IMF economy warnings: Time to panic?

Christine LaGarde at the IMF press conference, 22 Sept 2011 Christine Lagarde, managing director of the IMF, says the window for action is narrowing

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When the dramatic becomes wearisomely familiar, maybe it is time to panic.

With the IMF meeting in Washington we again have a parade of world leaders issuing dire warnings about the state of the economy. Again, they exhort their colleagues to take firm political action, to prevent what is already bad from getting worse.

Christine Lagarde, the new IMF boss, says this is a "dangerous phase" and while there is a path to recovery, it is narrower than three years ago.

She says the US must repair its broken finances and reduce debt, while balancing that with growth creation.

This feels like a critical moment. Not simply today, nor this week, but the next few months will be a test of political systems in Europe and the US.

The short-term problem is that just talking about all this makes it worse, as we've seen with the Federal Reserve's attempt to "twist".

Dr Fed decided that the patient was more seriously ill than we'd thought. So he came up with new stronger medicine. The problem is that the markets, like relatives around the sickbed, heard the diagnosis with alarm and discounted the new prescription.

No one seems to doubt that what is needed is firm political action.

"The two other clouds still over us are the European crisis and the deep concern that you can see across the world and around the country about whether the political system in the United States is up to the challenges we face," warned US Treasury Secretary Tim Geithner.

But there is something false about the picture being painted of weak leaders who can't quite summon up the energy to do something.

The problem isn't really the lack of political will, it is the lack of political agreement.

In America, President Obama believes he knows what to do. He has a plan to promote growth, but its mixture of stimulus spending and increased taxation is anathema to the Republican-controlled House of Representatives.

Members of the US Congress' debt super-committee The bicameral, bipartisan 'super-committee' has differing views on how to reduce the US debt

The Republicans also know what to do. They would slash spending and taxation, but they wouldn't stand a chance getting it past the president or the Senate.

Some members of the special panel on how to reduce the US debt have already said they won't accept any tax rises. Others say there can be no agreement without them.

In Europe, the problem isn't between political parties but countries, or indeed voters, who don't share their leaders' enthusiasm for cross-border solidarity.

In particular, Germany, no longer in thrall to a horrified fascination with its own past, isn't willing to dig deeper into its pockets to endlessly fund the European project.

Germans are still reeling from the huge cost of reuniting their own country, and know all about the burden of supporting a failed economy.

The US and the EU have very different histories. For a start, one is a country, the other is not.

But both have political systems that were deliberately designed to move at the pace of the slowest participant. You could say they were crafted to prevent bold radical, actions unless everyone is signed up to it.

It means that political will has to be aimed at getting agreement, which only comes at a great price.

The uncomfortable fact is that while economics is global, politics is local.

Mark Mardell Article written by Mark Mardell Mark Mardell North America editor

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  • rate this

    Comment number 493.


    There's definitely something going on

    They saw how strong the USA middle class was ten years ago

    The Clinton bill of 2000 changed everything forever

    If USA can be affected, any country can be

    Europe media are bravest in the world to cover such

    Now I understand why middle class is being hit so hard by everything

  • rate this

    Comment number 492.

    Still unable to access Page 25

  • rate this

    Comment number 491.

    Help fill inaccessible page 25?

  • rate this

    Comment number 490.


    Page 25 LOST

    Have you any influence?

  • rate this

    Comment number 489.

    AfA @488

    "Willing workers WITHOUT jobs - now in tens of millions"

    US aim WAS for ALL to be FREE, to build 'health & happiness'

ALL 'deserve' EQUALITY to Create True Wealth

    NEED to claim / re-claim Secure Shared Freedom - to see all build enduring 'health & happiness'

    Equality of shared freedom, without which no security, only mock-freedom

  • rate this

    Comment number 488.

    LucyJ @486
    Sorry to intrude

    No comment on detail of US Trade Agreements

    BUT at such length you have described US woe

    Willing workers with jobs - now in tens of millions

    YOU "will never give up" YOUR "national sovereignty"?

    Whatever you wish, for good of self AND others, we will need Democratic Equality

    By "sovereignty" you do not mean "hostile dominance", do you?

  • rate this

    Comment number 487.

