Skip to content

IMF WARNING: Rich countries deluded that austerity will help balance world debt

By Catholic Online (NEWS CONSORTIUM)
1/5/2014 (3 years ago)
Catholic Online (www.catholic.org)

Fund warns that the west must weather higher inflation and look to defaults in order to remain afloat

The International Monetary Fund has issued a sobering report for the western world. In short, the analysis maintains that the world's wealthiest nations are deluded in thinking that austerity cuts will chip away at debt. The report is warning of massive write-offs and defaults in order for the world's economy to remain afloat.

Some of these methods are already in use, but not yet on the scale seen in the late 1940s and early 1950s as countries resorted to every trick to tackle their war debts.

Some of these methods are already in use, but not yet on the scale seen in the late 1940s and early 1950s as countries resorted to every trick to tackle their war debts.

Highlights

By Catholic Online (NEWS CONSORTIUM)
Catholic Online (www.catholic.org)
1/5/2014 (3 years ago)

Published in Business & Economics

Keywords: IMF< First World, debt, haircuts, war debt


LOS ANGELES, CA (Catholic Online) - According to the reports, the majority of the Western world will require defaults, a savings tax and higher inflation. Debt levels have reached their highest in more than 200 years.

Debt burdens in the First World have become extreme by any measuring stick. A wave of haircuts, either negotiated Depression Era-style write-offs or the standard mix of measures used by the IMF is required, the report argues.

"The size of the problem suggests that restructurings will be needed, for example, in the periphery of Europe, far beyond anything discussed in public to this point," Harvard professors Carmen Reinhart and Kenneth Rogoff say.

Overall, developed nations are working under the delusion that they are different from poorer nations and can therefore chip away at their debts with a blend of austerity cuts, growth, and tinkering. "Forbearance" is just another form of debt.

Advanced economies, many assume, "do not resort to such gimmicks" such as debt restructuring and repression, which would "give up hard-earned credibility" and throw the economy into a "vicious circle."

This line of thought, researchers say, rely on the "collective amnesia" of European and U.S. history. They are structured upon "overly optimistic" assumptions that risk doing far more damage to credibility in the end. This only drags on the crisis, blocking a lasting solution. "This denial has led to policies that in some cases risk exacerbating the final costs," it said.

Higher burdens are placed upon northern taxpayers with debt pooling in the eurozone. This could drag the EMU core states into a recession and aggravate their own debt and aging crises. Germany and the creditor core would do better to "bite the bullet" on big write-offs immediately rather than buying time with creeping debt mutualization, the paper argues.

Western debt burden is now so big that rich states will need same tonic of debt haircuts, higher inflation and financial repression, defined as an "opaque tax on savers" - as used in countless IMF rescues for emerging markets.

"The magnitude of the overall debt problem facing advanced economies today is difficult to overstate. The current central government debt in advanced economies is approaching a two-century high-water mark," they said.

Financial repression can take many forms, including capital controls, interest rate caps or the force-feeding of government debt to captive pension funds and insurance companies.

Some of these methods are already in use, but not yet on the scale seen in the late 1940s and early 1950s as countries resorted to every trick to tackle their war debts.

---


'Help give every student and teacher Free resources for a world-class moral Catholic education'


Copyright 2017 - Distributed by THE CALIFORNIA NETWORK

Pope Francis Prayer Intentions for OCTOBER 2017
Workers and the Unemployed.
That all workers may receive respect and protection of their rights, and that the unemployed may receive the opportunity to contribute to the common good.


Comments


More Business & Economics

Is now the time to sell? Experts say Wall Street is on a bubble, here's why Watch

Image of Stocks appear to be on a bubble according to many experts.

Is now the time to sell on Wall Street? Stocks are on a bubble, according to multiple analysis and expert opinions. Fundamental market ... continue reading


Forget Winter, Recession is Coming Watch

Image of Major indicators reveal recession is coming.

The economy is about to go into recession according to several Wall Street firms. They are warning investors to prepare for an end to the ... continue reading


Get ready for self checkout everywhere: 3.5 million retail cashiers are about to be replaced by automation Watch

Image of Retail cashiers often loathe self checkout stands. However, both cashiers and self checkout stands are facing replacement as new technologies threaten to eliminate the checkout process.

Automation is coming soon to a store near you as retailers look for ways to cut costs and improve profits. The best way to accomplish this ... continue reading


'Budgets are moral documents'

Image of

The highly relevant quote, "Budgets are moral documents," has been arguably attributed to Rev. Martin Luther King, Jr. But if he didn't ... continue reading


Central bankers warn of looming global recession Watch

Image of A recession could be lurking around the corner and central banks have been asked to take note, especially in Asia.

A group of central bankers has warned that a great recession, possibly larger than the 2007-2008 recession is looming on a global scale. ... continue reading


Never Miss any Updates!

Stay up to date with the latest news, information, and special offers.

Information
Learn about Catholic world

Catholic Online
Inform - Inspire - Ignite

Catholic Online Saints
Your saints explained

Catholic Online Prayers
Prayers for every need

Catholic Online Bible
Complete bible online

Catholic Online News
Your news Catholic eye

Daily Reading
Today's bible reading

Lent / Easter
Death & resurrection of Jesus

Advent / Christmas
Birth of Jesus

Rest of Catholic Online
All Catholic world we offer

Services
Products and services we offer

Catholic Online Shopping
Catholic medals, gifts & books

The California Network
Inspiring streaming service

Advertise on Catholic Online
Your ads on catholic.org

Catholic Online Email
Email with Catholic feel

Catholic Online Singles
Safe, secure Catholic dating

The California Studios
World-class post production service

Education
Learn the Catholic way

Catholic Online School
Free Catholic education for all

Student Classes
K-12 & Adult Education Classes

Catholic Online MasterClass
Learn from experts

School Teachers
Teacher lesson plans & resources

Catholic Media Missionaries
The New Evangelization

Support Free Education
Tax deductible support Free education

Socials
Connect with us online

Catholic Online on Facebook
Catholic social network

Catholic Online on Twitter
Catholic Tweets

Catholic Online on YouTube
Enjoy our videos

Catholic Online on Instagram
Shared Catholic moments

Catholic Online on Pinterest
Catholic ideas style inspiration

Catholic Online Logo

Copyright 2017 Catholic Online. All materials contained on this site, whether written, audible or visual are the exclusive property of Catholic Online and are protected under U.S. and International copyright laws, © Copyright 2017 Catholic Online. Any unauthorized use, without prior written consent of Catholic Online is strictly forbidden and prohibited.