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As part of the IMF’s latest global economic forecast, which for the first time since 2016 saw the D.C.-based organization cut its global growth forecasts, the IMF warned that a severe recession would slash US public wealth by about $5 trillion, causing vastly more damage to Washington’s finances than just an increase in debt and deficits.

At the same time, governments around the world, many of which face similar dangers, do not clearly publicize their overall net worths, the International Monetary Fund said in its new report, noting that “Few governments know how much they own” or how they use those assets for the public’s well-being, the IMF explained.

This creates a potential blind spot for policymakers who could use this knowledge to head off economic risks; Knowing what a government owns and how they can put their assets to better use matters because they can earn about 3% of GDP more in revenues each year and reduce risks, all at once according to France24. That’s as much revenue as governments make from corporate income tax receipts in advanced economies. Governments can put this money toward better schools, hospitals, or other priority spending.

Public assets consist of public infrastructure such as roads, bridges, and sewer pipes, as well as the money governments have in the bank, their financial investments, and payments owed to them by individuals and businesses. According to the IMF, “natural resource reserves in the ground are also part of assets, something that is particularly important for natural resource-rich countries. But assets also include state-owned enterprises such as public banks and, in many countries, utilities such as public electricity and water companies.”

…click on the above link to read the rest of the article…

IMF Slashes US Growth Outlook, Blames Rates & Trade; Sees Venezuelan Inflation 10-Million-Percent

October 9, 2018

IMF Slashes US Growth Outlook, Blames Rates & Trade; Sees Venezuelan Inflation 10-Million-Percent

Confirming Director Lagarde’s warning that “clouds on the horizon have materialized,” The International Monetary Fund is downgrading its outlook for the world economy, citing rising interest rates and growing tensions over trade.

The IMF said Monday that the global economy will grow 3.7 percent this year, the same as in 2017 but down from the 3.9 percent it was forecasting for 2018 in July.

It slashed its outlook for the 19 countries that use the euro currency and for Central and Eastern Europe, Latin America, the Middle East and Sub-Saharan Africa.

Given the actual global data, The IMF and consensus have a long way to go…

Furthermore, The IMF expects the U.S. economy to grow 2.9 percent this year, the fastest pace since 2005 and unchanged from the July forecast.

But it predicts that U.S. growth will slow to 2.5 percent next year as the effect of recent tax cuts wears off and as President Donald Trump’s trade war with China takes a toll.

As The IMF blog details, there are clouds on the horizon. Growth has proven to be less balanced than hoped. Not only have some downside risks that the last WEO identified been realized, the likelihood of further negative shocks to our growth forecast has risen. In several key economies, moreover, growth is being supported by policies that seem unsustainable over the long term. These concerns raise the urgency for policymakers to act.

Growth in the United States, buoyed by a procyclical fiscal package, continues at a robust pace and is driving US interest rates higher. But US growth will decline once parts of its fiscal stimulus go into reverse. Notwithstanding the present demand momentum, we have downgraded our 2019 US growth forecast owing to the recently enacted tariffs on a wide range of imports from China and China’s retaliation. China’s expected 2019 growth is also marked down.

…click on the above link to read the rest of the article…

Spain: IMF Highlights Rising Risks

October 8, 2018

Spain: IMF Highlights Rising Risks

The International Monetary Fund can be criticized for many things, but its analysis of countries’ debt risk tends to be worth a read.

In this case, the International Monetary Fund has once again warned Spain of the risk of reversing reforms and increasing imbalances.

It asks to deepen in the labor reform to end structural unemployment and credible measures for the 2019 budget.

The IMF is often criticized on many sides. It is often accused of being “neoliberal” despite the fact that in almost all its recommendations aim to prevent spending cuts. It is wrongly criticized, on many occasions, for being negative on countries. It is exactly the opposite. The IMF is often too diplomatic and, above all, undemanding with governments.

A clearly diplomatic IMF has verified in its last report the important risks facing the Spanish economy. As growth slows down more quickly than expected, the risks that threaten the recovery have increased and many of the socialist government’s announcements could be counterproductive and accelerate a relapse.

In a very diplomatic but forceful way, the IMF warns about the governments’ optimistic and inflated estimates of tax revenues. No wonder, because the average error in revenue estimates for new taxes in Spain is very important, an average of 5.8 billion euro annually.

Inflated estimates are an easy trick to square budgets. Making impossible estimates of tax revenue while spending increases are very real. Then, when deficits soar, blame an external enemy.

The graph below shows the historical overestimation of tax revenues (5.8 billion euro per annum more tax revenues estimated than actually collected).

