IMF Report Applauds Governmental Action

By Jonathan Bronstein Talk Radio News Service

The International Monetary Fund Spring 2009 Global Financial Stability Report applauded Western governments employment of stimulus, but stressed that such proactive policies need to be continued in order to continue staving off a full-fledged depression.

The IMF released three major goals in the report: Supplying liquidity to the banking system; cleaning bank balance sheets; and re-capitalizing salvageable banks.

“The unprecedented policy response in both the financial and macroeconomic domains is gradually beginning to restore market confidence,” said José Viñals, an economist and a key contributor to the report.

Viñals says that if these goals are met within the next several months, the recession could possibly come to an end by 2010.

Positive news released in the report was eclipsed by the discovery that “bad-assets” in America have in creased from $2.2 trillion in January 2009 to $2.7 trillion today, which could morph into an unprecedented $4 trillion. The reason for this increase is because the type of assets labeled as “toxic” has widened and increased.

The report stated that “the de-leveraging process will be slow and painful, with the economic recovery likely to be protracted.”

But “decisive and effective action is needed to preserve and strengthen these first signs of improvement,” said Viñals. “Healing the financial system is indispensable to restore confidence and thus set the stage for a durable economic recovery.”

In contrast to governmental inaction seen during the Great Depression of the 1930s, the IMF believes that the current recession has been marked by effective governmental policies, like global stimulus, to help stem the spread of this economic crisis.