“The Path Forward—Act Now and Act Together”- IMF Christine Lagarde

Posted: September 23, 2011 in World Economy
Tags: , ,

Opening Address to the 2011 Annual Meetings of the Boards of Governors of the World Bank Group and the International Monetary Fund

Christine Lagarde- Managing Director, International Monetary Fund- Washington DC, September 23, 2011-Exerpt

So let me turn to my second issue: the path forward

What do we want? Inclusive, job-creating, growth must be our goal. But today, we risk losing the battle for growth. With dark clouds over Europe, and huge uncertainty in the United States, we risk a collapse in global demand.

This challenge could not be more urgent.  In our interconnected world, we are all on one boat. Any thought of decoupling is a mirage.

But let us be frank—the primary burden of responsibility for addressing the current crisis lies with the advanced economies.

I see three policy imperatives for them—fiscal and monetary, financial, and structural.

Fiscal policy must navigate between the twin threats of undermining credibility and undercutting recovery. Advanced countries need fiscal consolidation as a matter of priority, but, for some, pushing too fast will harm growth and jobs. So the pace must neither be too hesitant nor too hasty.

It is less a dilemma than a question of timing and confidence. If countries have solid measures to anchor savings in the medium and long term, they can do more in the short term to accommodate growth. The amount of available space depends, of course, on country circumstances.

As for monetary policy, given that inflation expectations are generally well anchored, it should remain accommodative. And central banks should stand ready to dive back into unconventional waters as needed—as some have done in recent days.

Turning to the financial sector, we must strengthen banks’ balance sheets so that they can lend to fuel growth and adequately face uncertain times with confidence.

We also need stronger consistent and implementable financial regulation, to make the system safer and sounder—to make financial crises less likely, and to make taxpayer bailouts of reckless operators less likely still.

AUTF COMMENT:

Yet again, world central banks are given the thumbs up to continue unconventional insane quantitative easing programs to bail out banks. There is no end in sight to these problems, and the worldwide solution is to print more money and throw it at the banks? To the point of “inflation is well anchored”, I’m wondering what statistics Christina Lagarde is looking at? Looking to most of the world, China and India, the EU and many other countries have had to raise interest rates to battle inflation over the past two years. Looking at commodities prices, they are still considerably up over last year, and the only reason for the dip in these prices is a temporary strengthening of the dollar. Investors are jumping out of the markets in droves and are exchanging stocks for US Dollars, hence the rally in the dollar. It is only a matter of time before these same investors realize that their dollars are in danger, and again you will see the commodities market run for the sky. These are interesting times that we live in.- John F. Haettich.

Click here for full text of the speech

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