Spain: IMF Highlights Rising Risks

The Spanish Treasury Inspectors themselves have warned: “It would also be very interesting that those who speak again and again of these striking figures will provide the studies on which they are based to compare them. From previous unsubstantiated studies, inadequate and impossible proposals arise”(Tax Inspectors, January 2015).

…click on the above link to read the rest of the article…

World economy at risk of another financial crash, says IMF

October 4, 2018

World economy at risk of another financial crash, says IMF

Debt is above 2008 level and failure to reform banking system could trigger crisis

The floor of the New York stock exchange in September 2008. Photograph: Richard Drew/AP

The world economy is at risk of another financial meltdown, following the failure of governments and regulators to push through all the reformsneeded to protect the system from reckless behaviour, the International Monetary Fund has warned.

With global debt levels well above those at the time of the last crash in 2008, the risk remains that unregulated parts of the financial system could trigger a global panic, the Washington-based lender of last resort said.

Much has been done to shore up the reserves of banks in the last 10 years and to put in place more rigorous oversight of the financial sector, but “risks tend to rise during good times, such as the current period of low interest rates and subdued volatility, and those risks can always migrate to new areas”, the IMF said, adding, “supervisors must remain vigilant to these unfolding events”.

A dramatic rise in lending by the so-called shadow banks in China and the failure to impose tough restrictions on insurance companies and asset managers, which handle trillions of dollars of funds, are highlighted by the IMF as causes for concern.

The growth of global banks such as JP Morgan and the Industrial and Commercial Bank of China to a scale beyond that seen in 2008, leading to fears that they remain “too big fail”, also registers on the IMF’s radar.

The warning from the IMF Global Financial Stability report echoes similar concerns that complacency among regulators and a backlash against international agreements, especially from Donald Trump’s US administration, has undermined efforts to prepare for another downturn.

…click on the above link to read the rest of the article…

Argentina Hikes Rates To 65% As Peso Plunges To New Record Low

September 28, 2018

Argentina Hikes Rates To 65% As Peso Plunges To New Record Low

It appears the market is willing to test BCRA’s mettle as it pukes pesos down to a new record low against the greenback and pushes towards the bottom of its new “no intervention” band.

The new record low is now 41.54/USD…

While not ‘allowed’ to intervene directly until 44/USD, Bloomberg reports that Argentina just hiked its Leliq rate to 65%.

The sharp drop follows Thursday’s 2.8% decline and comes despite the IMF agreeing on Wednesday to increase its bailout package to the Latin American country by an extra $7.1bn.

Paging Christine Lagarde…

Argentina Gets Record $57 Billion As IMF Boosts Bailout, Creates “No Intervention” Zone For The Peso

September 26, 2018

Argentina Gets Record $57 Billion As IMF Boosts Bailout, Creates “No Intervention” Zone For The Peso

Just a few months after the IMF announced in June what was a record-setting $50 billion, 36-month bailout agreement with Argentina, the International Monetary Fund said it would expand the credit line to $57 billion in an attempt to halt the economic and financial crisis that has sent the country’s currency plunging over 50% this year, and pummeled the third-largest Latin American economy. In exchange, Argentina will set a “no intervention” zone for the peso from 34 to 44, meaning the exchange rate will be flexible but not floating.

The revised standby agreement is “aimed at bolstering confidence and stabilizing the economy,” IMF chief Christine Lagarde said Wednesday in a joint statement with Argentine Economy Minister Nicolas Dujovne.

The agreement, which is subject to IMF Executive Board approval, “front loads IMF financing, increasing available resources by US$19 billion through the end of 2019, and brings the total amount available under the program to US$57.1 billion through 2021,” according to statement.

Argentina had started renegotiating the terms of the bailout deal last month when it became obvious that the original funds would be insufficient, and when President Mauricio Macri asked to speed up payments in the original agreement. Meanwhile, as part of the deal, Argentina would be required to fulfill certain stipulations under the agreement, which would need congressional approval by way of the 2019 budget. In exchange, the IMF would cover a significant portion of Argentina’s financing through next year, according to Moody’s.

As part of the government’s efforts to cut its debt, which is projected to reach 70% of GDP next year. Macri and finance minister, Nicolas Dujovne unveiled economic reforms earlier this month, including highly unpopular spending cuts and export tax increases demanded by the IMF.

…click on the above link to read the rest of the article…

Argentine President Admits “More Poverty” To Come, Announces Price Controls, Higher Taxes, Smaller Govt

September 3, 2018

Argentine President Admits “More Poverty” To Come, Announces Price Controls, Higher Taxes, Smaller Govt

Things have not worked out so well since The IMF “bailed them out”…

In his address, there was good news, bad news, and ugly news.

