IMF Sees “Alarmingly High” Risk World Is Going Down Sh*tter
According to the IMF, the world economy will grow just 3.3 percent this year, the slowest growth rate since the 2009 recession, and 3.6 percent next year. This just one week after the IMF published reports that we were on the edge of another Lost Decade. Today, the global institution is cutting global growth forecasts across the board due to the euro zones debt crisis getting worse and warned of worsening expansion in the US and Europe if officials did not address the problems facing their economy. These are downgrades from July predictions of 3.5 percent in 2012 and 3.9 percent in 2013. The Washington-based world lender now recognizes the “alarmingly high” risk of a steeper slowdown that everyone not beholden to the status quo has internalized already. The IMF, the foremost global financial institution, is behind nearly everyone on what’s up for what’s next. The IMF perhaps naively assumes $106.18 a barrel this year and $105. 10 net year, based on the average prices of UK Brent, Dubai and West Texas Intermediate crudes. That compares with its July estimates of $101.80 and $94.16 in July. This means any instability in the oil price could mean further contraction in growth and problems for the global economic architecture.
Monetary policy should remain soft, says the IMF, according to Bloomberg. The ECB has “ample justification for keeping policy rates very low or cutting them further,” the IMF said. In other words, they gotta keep this thing afloat until the EU is the sort of superstate wet-dreamed about in Orwell’s 1984. Cultural homogenization, the whole nine yards, begins with the making of economic society.
The Bank of Japan may also need to further quantitatively ease. Renewed oil price increases threaten the stability of the global economic system, the IMF continued, as well as the US fiscal crisis and possible gridlock over raising the US debt ceiling. Anyone looking to argue against Krugman’s alien invaders scenario can use Japan has a prime example: Fukushima came, but Japan ain’t digging itself out of its multiple lost decades.
According to the IMF, imperialist of the southern Hemisphere (and soon to be the northern) over the last fifty years, there is a one-in-six chance of growth slipping below 2 percent. That means, more or less, the world extremely close to the tipping point where there is zero economic growth. This will see birth rates plummet across the globe, and unemployment to skyrocket everywhere.
“Confidence in the global financial system remains exceptionally fragile,” the IMF said like the slow student who, eventually, inevitably gets it, although after the rest of the class. “Bank lending has remained sluggish across advanced economies” and increased risk aversion has damped capital flows to emerging markets, the institution stated. Good thing we were all waiting on the IMF to inform us of our plight. Now we can act.
The 17-country euro zone is expanded to contract this year by .4 percent, 0.1 percentage point worse than the forecast in July, and grow .2 percent in 2013, less than the 0.7 percent IMF predicted three months ago. The US is expected to expand 2.2 percent this year, which outpaces the earlier July forecast, and then grow 2.1 percent next year, less than predicted in July. Japan’s estimate was cut to 2.2 percent this year and to 1.2 percent in 2013. Some of the euro zone’s worst hit will continue to wear the worst of the crisis. Spain’s economy is predicted to shrink 1.3 percent next year, 0.7 percentage point worse than predicted in July. German growth is anticipated to be 0.9 percent each year, with the 2013 estimate half a percentage point less than previously conjectured.
“A key issue is whether the global economy is just hitting another bout of turbulence in what was always expected to be a slow and bumpy recovery or whether the current slowdown has a more lasting component,” the IMF said in its World Economic Outlook report. “The answer depends on whether European and U.S. policy makers deal proactively with their major short-term economic challenges.”
The IMF’s 188 member countries meet this week in Tokyo amid worldwide economic problems, with China’s slowdown, Europe’s debt crisis and political issues, and US fiscal crisis likely to be at the heart of concerns. The purview of the meeting will focus on how Europe’s and the US’s problems hurt China and Brazil.
The IMF told US policymakers to find alternatives to the automatic tax increases and spending cuts that would lead to renewed recession concerns in the US. Further, Europeans must follow their commitments to usher in power consolidation. It seems as though power consolidation in Europe must be further advanced than it currently is before the rug is pulled out from under the Americans.
Western Countries Must Do As their Third World Counterparts in the 20th Century
“Spain and Italy must follow through with adjustment plans that re-establish competitiveness and fiscal balance and maintain growth,” IMF Chief Economist Olivier Blanchard wrote. “To do so, they must be able to recapitalize their banks without adding to their sovereign debt. And they must be able to borrow at reasonable rates.”
Growth forecasts were lowered not just for Europe, the US and Japan, but for much of the world. Brazil experienced some of the steepest cuts, with growth expected to be just 1.5 percent in 2012, down from 2.5 percent, and 4 percent in 2013. India’s may grow 4.9 percent in 2012, and 6 percent next year, also lower than previous IMF predictions of 6.2 percent amid 6.6 percent respectively. China’s estimate was cut by 0.2 percentage point each year to 7.8 percent in 2012 and 8.2 percent in 2013.
What the IMF does is this: it assumes the role it took to numerous countries around the world in the post-World War II period to introduce austerity measures and increase taxes alongside a currency devaluation. Incomes plummeted as economies were dampened via new regulations and higher taxes. Social services were cut and people were left without a safety net of any sort as economic war was waged on their countries. This model is now slowly taking route in the western world, with power consolidation in Europe at the top of the list. While this is ongoing, and the US still has troops standardizing the world militarily, it will stay afloat. But, once these related goals are nearly reached, the US will plunge into its own austerity measure/service-cuts one-two punch and know what it financed (via taxes to the IMF) in the rest of the world, all along.