Tuesday, January 31, 2012

The Global Economy From IMF's Chief Economist's Perspective

This article explains why the Chief Economist at the IMF has lowered his economic growth forecasts. He argues that we have been trying to grow the global economy while the brakes have been put on in the Western economies. Fiscal contraction has been premature. It takes a long time to deleverage public debt. Banks is Europe may cut lending on the way to meeting capital requirement goals. They should recapitalize instead of cutting back on credit.

The bad news is that the IMF forecast is based upon the assumption that the crisis in Europe does not worsen. All bets are off if the crisis worsens.

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