“Everyone has to make sacrifices,” Macri implored of his nation’s citizens – who have lost 50% of their wealth year-to-date due to the collapse of the peso, which he also attributes to being “exaggerated by Turkey and Brazil weakness.”

Having blamed “mostly external factors” for the collapse of the economy (not bingeing on too much dollar-denominated debt in order to manufacture a smoke-and-mirrors-based boom), Macri notes that investors “have started doubting” Argentina’s ability to function.

The Good News

Macri has promised to dramatically shrink the size of the government, eliminating several ministries entirely, adding that Argentina must “set a goal not to spend more than we have.”

The Bad News

In an effort to close its budget gap, Macri will raise taxes on its one positive economic attribute – its exporters.

The Ugly News

Amid the hyperinflationary regime shift that is occurring, Macri will resort to price controls of some essential foods. When has that ever ended well.

All of which, as Bloomberg notes, is intended to signal a shift in the government’s strategy as it heads into talks on Tuesday with the International Monetary Fund to speed up the disbursement of cash from a $50 billion credit line.

Macri is now caught between the ‘rock’ of pleasing investors by cutting spending, and the ‘hard place’ of ensuring that the belt-tightening of austerity doesn’t cause social upheaval ahead of next year’s election.

These measures, Macri warned “will lead to more poverty.”

For now, the peso is stable (modestly weaker)…

Peso Set To Disintegrate After IMF Tells Argentina To Stop Supporting Currency

September 2, 2018

Peso Set To Disintegrate After IMF Tells Argentina To Stop Supporting Currency

On May 11, three days after Argentina secured a $50 Billion IMF bailout – the largest in the fund’s history – we jokingly noted that with the peso resuming its slide, an indication the market did not view the IMF backstop as credible, the ECB would need to get involved.

ARGENTINE PESO EXTENDS LOSS, HITS NEW ALL-TIME LOW AT 23.16/USD
Time to add ECB to IMF bailout

10:22 AM – May 11, 2018

In retrospect, it now appears that this may not have been a joke, because with the Peso plummeting, and surpassing the Turkish Lira as the worst performing currency of 2018 having lost half its value YTD…

… with the bulk of the collapse taking place in August…

… Christone Lagarde had some very bad news for Buenos Aires and Argentina president Mauricio Macri: the IMF now insists that after burning through billions in central bank reserves, Argentina should stop using funds to support the peso, and float it freely.

According to Infobae, the Argentine foreign currency reserves have declined below the level demanded by the IMF, with Argentine authorities selling $2.5BN to support the peso in August; meanwhile the overall level of reserves has slumped even more, approaching the levels before the IMF bailout and failing to prop up the peso which, as shown below, has collapsed in a move reminiscent of what is taking place in hyperinflating Venezuela.

Worse, the Argentine Peso suffered its latest sharp drop in the days after the central bank unexpectedly hiked rates to 60% – the highest in the world – and another indication that the market is firmly convinced that not even the IMF backstop will force Argentina into a painful, and politically destabilizing structural program.

…click on the above link to read the rest of the article…

A Review of “The Production of Money” and Reflection on the Climate Movement

August 23, 2018

A Review of “The Production of Money” and Reflection on the Climate Movement

“…over the past few months the IMF has been sending warning signals about the state of the global economy. There are a bunch of different macroeconomic developments that signal we could be entering into another crisis or recession in the near future. One of those elements is the yield curve, which shows the difference between short-term and long-term borrowing rates. Investors and financial pundits of all sorts are concerned about this, because since 1950 every time the yield curve has flattened, the economy has tanked shortly thereafter.”

-Paul Sliker on Left Out Podcast

Ann Pettifor has a 160 page book that all serious people— organizers and activists, farmers, workers, intellectuals, teachers and students—should read; it’s called The Production of Money: How to Break the Power of the Bankers. At its core, the book’s guiding questions are: How does moneycurrently facilitate a despotic regime of finance and how can it facilitate, as a fiat currency, socially beneficial activity to set us on a better path toward Just Transition and equality?

The Production of Money emerges in a moment where larger movements are taking seriously the concepts of democratizing the economic sphere through initiatives such as public banking, Federal Jobs Guarantees, and the Solidarity Economy. This is a perfect book for the layperson (and latent activist) because it demystifies the currently authoritarian function of central and commercial banks in our world and how they have a stranglehold over our collective ability to address the massive global crises we face. Even more importantly, it presents a winning narrative about how we can begin to tackle financial oligarchy, climate chaos, inequality, and sexism precisely by framing a realistic horizon of dramatically better life conditions for ordinary people.

