Top Links from the IMF – Global and Regional Economic Analysis for April

The IMF and World Bank have just wrapped up their Spring Meetings for April, dominated by agreement on a huge boost to the anti-crisis firewall to prevent contagion in the event of another flare-up.

Here’s some of the highlights in our latest global and regional assessments:

4 Responses

  1. You don’t need to hold your ear to the concrete to hear the cracking and groaning

    Loud and menacing is the rumbling from the dam that is supposed to prevent a collapse.

    Policy, central banks, and the press are taking the world for a ride with false notions. It is not the firewall or rescue wall that will be increased, but the pent-up water behind it. With rundown turbines and generators, raising the water pressure doesn’t help. But politicians are not physicists (even with a doctorate, they clearly do not understand), and these authorities are certainly not financial experts. What drives them is panic.

    The shorter the half-lives of the rescue packages, the greater the inflation mentality. The extent to which salary raises and cost and price increases are interconnected is not being questioned – yet.

    Inflation will ravage the countries.

    Interest rates are starting to rise, and for the time being even asset prices are rising. For now!

    The world is awakening from a 40-year-long slumber.

    The rising water level behind the dam led to the false belief that the worn-out power station was performing better. But the monstrous increase in funds leads only to small, short-lived economic bounces. The turbines are ruined. Their efficiency is falling dramatically. Never before have so many dollars been needed to generate a single cent of growth.

    The law of physics cannot be denied. Either the water will flood the dam, or the dam will break.

  2. My Op-Ed on the issue of IMF and “safe assets” that I referred to: In Spanish

    El gran riesgo de la aversión al riesgo http://www.eluniversal.com/opinion/120426/el-gran-riesgo-de-la-aversion-al-riesgo

    And translated:
    The great risk of risk aversion http://subprimeregulations.blogspot.com/2012/04/great-risk-of-risk-aversion.html

  3. Trying to explain the current crisis using the excessive risk-taking hypothesis, when confronted with the facts of excessive lending and investments to what was perceived to be absolutely not risky, has caused most risk experts to be a bit silly dizzy.

    For instance, in the Global Financial Stability Report 2012 of the IMF, the list of the “Outstanding Amounts of Marketable Potentially Safe Assets” includes both highly rated sovereign debt and gold. Clearly, since the current values of gold can only be justified in terms of an insurance against sovereign debt defaulting, that seems like listing and summing up, on your balance sheet, both the value of your house and the value you would collect from the insurance company if it burned down.

  4. I will extend on this in my humble Op-Ed in Venezuela of every Thursday, but what amazed most, was how much time was dedicated to the issue of the need for “safe assets”, in these days when it should be obvious that what we most need, in order to get out of this mess created by excessive bank exposures to assets considered as absolutely safe, is to nurture the willingness to take risks, or have we irrevocably degenerated into being a society of wimps? If so, we are lost.

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