Recession likely to be longer according to International Monetary Fund

April 16, 2009 by · Leave a Comment
Filed under: Opinion 

I agree with their assessment.  The more will bailout the bad actors in this situation the longer it will be until trust is restored in our markets and that is the single most important step in getting banks to restore a normal level of credit in our markets.  Hopefully our representatives will realize this and do what is right.  Criminal charges are in order as well, you don’t pull something of this scale without breaking some laws.  There is no easy answer to this crisis but this is when we can shine and do the right thing.

News (Reuters):

The current global recession is likely to be unusually long and severe and the recovery sluggish since it sprang from a financial crisis, the International Monetary Fund said on Thursday.

The IMF called for aggressive and coordinated monetary and fiscal policies, and said restoring confidence in the financial sector was important for economic policies to work and for a recovery to take hold.

New IMF analysis published on Thursday shows recessions tied to financial crises, such as the current one which has its roots in reckless bank lending to the U.S. housing market, are more difficult to shake because they are often held back by weak demand.

Worse still is that the current global recession combines a financial crisis at the heart of the world’s largest economy with a broader global downturn, making it unique, the IMF said in chapters of its World Economic Outlook, which is to be released in full on April 22 with updated forecasts.

The fund’s analysis also says that emerging market economies, including those with sound economic policies, are not insulated from recessions beginning in major economies since they are often accompanied by a drop in exports and capital flows.

Using a new financial stress index, the IMF said stress levels in advanced economies suggest capital flows to emerging economies will suffer large declines — especially banking-related flows — and will recover slowly.

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