International Monetary Fund: ‘Time is Running Out’

September 26, 2011 by · Leave a Comment
Filed under: Global News 

IMF sees this next round of de-leveraging as a not so positive thing.   I see it as a very positive thing.  We have way too much debt in the system, well beyond anything meaningful restructuring would do.   Yes, default has pains associated with it but in the long run this is what “is” going to happen to get balance back into the financial system and the economy on a whole.  We can not socialize these losses on national balance sheets.

The problem is that these liabilities are so large that they actually do seriously impair a countries federal balance sheet vis a vie their central bank.  We need to just own up the problem and force these bad actors no matter who they are and how big they are to shallow these losses and write them off.   If they do some systemically important function, we create a unit to keep that portion going but the share and bond holders need to take these losses.  I have nothing against banks, when they do their function prudently, they are a great asset.  This is just what the right move is for the majority.

If we do not take this course of action then we are going to suffer a fate that has much higher unemployment and prices in it.    Is that what you want, sound off?

Fox Business (Adam Samson) – The stumbling global economic recovery and deepening euro zone sovereign debt crisis pose a heightened risk to financial markets in advanced economies, the International Monetary Fund said Wednesday, calling for swift government action.

Political strife across many of the world’s largest economic players, including the United States and European Union, have prompted private financial markets to “question their ability” to take action to boost economic expansion, while also enacting much-needed fiscal reforms.

“Risks are elevated, and time is running out to tackle vulnerabilities that threaten the global financial system and the ongoing economic recovery,” the IMF said in a release.

The IMF sees the debt situation in the euro zone as particularly worrisome as several countries are struggling with levels of public debt that significantly surpass their total economic output. Greece, in fact, needs billions of euros to avoid defaulting on its debt, a move that the IMF says could reverberate across the 17-member currency bloc.

Indeed, according to the IMF’s calculations, the sovereign debt crisis has already cost the European banking sector more than $270 billion since 2010, not including the capital needs of banks. French banks, which are seen as having particularly high exposure to sovereign debt, have seen their shares pummeled in the stock market. For example, banking-giant BNP Paribas has plunged 47% since the beginning of 2011.

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