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Imbalances Threaten New Global Meltdown - Imf

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http://www.telegraph.co.uk/finance/comment/jeremy-warner/8047097/Imbalances-threaten-new-global-meltdown.html

You might have thought that the shock of the worst financial crisis since the 1930s would have brought everyone to their senses, and prompted concerted action to make the necessary adjustments.

It has not. As Olivier Blanchard, the IMF’s chief economist, observes in the foreword to the latest IMF World Economic Outlook, there’s scant evidence of change; rebalancing in the world economy is proceeding far too slowly.

The latest outbreak of beggar-thy-neighbour policy action among central banks to make their currencies more competitive doesn’t bode well for a long-term solution.

In announcing a reduction in interest rates to virtually zero and another massive dose of quantitative easing this week, the Governor of the Bank of Japan as good as admitted that his hand had been forced by what everyone else was doing. If you cannot beat them join them, he seemed to be saying. Nothing seems capable of halting this unseemly rush to the bottom.

If things don’t correct themselves soon, then the next crisis will be even worse than the last one, with nothing left in the fiscal locker to fight it either. Everyone agrees on the diagnosis, but the remedy remains as elusive as ever.

To achieve the “strong, balanced and sustained world recovery” which the G20 Pittsburgh summit set as its goal, both the fiscal stimulus has to be replaced by private demand and the big deficit nations must start deriving more of their growth from exports and investments.

Countries that have relied in the past too heavily on debt-fuelled domestic demand - notably the US, the UK and the some of the peripheral economies of the eurozone - must shift to trade and investment.

By the same token, the big surplus countries – mainly China, but also Germany and Japan – must go the other way and make domestic demand, particularly consumption, a bigger component of their growth. Regrettably, this is not happening. As the world economy returns to growth, trade gaps are widening afresh.

Wow the next crisis will be even worse than the last, I didn't realise the last crisis had actually ended.

If only someone had proposed after the war a system where trade imbalances etc... wouldn't get built up.

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So has the IMF made any move to get China to re-evaluate the Yuan?

It's impossible to increase exports from rich countries without it.

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Wow the next crisis will be even worse than the last, I didn't realise the last crisis had actually ended.

If only someone had proposed after the war a system where trade imbalances etc... wouldn't get built up.

:lol::lol::lol:

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Countries that have relied in the past too heavily on debt-fuelled domestic demand - notably the US, the UK and the some of the peripheral economies of the eurozone - must shift to trade and investment.

And our government's solution is? Yup - more debt fuelled domestic demand. You couldn't make this stuff up could you?

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  • 149 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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