1. The document discusses global poverty statistics, highlighting that at least 80% of humanity lives on less than $10 per day and the poorest 40% accounts for only 5% of global income. 2. Key facts provided include that 22,000 children die daily due to poverty, 72 million primary-aged children are not in school, and over 1 billion people cannot read or write. 3. Infectious diseases greatly impact the poor, with millions of cases of malaria, HIV/AIDS, and lack of access to water, shelter, and healthcare.

1. Exchange Rates: The strength of the U.S.
in the 1990s relative to Euro, Yen and other
currencies led to a large a growing current
account deficit in the US. After 2000, the US
current account deficit worsened further as the
fiscal deficits mushroomed ( twin deficits ) and
as the private savings rate sank to zero. Is this
current account deficit sustainable or is going to
lead to a crash in the value of the US dollar
and/or a spike in US interest rates (hard
landing)? The dollar peaked and started to
decline in 2002-2004, especially relative to the
Euro, but then it sharply appreciated again in
2005 as interest rates and real growth
differentials favored the dollar relative to the
euro and the yen. But the dollar resumed its fall
in 2006 when signals of a US slowdown and a
Fed pause increased. Will the U.S. dollar
continnue its fall? Will the adjustment of global
current account imbalances be orderly or
disorderly? How will the Euro perform during the
rest of 2005 and in 2006? Will the yen weaken
or strengthen? Will China further revalue its
currency? Will other Asian economies keep on
aggressively intervening in the forex market to
prevent the appreciation of their currencies
relative to the US dollar? Are we going to

2. experience other currency crisis in some
emerging markets as the market turmoil in May-
June 2006 seemed to intimate?
Energy: The spike in the price of oil since 2004
has led to concerns about stagflation (recession
plus inflation) as oil prices have been hovering
around $70 a barrel or above for several months
now. Earlier in the decade, the 2000 oil price
shock negatively affected oil importing countries
and contributed to the 2001 recession. Oil prices
went up again in late 2002 and the first quarter
of 2003 because of expectations of a war with
Iraq and supply shocks in Venezuela and
Nigeria. But even after the war was oil prices
remained high and they spiked sharply in 2004
and 2005 because of high demand (especially
from China and the U.S.), low global spare
production and refining capacity, concerns that
terrorism (Iraq, Saudi Arabia) will lead to supply
shortages ( fear premium ) and continued supply
concerns about Russia, Venezuela and Nigeria.
Will recent oil spike lead to a U.S. and global
slowdown in 2007? Why didn t the 2004-2005 oil
shock lead to a slowdown? What is the risk that
the currently high oil prices and further oil price
spikes will lead to a sharp U.S. and global

3. economic slowdown?
Emerging Market Economies: 2001 was a
dismal year for emerging market (EM)
economies. The slowdown of growth in US and
G7, the tech bust and the reduction of flows of
capital to emerging markets led to a sharp
slowdown of growth in many emerging markets.
Outright currency and financial crises emerged
in Turkey (February 2001) and Argentina
(December 2001). In 2002, severe pressures
mounted in Uruguay and Brazil; Uruguay
experienced a severe financial crisis in mid
2002; Brazil barely escaped a financial crisis as
elections loomed in October 2002 but then it
recovered after Lula followed moderate policies.
2003 was also a poor year for emerging markets
(especially Latin America) as the global
economy did not recover fast enough. Emerging
market economies growth recovered sharply in
2004, especially in Asia but also in Latin
America. 2004-2006 were excellent years for
EMs as global growth was high, global interest
rates were low and commodity prices were high.
But as short rates are going up (in the G7) and
the global economy may be slowing down, oil
prices and commodity prices may fall; thus,
economic and financial conditions may get

4. rougher for some emerging markets. The turmoil
in emerging markets in May-June 2006 is a
signal that rougher times are ahead. Which
emerging market economies are vulnerable to
financial stress in 2006-2007?
Economy: The main risk is that three bearish
shocks a housing bust, high oil prices, and the
delayed effects of the Fed Funds rate increases
- will lead to a sharp U.S. slowdown as the U.S.
economy is already imbalanced with low private
savings, large budget deficits, large current
account deficits, a real estate bubble that is now
bursting and a shopped-out consumer. These
shocks are hitting a US consumer facing falling
real wages, negative savings, high debt ratios,
increasing debt servicing ratios, a softening
labor market; no wonder consumer confidence is
sharply down? In 2001, the U.S. economy
experienced a recession; there was a sharp
slowdown of growth in other developed and
developing countries, with recession in several
of them. Twin (fiscal and current account)
deficits emerged and got worse until 2005. The
U.S. recovery in 2002 was weak (growth of
output but not of jobs). In 2003 the economy
picked up after the Iraq war uncertainty was
cleared, but it remained a jobless recovery . In

