IMF Chief: It's a Government Manipulated Recovery

International Monetary Fund head Dominique Strauss-Kahn said on Sunday the world economy was not "out of the woods" despite a faster recovery in developing and emerging countries than earlier forecast, reports Reuters.

"You see growth resuming almost everywhere but that almost everywhere these growth figures are related to public support and private demand remaining rather weak and not strong enough.


Until private demand is sustainable to provide growth it will be difficult to say the crisis is over," he added.

Strauss-Kahn said that although a double dip could not be ruled out, the IMF did not forecast one.

Merkel: “A good European is not necessarily one who rushes to assist”

German Chancellor Angela Merkel does not seem to be in any hurry to provide bailout funds to Greece (Unless, of course, they are American funds via the IMF).

“A good European is one who abides by the European treaties and national law and thus sees to it that the euro zone’s stability isn’t harmed. That’s our guidance for all decisions today and tomorrow, and also for the future,”  Merkel said at today’s EU summit in Brussels.

However, according to Bloomberg, she did push for American taxpayers  the IMF to be part of any potential rescue.

Former-IMF Economist:A Whopper Bank Failure Is Coming

The worst of the global financial crisis is yet to come and a large U.S. bank will fail in the next few months as the world’s biggest economy hits further troubles, former IMF chief economist Kenneth Rogoff said on today.

”The U.S. is not out of the woods. I think the financial crisis is at the halfway point, perhaps. I would even go further to say ’the worst is to come’,” he told a financial conference.

”We’re not just going to see mid-sized banks go under in the next few months, we’re going to see a whopper, we’re going to see a big one, one of the big investment banks or big banks,” said Rogoff, who is an economics professor at Harvard University and was the International Monetary Fund’s chief economist from 2001 to 2004.

”We have to see more consolidation in the financial sector before this is over,” he said, when asked for early signs of an end to the crisis.

”Probably Fannie Mae and Freddie Mac -- despite what U.S. Treasury Secretary Hank Paulson said -- these giant mortgage guarantee agencies are not going to exist in their present form in a few years.”

Rogoff said multi-billion dollar investments by sovereign wealth funds from Asia and the Middle East in western financial firms may not necessarily result in large profits because they had not taken into account the broader market conditions that the industry faces.

”There was this view early on in the crisis that sovereign wealth funds could save everybody. Investment banks did something stupid, they lost money in the sub-prime, they’re great buys, sovereign wealth funds come in and make a lot of money by buying them.

Rogoff said the U.S. Federal Reserve was wrong to cut interest rates as ”dramatically” as it did.
”Cutting interest rates is going to lead to a lot of inflation in the next few years in the United States.”

”That view neglects the point that the financial system has become very bloated in size and needed to shrink,” Rogoff told the conference in Singapore, whose wealth

IMF to Saudis: Quit Bailing Out the Dollar By Creating Domestic Inflation

International Monetary Fund officials said the peg of the Saudi riyal to the U.S. dollar has been a great “anchor” for the Persian Gulf but recommended that Saudi officials consider alternative exchange rate regimes if inflation worsens.

“Most directors considered the benefits of maintaining the peg to outweigh the cost of higher short-term inflation, provided current inflationary pressures prove temporary,” IMF board directors said in a report on Saudi Arabia released Tuesday. “If, however, inflation should persist and the Gulf Cooperation Council monetary union be delayed, they recommended to consider also alternative
exchange rate regimes.”

Randal Quarles Sure Does Get Around

Randal Quarles was spotted in Waterloo, Ontario Canada this weekend at an International Monetary Fund conference.

Waterloo's The Record noted coldly:

The conference also drew the presence of Randal Quarles, managing director of the controversial Carlyle Group, the American private-equity investment firm which manages funds of more than $81 billion.

Looks like Quarles would like to see the type of policy advice that is dispensed by the IMF changed. The Toronto Globe and Mail's Kevin Carmichael reported:

Others, including Randal Quarles, a former U.S. Treasury official, said the IMF's standing would improve if it offered policy advice other than that based on orthodoxy or fad.

Something to keep an eye on: Changes in posture and/or personnel at the IMF

IMF Chief Warns on Inflation

Inflation is in danger of “getting out of control” in some emerging economies, Dominique Strauss-Kahn, managing director of the International Monetary Fund,told the Financial Times.

Note to Dominique:

It's not just emerging economies, and although you spouted off that the G8 are doing important things to fight the inflation, the fact of the matter is that the only thing that needs to be done is for central banks to stop printing money.