US & Europe Rising Risk of Recession-IMF & Mo, by Ambassador mo
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The US and Europe are at ever greater risk of sliding back into recession. In the US, sharp cuts in government spending are coming at the wrong time further compounding an economic slowdown. For Europe, the sovereign debt crisis is spreading. Europe needs to lower rates. Asian economies are doing better; however they need to boost domestic demand. Overall global economic forecast is being downgraded for this year and next to 4%. This is the summary in most abbreviated form from Olivier Blanchard, IMF Chief Economist. (Extended Report – several hundred pages and graphs is available at IMF site – imf.org) Is IMF Changing Its Song & recommendations? My concern though is that the IMF as an institution is being a bit inconsistent in its recommendations. (We have been consistent in our view on the risk of austerity cuts - diplomaticallyincorrect.org/films/blog_post/cut-in-us-economic-growth-forecasts-by-ambassador-mo/32753 ). Only a month or two earlier, austerity was being heralded as the primary necessity. From Greece to Italy in the Eurozone that was advanced as the bitter medicine for presumably inflated public debt. However, that medicine may not only not be working but it may be making things worse. (Read Also our previous assessment - diplomaticallyincorrect.org/films/blog_post/greek-default-sooner-or-later-by-ambassador-mo/30326 ). Feeding the Republican/Tea Party Calls for Budget Axe? In the US, the Republican and Tea Party demands for cutting spending cited the IMF, among others as rationale for the budget axe. Again, that medicine may now only increase deficits by reducing economic activity, cutting revenues sharply and this worsening deficits. (Read “Triggering Global Recession” - diplomaticallyincorrect.org/films/blog_post/triggering-global-recession-by-ambassador-mo/32982 ). The IMF usually gets it right in the end, but it is important to get it on time and without equivication - Olivier Blanchard, the IMF's Chief economist has now painted a clearer picture of risks and causes. Our Earlier Warning - “Global Economy Swerving and Recession on Edge” - diplomaticallyincorrect.org/films/blog_post/financial-markets-swerving-global-recession-on-edge-by-ambassador-mo/33537 By Ambassador Muhamed Sacirbey Facebook – Become a Fan at “Diplomatically Incorrect” Twitter – Follow us at DiplomaticallyX “America – AAA Country” - diplomaticallyincorrect.org/c/america-aaa-country Much more at “International Financial Crisis Channel” - diplomaticallyincorrect.org/c/international-financial-crisis