Click here to read an article from Martin Wolf, associate editor and chief economics commentator at the Financial Times, regarding the meetings of the International Monetary Fund and World Bank in Istanbul.
Read below few notes:
The world could still make two mistakes: first, we might withdraw stimulus too soon; second, we might lose the opportunity for reform. We must avoid both dangers. That is the lesson I learnt at the annual meetings of the International Monetary Fund and World Bank in Istanbul. So where are we and where do we need to go? Think of this in terms of five ‘r’s: rescue; recovery; rebalancing; regulation; and reform.
In response, the authorities socialized most financial liabilities, launched unprecedented monetary easing and ran fiscal deficits never before seen in peacetime. In the high-income countries, support for the financial sector – via capital injections, guarantees, asset purchases and liquidity provision – was 29 per cent of 2008 gross domestic product The IMF forecasts the fiscal deficit of these countries at 9 per cent of GDP in 2009. The rise envisaged in public debt compares to that of a big war.
We must not forget what such a recovery would mean: few economies are likely to see a fall in unemployment or in excess capacity over the next year. Moreover, the recovery is hugely dependent on the surge in government spending and the inventory cycle, particularly in the US. As the IMF stresses, “the main risk is that private demand in advanced economies remains very weak”.
They are two longer-term issues: regulation of the financial sector and reform of the international monetary system. Both are now on the agenda. But on both action is likely to fall far short of what is needed.
This is not a time for a return to business as usual. We have survived this crisis. But we could not cope with another, possibly bigger and yet more dangerous one in a few years. Let us now show posterity we are able to learn from history.
