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Anorak | Goodbye, Cruel World – The IMF’s Suicide Note

Goodbye, Cruel World – The IMF’s Suicide Note

by | 8th, October 2008

“THE world economy is entering a major downturn in the face of the most dangerous financial shock in mature financial markets since the 1930s,” notes the IMF.

Yes, we’d noticed; can you tell us something new?

The situation is exceptionally uncertain and subject to considerable downside risks.

Yes, we’d noticed that too, but we were hoping for something a little more substantive from the IMF, which, after all, has has shaped policy for decades.

In hindsight, however, lax macroeconomic and regulatory policies may have allowed the global
economy to exceed its “speed limit” and may have contributed to a buildup in imbalances
across financial, housing, and commodity markets.At the same time, market flaws, together
with policy shortcomings, have prevented equilibrating mechanisms from operating effectively
and allowed market stresses to build.

I don’t need hindsight to point out that the ‘lax’ regulatory policies were at the instigation of the IMF, which has assured anyone willing to listen that markets are good, governments are bad, regulation really bad, and free markets solve everything. It has apparently come as news to the IMF that:

The financial turmoil has revealed that national stability frameworks have failed to keep with financial market innovation and globalization, at the price of deleterious cross-border spillovers.

Which seems a little odd since anyone with any experience in the financial markets knows that the IMF has consistently opposed any attempt to regulate the globalised markets.

Nor do I need anything special in the way of analytical powers to note that the IMF’s estimates of how much bad stuff is out there are a lot higher than they have previously admitted, and even then:

The baseline projections assume that actions by the U.S. and European authorities will succeed in stabilizing financial conditions and avoiding further systemic events.

In other words, they are relying on prayer.

And even if the prayer works:

Nonetheless, even with successful implementation of the U.S. plan to remove troubled assets
from bank balance sheets, counterparty risk is likely to remain at exceptionally high levels for some time, slowing down the return to more liquid conditions in key financial markets. Furthermore, additional credit losses are very likely as the global economy decelerates.

That’s the cheerful bit; I’m sorry to say that it gets even gloomier, but you’ve probably got the gist by now.

The IMF not only failed to see this coming but helped to ensure that it would come. It is beyond redemption, and if you think I am being unduly harsh then go read it for yourself.

You can start with the executive summary at

Have fun!

Chenier



Posted: 8th, October 2008 | In: Reviews Comment | Follow the Comments on our RSS feed: RSS 2.0 | TrackBack | Permalink