Saturday, August 27, 2011

IMF Chief Lagrade as Global Inflationist and Interventionist

From her speech today in Jackson Hole:
Monetary policy should remain highly accommodative, as risk of recession outweighs risk of inflation. This is particularly true as (i) in most advanced economies inflation expectations are well anchored; and (ii) pressures from energy and food prices are abating. So policymakers should stand ready, as needed, to dive back into unconventional waters.

Lagarde as a supporter of a one world Europe:
Europe needs a common vision for its future. The current economic turmoil has exposed some serious flaws in the architecture of the eurozone, flaws that threaten the sustainability of the entire project. In such an atmosphere, there is no room for ambivalence about its future direction. An unclear or confused message will add to market uncertainty and magnify the eurozone’s economic tensions. So Europe must recommit credibly to a common vision, and it needs to be built on solid foundations—including, for example, fiscal rules that actually work.
Lagarde telling the U.S. government how to intervene:
...the United States needs to move on two specific fronts.

First—the nexus of fiscal consolidation and growth. At first blush, these challenges seem contradictory. But they are actually mutually reinforcing. Credible decisions on future consolidation—involving both revenue and expenditure—create space for policies that support growth and jobs today. At the same time, growth is necessary for fiscal credibility—after all, who will believe that commitments to cut spending can survive a lengthy stagnation with prolonged high unemployment and social dissatisfaction?

Second—halting the downward spiral of foreclosures, falling house prices and deteriorating household spending. This could involve more aggressive principal reduction programs for homeowners, stronger intervention by the government housing finance agencies, or steps to help homeowners take advantage of the low interest rate environment.
Her scary conclusion:
I can assure you that for its part, the IMF will continue to do everything in its power to advocate for this outcome, and to lend its material support wherever it is requested and relevant. 

5 comments:

  1. That last paragraph was lifted from Harry Hopkins 1933??

    Oh Boy! We're SO SCREWED!!!

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  2. Is she really that stupid?
    She is French.

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  3. Her and Bernanke get it on and we are guaranteed to be delivered the antichrist.

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  4. @anon 4:54PM what does her being French have anything to do with "stupidity"? Is she stupid, yes probably considering her remarks regarding anchored inflation expectations, but racist remarks regarding her nationality are unnecessary. Your comments as such are not appreciated here.

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  5. Is French a race?

    ReplyDelete