…click on the above link to read the rest of the article…

Genocide of the Greek Nation

August 23, 2018

Genocide of the Greek Nation

The political and media coverup of the genocide of the Greek Nation began yesterday (August 20) with European Union and other political statements announcing that the Greek Crisis is over. What they mean is that Greece is over, dead, and done with. It has been exploited to the limit, and the carcas has been thrown to the dogs.

350,000 Greeks, mainly the young and professionals, have fled dead Greece. The birth rate is far below the rate necessary to sustain the remaining population. The austerity imposed on the Greek people by the EU, the IMF, and the Greek government has resulted in the contraction of the Greek economy by 25%. The decline is the equivalent of America’s Great Depression, but in Greece the effects were worst. President Franklin D. Roosevelt softened the impact of massive unemployment with the Social Security Act other elements of a social safety net such as deposit insurance, and public works programs, whereas the Greek government following the orders from the IMF and EU worsened the impact of massive unemployment by stripping away the social safety net.

Traditionally, when a sovereign country, whether by corruption, mismanagement, bad luck, or unexpected events, found itself unable to repay its debts, the country’s creditors wrote down the debts to the level that the indebted country could service.

With Greece there was a game change. The European Central Bank, led by Jean-Claude Trichet, and the International Monetary Fund ruled that Greece had to pay the full amount of interest and principal on its government bonds held by German, Dutch, French, and Italian banks.

How was this to be achieved?

In two ways, both of which greatly worsened the crisis, leaving Greece today in a far worst position that it was in at the beginning of the crisis almost a decade ago.

…click on the above link to read the rest of the article…

Looks Like Italian Default is Back on the Menu

August 18, 2018

Looks Like Italian Default is Back on the Menu

Italian Deputy Prime Minister Matteo Salvini was right to call out the EU over the failure of the bridge in Genoa this week. It was an act of cheap political grandstanding but one that ultimately rings very true.

It’s a perfect moment to shake people out of their complacency as to the real costs of giving up one’s financial sovereignty to someone else, in this case the Troika — European Commission, ECB and IMF.

Italy is slowly strangling to death thanks to the euro. There is no other way to describe what is happening. It’s populist coalition government understands the fundamental problems but, politically, is hamstrung to address them head on.

The political will simply isn’t there to make the break needed to put Italy truly back on the right path, i.e. leave the euro. But, as the government is set to clash with Brussels over their proposed budget the issues with the euro may come into sharper focus.

Looking at the budget it is two or three steps in the right direction — lower, flat income tax rate, not raising the VAT — but also a step or two in the wrong direction — universal income.

Opening up Italy’s markets and lowering taxpayers’ burdens is the path to sustainable, organic growth, but that is not the purpose of IMF-style austerity. It’s purpose is to do exactly what it is doing, strangling Italy to death and extracting the wealth and spirit out of the local population, c.f. Greece and before that Russia in the 1990’s.

So, looking at the situation today as the spat between Turkey and the U.S. escalates, it is obvious that Italy is in the crosshairs of any contagion effects into Europe’s banking system.

…click on the above link to read the rest of the article…

Turkey Rules Out Capital Controls As Germany Says IMF Bailout “Would Be Helpful”

August 16, 2018

Turkey Rules Out Capital Controls As Germany Says IMF Bailout “Would Be Helpful”

Albayrak also said that reining in inflation and narrowing the current-account deficit were policy priorities, although he provided no details on how we would do that absent raising interest rates – an outcome that Erdogan has decried as unlikely – with both an IMF bailout and capital controls off the table.

Discussing Turkey’s runaway inflation, Albayrak said the central bank alone wouldn’t be able to rein it in without tighter fiscal policy, although he has yet to provide any details on what options are on the table. In the meantime, GDP is set to slow further in the medium term from 7.4% expansion last year.

Still, after losing as much as a quarter of its value in the past few weeks after the U.S. sanctioned members of President Recep Tayyip Erdogan’s government, it continued to recover losses both before and after this morning conference call, rising to the highest level since last Friday, after Turkey cracked down on short sellers. Albayrak’s speech appears to have been successful, and the lira gained trading 4.0% stronger at 5.70 per dollar.

Meanwhile, as Albayrak was hoping to preserve some stability, a German government source told Reuters on Thursday that “the Federal Government believes that an IMF program could help Turkey.”

