Thursday, October 16, 2014
IMF WEO pessimism
There is growing pessimism with the IMF as evidenced by the summary in their WEO report. The first paragraph sets the tone of pessimism. The global economy is beset with crisis legacies and a cloudy future. The global economy is slowing and forecasts have been revised down. There is no area where there has not been downward revisions. There is no engine for global growth. Their catch phrase is that increasing growth is "a tall order". Low rates which forces abnormal yield seeking, geopolitical risks, and the threat of deflation make for an uncertain future.
In the face of this environment, there has been a change in the IMF policy view. Infrastructure projects are needed to boost aggregate demand becasue monetary policy is not going to get it done. This is the same organization which has always said that the solution for most any global problem is austerity. There is no silver lining in this report.