5. 2004, job growth started to be positive (but still
sub-standard); the economy hit a growth soft
patch in Q2 of 2004, then recovered for the rest
of the year. In 2005, the economy followed a yo-
yo pattern: high growth in Q1, concerns about a
new soft patch in part of Q2, renewed optimism
about a goldilocks economy (with low inflation
and good growth) in the early summer and
renewed concerns about an economic slowdown
in the late summer because of the further spike
in oil prices. The growth rate took a hit in Q4 in
the aftermath of the Katrina hurricane. Growth
recovered to above 5% in Q1 of 2006 but it
slowed down sharply in Q2 to 2.9%. How
rapidly will the U.S and global economy grow in
the second half of 2006 and 2007? Will the US
experience a soft landing or a hard landing?
What will be the macro effects of the bust in the
housing sector? Will the rest of the world
decouple from a US slowdown? What are the
risks of a major US and global slowdown? Will
the Fed maintain its pause? Will the next Fed
move be a hike given inflation concerns or a
cut rates given growth slowdown?
Poverty Facts and Statistics
Almost half the world — over three billion
people — live on less than $2.50 a day

6. 1:At least 80% of humanity lives on less than
$10 a day.
2:More than 80 percent of the world’s population
lives in countries where income differentials are
widening.
3: The poorest 40 percent of the world’s
population accounts for 5 percent of global
income. The richest 20 percent accounts for
three-quarters of world income.
4:According to UNICEF, 22,000 children die
each day due to poverty. And they “die quietly in
some of the poorest villages on earth, far
removed from the scrutiny and the conscience of
the world. Being meek and weak in life makes
these dying
multitudes even more invisible in death.
5:Based on enrollment data, about 72 million
children of primary school age in the developing
world were not in school in 2005; 57 per cent of
them were girls. And these are regarded as
optimistic numbers.
6:Nearly a billion people entered the 21st
century unable to read a book or sign their
names.

7. 7:Less than one per cent of what the world
spent every year on weapons was needed to put
every child into school by the year 2000 and yet
it didn’t happen.
8:Infectious diseases continue to blight the lives
of the poor across the world. An estimated 40
million people are living with HIV/AIDS, with 3
million deaths in 2004. Every year there are
350–500 million cases of malaria, with 1 million
fatalities: Africa accounts for 90 percent of
malarial deaths and African children account for
over 80 percent of malaria victims worldwide.
9:Shelter, safe water and health
For the 1.9 billion children from the developing
world, there are:
640 million without adequate shelter (1 in 3)
400 million with no access to safe water (1 in 5)
270 million with no access to health services (1
in 7)
10:Rural areas account for three in every four
people living on less than US$1 a day and a
similar share of the world population suffering
from malnutrition. However, urbanization is not
synonymous with human progress. Urban slum
growth is outpacing urban growth by a wide
margin.

8. Arms Trade—a major cause of suffering
The arms trade is a major cause of human rights
abuses. Some governments spend more on
military expenditure than on social development,
communications infrastructure and health
combined. While every nation has the right and
the need to ensure its security, in these
changing times, arms requirements and
procurements may need to change too.
Each year, around $45-60 billion worth of arms
sales are agreed. Most of these sales
(something like 75%) are to developing
countries.
The 5 permanent members of the UN Security
Council (US, Russia, France, United Kingdom
and China), together with Germany and Italy
account for around 85% of the arms sold
between 2004 and 2011.
World Military Spending
World military spending had reduced since the
Cold War ended, but a few nations such as the
US retain high level spending.
In recent years, global military expenditure has
increased again and is now comparable to Cold
War levels again. Recent data shows global

9. spending at over $1.6 trillion.
The highest military spender is the US
accounting for just over two-fifths of the world’s
spending, more than the rest of the G7 (most
economically advanced countries) combined,
and more than all its potential enemies,
combined.