy

In December 2003 Bush altered U.S. policy toward Taiwan, telling Chinese Premier Wen Jiabao at an Oval Office meeting the U.S. was opposed to Taiwan's planned referendum on its independence and to “any unilateral decision by either China or Taiwan to change the status quo.''

A president doesn't normally announce changes in Taiwan policy personally, “and certainly doesn't articulate it with the Chinese premier sitting next to him in the Oval Office,'' Lieberthal says.

The policy change came over the opposition of some in the Bush administration. It was “a policy based on fear,'' says John Bolton, who headed the State Department's arms-control efforts and later served as ambassador to the United Nations fast cash loans. “It is a fear that if we upset China it will do bad things with respect to the six-party talks.''

Taiwan Arms Sales

The closer ties with China are coinciding with a slowdown in arms sales to Taiwan. In May, Deputy Secretary of State John Negroponte said the U.S. wouldn't sell new F-16 fighter jets to Taiwan, rejecting a request by newly elected President Ma Ying- jeou. Admiral Timothy Keating, head of the U.S. Pacific Command, told a forum in Taiwan last month there's “no pressing, compelling need'' for arms sales to Taiwan.

That remark prompted speculation that the U.S. has frozen arms sales, something the Bush administration denies.

“I don't think the government has come out and said it is a freeze, but if it looks like a duck and walks like a duck,'' it may be one, says Taylor Fravel, a political science professor at the Massachusetts Institute of Technology.

The administration's engagement with China has had reverberations beyond Asia. In a September 2005 speech in New York, Zoellick urged China to be a “responsible stakeholder'' globally. That challenged China and flattered its sense of stepping into the role of world power.

Zoellick's speech suggested that “China is an insider now,'' says Huang Jing, a senior research fellow at the National University of Singapore's East Asian Institute.

Zoellick, who left the administration in 2006 and now heads the World Bank, and Treasury's Paulson expanded communication between the governments through initiatives such as the Strategic Economic Dialogue.

Damage Control

That can help limit the damage of gaffes, such as when a Falun Gong activist disrupted a welcoming ceremony during President Hu Jintao's April 2006 visit to Washington. At that ceremony, an announcer said the band would play the anthem of the Republic of China — the official name of Taiwan.

The communication can also smooth over more serious incidents.

Bush invoked the increased exchanges and “good personal relations'' with Chinese leaders as one of his main legacies, in a July 30 interview with Asian journalists in Washington. Regular talks have helped create mutual trust, in contrast to the tense standoff over the spy plane in 2001, Bush says.

“Frankly, it took a while to get phone calls returned and we were just trying to get information,'' Bush says of the incident. If “that happened now, there would be a much more immediate response because there's more trust.''

Fending Off Tariffs

Paulson, who logged four trips a year to China as head of Goldman Sachs Group Inc., fended off congressional calls for punitive legislation against Chinese exports.

The Treasury also declined to label China a currency manipulator amid anger in Washington over Chinese reluctance to let the yuan rise faster. The currency has gained 21 percent against the dollar in three years.

Those actions leave some lawmakers arguing that Bush's policy is a failure.

“His corporate backers and interests, time and time again, trump our communities' interests, trump our workers' interests, trump our small manufacturers' interests,'' says Senator Sherrod Brown, an Ohio Democrat. “Except for the Iraq War, there's no bigger failure of the Bush administration than his China policy.''

Dissidents

Senator Sam Brownback, a Kansas Republican, says Bush hasn't pressed China hard enough to improve its treatment of political dissidents and expand religious freedom.

“I don't think the president ought to go to the opening of the Olympics,'' Brownback says. “I think we should push them more aggressively.''

Dennis Wilder, the senior director for Asian affairs on the White House National Security Council, says attending the Olympics will build goodwill and increase U.S. leverage.

“People want us to have influence on the Chinese government,'' Wilder told reporters at the White House. “If you don't have a good working relationship with the Chinese government, how do you do that?''

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