IMF Predicts Lower U.S. Growth

by John M. Curtis
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Copyright June 17, 2011
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               Meeting in Sao Paulo, Brazil, the International Monetary Fund unveiled its crystal ball, predicting a lower U.S. growth rates over the next two years.  U.S-funded IMF supplies low interest loans to developing countries has one of the highest default rates of any global lending institution.  While it’s busy prognosticating, its former Director-Genearal Dominique Strauss-Kahn, mentioned as a possible French presidential candidate, sits under house arrest with 24/7 electronic monitoring in a rented New York condominium.  Posting $1 million cash bail and $5 million surety bond for sexually assaulting a 32-year-old Kenyan housemaid, Strauss-Kahn represents the fraudulent nature of the IMF.  Seeking control world financial markets, the IMF once proposed creating a new world reserve currency, despite all its economic problems, including its indebtedness to the U.S.

            Revising U.S. growth downward from 2.8% in 2011 to 2.5%, the IMF warned the U.S. and Europe to work feverishly toward retiring its debt.  Seeing global growth largely based on Asian economies, particularly China, at 4.3% in 2011, the IMF sees the West as incapable of competitive growth rates because of massive debt on both sides of the Atlantic.  “You cannot afford to have a world economy where these important decisions are postponed, because you’re really playing with fire,” said Jose Vinals, director of the IMB’s Monetary and Capital Markets Department.  Vinals urged the U.S. and European Union to deal with its debt problems, namely, implementing draconic austerity programs, sacrificing wages, pensions and other hard-fought benefits to bring public debt under control.  IMF officials don’t quite get that U.S. and Euro belt-tightening involves slashing funds to the IMF and World Bank.

            IMF officials can’t have it both ways:  Lecturing the U.S. and Europe about reducing debt levels, while, at the same time, increasing subsidies to the IMF and World Bank.  Given Strauss-Kahn’s recent problems, the IMF is hardly in a position to pontificate about prudent economic policies.  Strauss-Kahn, while head of the IMF, was wildly extravagant, sparing no expense living high on the hog.  IMF officials have a lot of nerve lecturing the U.S. and Europe about austerity while its head sexually assaults an African maid while living in unbridled luxury.  “We have now entered very clearly into a new phase of the [global] crisis, which is, I would say, the political phase of the crisis,” said Vinals.  Vinals warns of a default on U.S. debt, should the stubbornly divided U.S. Congress continue to wrangle over raising the debt ceiling, potentially lowering U.S. debt ratings.

            IMF officials don’t dare weigh in on the Euopean debt problems where the more prosperous Eurozone countries, like France and Germany, must bailout more debt-ridden nations like Greece, Portugal, Spain, Italy and Ireland, all in various stages of fiscal insolvency.  Frankfurt-based European Central Bank can’t figure out how to restructure Greece’s massive debt, worried that it could go the way of Lehmann Bros., the once venerable U.S. investment bank that went bankrupt in the 2008 global economic meltdown.  European Central Bankers haven’t yet committed to forgiving Greek’s debts and financing the nation’s currently untenable social welfare programs.  IMF likes to blame the Japanese earthquake and tsunami or global warming or cooling on the world’s sluggish economic growth   IMF officials heavily value the euro when it’s responsible for breaking much of Euorope.

            Preaching austerity in the U.S. Europe, the IMF has cut it own throat, with the U.S and EU unlikely to kick in more cash.  Instead of pushing major cutbacks, the IMF should urge European Central Bank to reconsider the viability of the euro that now appears to be failing in several Eurozone countries.  Forcing urging t he U.S. and European countries to slash its budget deficits doesn’t consider the damaging effect on U.S and European consumers.  IMF officials apparently don’t see the relationship with slashing budgets and high unemployment, something most certainly to hammer U.S. and Eurozone consumers.  Austerity programs, while attempting to slash budget deficits, can inadvertently cause more unemployment, lower tax revenues and dramatically expand budget deficits.  Despite IMF recommendations, U.S. and Eurozone officials don’t want to see more unemployment.

            IMF officials should get their own house in order before urging the U.S. and Eurozone to slash current budget deficits.  Since President Barack Obama took office, the fraction of the budget deficit to GDP has dropped from about 10% to 7%.  While European Central Bankers would like Eurozone countries to have ratios of only 3% of GDP, slashing budget deficits prematurely could cause a spike in unemployment, reduce tax revenues and increase unemployment.  Keeping U.S. and Eurozone consumers employed requires liberal fiscal and monetary policies, namely, high government spending and low interest rates.  Slashing government spending could easily backfire , causing more unemployment, lower tax receipts and bigger budget deficits.  Before the IMF recommends anything, they should get their own house in order, especially wild extravagance of its top officials.

John M. Curtis writes politically neutral commentary analyzing spin in national and global news.  He's editor of OnlineColumnist.com.and author of Dodging the Bullet and Operation Charisma.

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