…click on the above link to read the rest of the article…

Talk Cold Turkey

August 14, 2018

Talk Cold Turkey

Henri Matisse View of Nôtre Dame 1914

Recep Tayyip Erdogan became Prime Minister of Turkey in 2003. His AKP party had won a major election victory in 2002, but Erdogan was banned from political office until his predecessor Gül annulled the ban. Which he had gotten in 1997 for reciting an old poem to which he had added the lines “The mosques are our barracks, the domes our helmets, the minarets our bayonets and the faithful our soldiers….”

The Turkish courts of the time saw this as “an incitement to violence and religious or racial hatred..” and sentenced him to ten months in prison (of which he served four in 1999). The courts saw Erdogan as a threat to the secular Turkish state as defined by Kemal Ataturk, the founder of modern Turkey in the 1920’s. Erdogan is trying to both turn the nation towards Islam and at the same time not appearing to insult Ataturk.

The reality is that many Turks today lean towards a religion-based society, and no longer understand why Ataturk insisted on a secular(ist) state. Which he did after many years of wars and conflicts as a result of religious -and other- struggles. Seeing how Turkey lies in the middle between Christian Europe and the Muslim world, it is not difficult to fathom why the ‘father’ of the country saw secularism as the best if not only option. But that was 90 years ago.

And it doesn’t serve Erdogan’s purposes. If he can appeal to the ‘silent’ religious crowd and gather their support, he has the power. To wit. In 2003, one of his first acts as prime minister was to have Turkey enter George W.’s coalition of the willing to invade Saddam Hussein’s Iraq. As a reward for that, negotiations for Turkey to join the EU started. These are officially still happening, but unofficially they’re dead.

…click on the above link to read the rest of the article…

Oil Prices At Risk Of Economic Downturn

July 19, 2018

Oil Prices At Risk Of Economic Downturn

Oil prices have retreated as disrupted supply from Libya has started to come back online, threatening the recent gains in oil prices. But a bigger threat to crude over the second half of 2018 and into 2019 is a slowdown in the global economy.

The International Monetary Fund warned in its latest World Economic Outlook that a series of threats to economic growth are brewing. The Fund maintained its projection for solid global GDP growth of 3.9 percent for both 2018 and 2019 – rather robust figures – but said that “the expansion is becoming less even, and risks to the outlook are mounting.”

“Growth generally remains strong in advanced economies, but it has slowed in many of them, including countries in the euro area, Japan, and the United Kingdom,” the IMF said.

As John Kemp of Reuters points out, these are signs that the U.S. economy is in a late stage of an economic growth cycle, with growth topping out, inflation picking up, rising interest rates and an inversion in the yield curve for U.S. treasuries, which tends to precede recessions.

As has happened in the past, the last phase of an economic expansion has often coincided with a surge in oil prices, which is then followed by both a dip in oil prices and an economic contraction. The recessions following the price spikes in 1973 and 2008 are the most obvious, but not the only examples.

Others take a different tack, arguing that rising oil prices need not be a drag on the economy. “[T]he rise in oil and commodity prices today is leading to a recovery in pricing power for commodity companies and an improvement in terms of trade for commodity-exporting nations, thus providing support to capex in these segments,” Morgan Stanley’s chief economist and global head of economics Chetan Ahya wrote in May.’

…click on the above link to read the rest of the article…

Argentina Blew A Billion Dollars To Rescue The Peso On Friday… And Failed

June 30, 2018

Argentina Blew A Billion Dollars To Rescue The Peso On Friday… And Failed

Even Eva Peron would be crying…

The last 24 hours have not been great for Argentina.

First – despite endless jawboning about The IMF bailout and how it will secure the nation’s future and enable reforms, the currency collapsed to a new record low on Friday…

Second – the central bank decided to step in with their newly minted IMF funds and blew over a billion dollars to buy pesos, managing a very modest bounce (but ARS still closed down 3% on the day)

Third – IMF officials spoke with Argentina’s union leaders, warning of the social impact of the ongoing disruptions.

IMF spokesman Raphael Anspach confirmed Werner and Cardarelli’s participation in the call, which “reiterated the main elements of the IMF support to the government’s economic plans, including the measures aimed at supporting the most vulnerable in Argentine society.”

And union officials told the media that The IMF was not worried about the ongoing collapse:

“They are betting on a virtuous behavior by private investors, with the economy falling in the third and fourth quarters of 2018, but rebounding 1.5% in the first quarter of 2019”

“They were not worried about the flight of capital”

Fourth, and finally, and perhaps worst of all – Argentina is now out of The World Cup

A nation mourns.

View image on Twitter

Currently Argentina fans crying

11:29 AM – Jun 30, 2018 · Queens, NY

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