    One guy wrote in the Wash Post against approving PNTR with China

    The guy wrote about how approving PNTR would mean USA internatioanl corps selling computers, ect military applications to a non-democratic country whose intentions don't know

    He wrote that it would be wrong to approve it b/c it would be putting USA national security at risk

    Yet Clinton and Repub led Congress approved it

  • rate this

    Comment number 486.

    They say their biggest achievements are NAFTA, China's Permenent Favored Status with USA and the Euro or European Union

    All three have failed

    NAFTA and China's trade status have resulted in loss of millions of USA jobs and collapsing the USA economy

    The Euro and EU are in monetary trouble now

    As an American in USA I only follow American laws
    I will never give up my national soverigny

  • rate this

    Comment number 485.

    Most important thing countries have going for us is national soverignty and our individualism

    Can never give it up

    Many times quoted in this book is how unhappy they are with Americans' and British' patritotism to our countries

    Margaret Thatcher was a true British hero
    She wanted to save Britain
    She did not want to see Britain lose your national soverighty
    She truly loved your country

  • rate this

    Comment number 484.


    An Arkansas newspaper stated Clinton went to Baden-Baden in Germany when he was Gov in 1991 to Bilderberg meeting, paid for by himself

    the idea of NAFTA and giving permanent favored nation status to China came from?

    the idea of an American Union came from?

    The more I read about it, the more I realize you are right Beam

    Why be so secretive if nothing to hide?

  • rate this

    Comment number 483.

    Re "Germany values its workers"...

    It seems German companies value their employees in such countries like Brazil, Czechia, Mexico, Poland, Slovakia and Slovenia more, for they move more and more of their manufacturing there.

    BTW. Read on Airbus manufacturing in China.

  • rate this

    Comment number 482.

    "Do we want future America to be dependent on China?"

    As major manufacturers (not only American but also EU ones) are looking for the lowest labor costs, many of them (seeing the writing on the wall) are already moving some of their production to even cheaper countries such as India, Indonesia, Malaysia and Philippines.

    So I guess those countries will soon become new whipping boys.

  • rate this

    Comment number 481.

    MagicKirin@450"Because the workers don't own the company."

    Ah -- your ignorance of labor issues probably explains why you can't escape from a memorized script. Wonder who wrote it for you?

    If you cared to look, you'd find that union men and women own big parts of their companies -- as shareholders with pension plans and retirement accounts just like you and I.

  • rate this

    Comment number 480.

    #478 "Because a person looks for answers (like many do on computers) does not make it spam."

    Stick around for a couple of days, you will see the same spam posted over and over.

  • rate this

    Comment number 479.

    beammeup @472

    Such as JClarkson might be playing 'Samson in the Temple', mistaking Democracy for Idolatry…

    Perhaps amongst High Priests of out-sourcing 'Service Economy' cover-story?

    The American People waking and stirring and 'threatening' to show solidarity with their own and the world's oppressed

    Time to curb such enthusiasms?

    What do such people deserve anyway?

  • rate this

    Comment number 478.

    @475 JClarkson

    Because a person looks for answers (like many do on computers) does not make it spam. Many of us are questioning this crazy world we live in.

    If you have something construction to say, we are listening. Until then, behave yourself okay...I think you can do better.

  • rate this

    Comment number 477.

    #457 "USA corps can pay more for USA labor resulting in USA jobs resulting in USA being able to afford products"

    They can but they don't want to. Why? Because the consumers won't either.

  • rate this

    Comment number 476.

    @473 LucyJ

    Yes, I am familiar with the Bilderberg group. Many politicians have been their guests including Kissinger, Bill & Hillary Clinton amongst other world leaders (even Prince Charles) and other big 'egos'. Very hush, hush which has led to all kinds of theories like a 'one world' power. The Press can't get anywhere near them, as the location is protected.

  • rate this

    Comment number 475.


    Ah, it is all clear now. Haven't seen this spam before....

  • rate this

    Comment number 474.

    An excerpt:
    British writer and futurist H. G. Wells would go further than progressives by appropriating and redefining the term "new world order" as a synonym for the establishment of a technocratic world state and planned economy.a tyrannical New World Order as the fulfillment of prophecies about the "end time" in the Bible


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