By Celia Canon- Talk Radio News Service

Despite the uncertainties that Congressional Republican leaders have on the efficacy of the reform of the International Monetary Fund, House Speaker Nancy Pelosi is adamant that “The IMF will have a strong support from the Democrats.”

Pelosi defended the international organization today at her weekly press conference where she also mentioned the success of her recent bipartisan trip to China.

House Minority Leader John Boehner and Senate Minority Whip Eric Cantormay, backed by other House Representatives who fear that Democrats are fusing two very different entities, the IMF and a bill, together, said that “Weighing down this critical legislation with non-defense spending will only drag this process out further and cost it essential Republican support needed for passage.”

Cantor added that “We should not be having this discussion. IMF funding has no business being included in the war supplemental bill,” while adding that the funding may result in helping terror-sponsoring states such as Pakistan.

The debate over funding of the IMF has stemmed from President Barack Obama’s announcement at the April Group of 20 meeting that $100 billion will be granted to the IMF as part of the U.S war-bill which should further the fight against the global economic crisis.

Obama also said that the U.S would support the IMF as it sell 400 tons of gold, whilst Pelosi reminded that “It [the IMF] has been reformed so that it will help the poor. They wanted to sell gold, we said you can, but the proceeds have to go to help the poor.”

Responding to Cantor’s allegations, Pelosi said “I don’t know why anyone would say that the money is going to the hands of terrorists, it’s simply not based on facts and is a scare tactic.”

Pelosi also said “There are two contradictory things: one says that one shouldn’t be on war funding, which is our responsibility to support our troops in the war in Iraq, end the war in Iraq, bring our troops home and fight terrorism where is it a threat to our country, which is in Afghanistan, and we know that we have to do that.” She added that “The IMF, in its reformed state, can be a force for alleviating the despair amongst people in the world. It’s a very important national security initiative.”

“The issue of the IMF, I think, has strong support on the Democrats’ side; not any support we’re hearing on the Republican side,” Pelosi said.

This war-bill, which involves military and diplomacy costs for Iraq and Afghanistan, will skyrocket to over $100 billion.

House Speaker Nancy Pelosi responds to allegations that the recent IMF funding may lead to terrorism. On the contrary, Pelosi reaffirms that the IMF has been created for economic and humanitarian purposes, adding that the war-bill will only serve to reinforcing the international organization’s work. (0:48)

 

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By Aaron Richardson- Talk Radio News Service

IMF says they will assist Tanzania and Kenya with millions of dollars to help with rising food costs and infrastructure needs; even though billions are still owed. (0:17)

 

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Jonathan Bronsetin, Talk Radio News Service

Out of the International Monetary Fund’s, Spring 2009 meeting came a simple, but poignant message: the world is still in a recession. But the key to any recovery, according to the IMF, relied upon the restoration of the health of the banking system.

“You never recover before you completed the cleaning up of the balance sheet of the financial sector,” said Dominique Strauss-Kahn, Chairman of the IMF.

Strauss-Kahn believes that any nation can postpone cleaning the banks balance sheet, but this will only postpone a full-fledged recovery.

“I don’t underestimate the difficulties of the task, but the fact that it is difficult does not make it less necessary,” said Strauss-Kahn.

Additionally, Strauss-Kahn applauded the efforts of governments to recognize and quickly deal with this recession through the implementation of successful economic stimulus’s. He believed that the stimulus had a 1/3 greater affect because it occurred in a coordinated fashion.

Strauss-Kahn bluntly predicted. “Our [the IMF] belief is that the crisis is far from over, and there are long months of economic distress in front of us.”

Olivier Blanchard, an economic counselor and director of research at the IMF, explains how unemployment will continue to rise until 2010 because the rate of growth will be too low to increase the amount of jobs available in the economy. (0:36)

 

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Olivier Blanchard, an economic counselor and director of research at the IMF, states his belief that the economic crisis will begin to subside later this year, as long as economic policy remains consistent with those that already presently exist. (0:28)

 

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Jonathan Bronstein, Talk Radio News Service

The dreary, Washington, D.C. weather was matched only by the International Monetary Fund’s, IMF, Spring 2009 edition of the World Economic Outlook. This report was rife with sobering news regarding the future of the economy.

Echoing many statements made by various IMF economists over the past few days during the IMF’s annual Spring meetings, the report expects 2009 to be a year of negative growth, and a year in which many nations willingness to continue to maintain low interest rates and stimulate the economy will be tested.

The report predicted that the global economy will decline by 1.3 percent, as a whole during 2009, which is the greatest rate of decrease since World War II. This also marks a dramatic revision from the IMF’s last WEO report in January 2009.

Economists have recognized that the world is in the midsts of a economic slowdown, but the extent of the recession was worse than expected.

