IMF wants US rates low

Let's get one thing straight. The IMF has done a horrible job of forecasting anything to do with economic growth. There advice to countries has not been much better. They are good researchers on many issues but they are not paid to be right on market directions. 

So we should be careful when we hear any comments from IMF managing director, Christine Lagarde. She was in the news Monday stating that the US should keep interest rates lower for a longer period of time because the US and the world will have slower growth. Her solution for a developed economy is more liquidity. The solution for an emerging market has always been austerity. The IMF view is that US growth is going to come in at 2% this year and full employment will not be reached until 2017. 

Note that the IMF has been looking for a change in their capitalization that would allow them to provide more liquidity as well as adjustment in voting rules. This has not been approved by the US. Getting the Fed to continue providing more liquidity is the next best thing to getting more liquidity lines for the Fund. 

I don't have a problem with the current IMF forecast. I may actually agree with the slowdown view. I do have a problem with the view that monetary policy is the solution. We do not have a liquidity problem. We have balance sheet and structural problems.