Worst of financial crisis yet to come: IMF chief economist
ZURICH, Switzerland (AFP) — The IMF's chief economist has warned that the global financial crisis is set to worsen and that the situation will not improve until 2010, a report said Saturday.
Olivier Blanchard also warned that the institution does not have the funds to solve every economic problem.
"The worst is yet to come," Blanchard said in an interview with the Finanz und Wirtschaft newspaper, adding that "a lot of time is needed before the situation becomes normal."
The IMF has a pretty good record for "predicting" this kind of thing. Back in March, I wrote a diary about how they were warning the following:
IMF: "Think the unthinkable"
Back then it seemed shocking, over-the-top, impossible. Now? Well, exactly what they predicted did indeed happen:
IMF tells states to plan for the worst
Governments might have to intervene with taxpayers’ money to shore up the financial system and prevent a "downward credit spiral" from taking hold, the International Monetary Fund said on Wednesday.
And here's the phrase that freaked me out back in March:
He urged policymakers to "think the unthinkable" and prepare now for what they would do if the worst case scenarios materialised and "low probability but high impact events" threatened to jeopardise global financial stability.
Yup, that's exactly what happened.
So I'm listening to them now. But ... what to do? I'm not sure, really -- maybe just stay out of the stock market ...?
Here's more of what Blanchard is saying now:
Blanchard said the IMF was not able to solve all financial issues, in particular problems of liquidity.
Withdrawals of capital leading to problems of liquidity "can be so significant that the IMF alone cannot counter them," he said, adding that massive withdrawals of investments from emerging countries could represent "hundreds of billions of dollars.
"We do not have this money. We never had it," he said.
Good times. Good times ...
Thanks, Republicans! What a great way to end your eight year reign of power!