US economy still faces housing and unemployment drags, and on policy level it is stuck in a dogmatic debate over raising taxes and cutting spending.
“U.S. growth is going to improve relative to the slow pace in the first half of the year, but it’s not going to be great. We project it to be around 2-1/2 percent for this year and to accelerate a little bit into next year. The main obstacle to U.S. growth is the very difficult situation of the housing market and its implications for consumers’ willingness to spend. The housing prices are continuing to fall. This tends to reduce the wealth of consumers and their willingness to spend,” according to Gian-Maria Milesi-Ferretti, Western Hemisphere Department, International Monetary Fund.


Taxes & Spending:

“In short, the U.S. should raise taxes and cut spending. They have a very big task ahead because the fiscal deficit is very large and this task cannot be accomplished, in our view, by just cutting spending or just raising taxes. You will need a bit of both. And given the magnitude of the task ahead and the fact that the recovery is still quite weak, you don’t want to do everything at once. You want to make sure you have a well-established plan that stretches over several years, but you don’t want to have dramatic cuts to spending in the short run, in the next year or so, when the recovery is still quite weak,” according to IMF’s Milesi-Ferretti.


All Globe has Interest in US Financial System:

Rodrigo Valdes, Principal Advisor, International Monetary Fund:
“The key is first in growth, and as the economy recovers unemployment will reduce. The US labour market is not particularly flexible, so there aren’t any silver bullets for intervention and solutions; but we do think that something could be done to reduce the unemployment situation of people who have been jobless for a longer time, because those persons lose their work capacity and that has long term consequences. United Status is a large country thus the repercussions in the rest of the country are particularly important. In this report we recommend two key areas. One is fiscal policy, making a fiscal adjustment will help global imbalances -the issue that some countries save a lot and others little- gradually solve themselves, what would seem a credible plan, and moving ahead, is to avoid interest rates from increasing in the future with negative repercussions for the rest of the world. Also we have suggested to be particularly careful with the implementation of reforms to the financial system. The US financial system is very important for the rest of the world and we all have personal interest in it working well.”



Related Reports at “International Financial Crisis Channel” - diplomaticallyincorrect.org/c/international-financial-crisis


By Ambassador Muhamed Sacirbey


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