“Global GDP went down by an unprecedented 6 percent at an annual rate in the last quarter of 2008,” said Olivier Blanchard, an economic counselor and director of research at the IMF, “and as far as we can tell, will most likely decline almost as fast in the first half of 2009.”

The six percent contraction of the world economy in 2008 followed four percent growth the previous year.

However, “Growth is expected to reemerge in 2010, but at just 1.9 percent would be sluggish relative to past recoveries,” according to the report.

The WEO attributes this slow growth to financial market stabilization taking longer than to occur then perviously believed, despite the strong and effective efforts by policy makers. The reason for such a long and protracted stabilization of the financial sector is because the amount of “toxic assets” globally will reach $4 trillion, according to the Spring 2009 Global Financial Stability report, which greatly exceeds the previous estimate of $2.7 trillion made in January 2009.

Another piece of sobering news was in regard to the unemployment rate.

“As long as growth is below its normal rate, then unemployment will continue to increase, and therefore our forecast implies that unemployment will crest only at the end of 2010,” said Blanchard.

But all was not entirely negative in the report, as it did stress how the world’s governments have taken the proper steps needed to stem the damage of the recession. The main policy that was universally applauded was the employment of stimulus, which reached 2 percent of global GDP, a level that the IMF encouraged governments to strive for.

Such bold policies are key because they convince the markets that the economic crisis is being dealt with in an effective manner, which leads to “a revival in business and consumer confidence,” according to the WEO report.

Another issue the WEO has become concerned about is in regards to deflation, or a consistent decrease in the prices of all goods with the exception of food and energy. 

The reason deflation becomes so dangerous is that it drives down the prices of goods as people perpetually hold off on buying any goods until they deem that they have reached their lowest level. Thus, commodity prices fall, which ripples throughout the economy.

Economists point to deflation, as the root cause of exacerbating already destructive economic crisis, like in Japan in the 1990s and throughout the world during the Great Depression in the 1930s.

“An indicator of global deflation risk has now risen to well above levels observed in 2002-03, when deflation was also a concern,” according to the WEO.

But, as frightening as this deflation crisis sounds, the IMF believes that it remains but a problem on the distant horizon, which must be overlooked when dealing with problems that are more pertinent in the present, like stimulation of the economy.

Regardless of the morose news, Blanchard remained upbeat, when he said “The need for strong policies on both the macroeconomic and financial is as acute as ever, but with such policies in place there is light at the end of the tunnel. World growth can turn positive by the end of this year and unemployment by the end of next year.”

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.

Domonique Strauss-Kahn, chairman of the International Monetary Fund, applauds governments for being proactive in stopping financial crisis through stimulating the economy. However, the governments must continue to act in this manner or the world faces the fate of a longer and deeper recession. Also, he stresses how the International Monetary Fund is key to guiding world out of the recession. (0:28)

 

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By Jonathan Bronstein, Talk Radio News

The International Monetary Fund (IMF) released the last 2 chapters of their twice yearly World Economic Outlook (WEO). The report discovered that economic recessions of this global scale generally last 2 years. While this may make people feel optimistic, but when one realizes that the IMF economic recession began in June 2008, the report becomes more sobering.

Therefore, America is still in the thick of its recession.

“Recessions associated with financial crisis are longer and more severe,” said Marco Terrones, a key contributor to the IMF’s economic outlook, who has researched 160 recessions since 1960, and made distinctions between those related to the financial industry and those caused under other circumstances, like manufacturers overproduction.

The IMF believes that the recession began in June 2008, while the Bureau of Labor and Statistics says it began in December 2007. Thus, according to historical data discovered by the IMF, the recession should last until 2010.

But, this report was an analytical study of history and not an economic forecast, which will be released later this April.

Through this research, Terrones discovered that recessions caused by a failure of financial institutions last two years, or 2 quarters longer than all other recessions, and recovery takes about 3 years.

However, the statements made were not a prediction of the future, but a systemic analytical review of 20th century economic history. Also, only 6 recessions like this have occurred so the sample size is incredibly small, according to the IMF researchers who worked on the study.

“The twist of the current crisis is that bank lending linkages are the main driver,” said Stephan Danniger, another contributor to the IMF outlook WEO. As a result, the crisis quickly spread around the world, but nations that had the most connection to Western European banks were most vulnerable.

“The main recipient region was emerging Europe, and in a sense it is no surprise that an emerging Europe was the first to be hit hard by the crisis,” said Danniger.

Danniger stressed that countries, especially emerging ones, should continue to become integrated into the world economy because it is the most effective way to grow ones economy. But, such integration makes these nations vulnerable to external recessions.

So those who hope that the world is beginning the recovery process of the recession must heed the IMF assessment, that “recessions are likely to be unusually severe, and economic recovery will be sluggish,” said Terrones.