The G-7 meeting on 10 October and IMF meeting on 11 October might be seen by historians as one of the major international gatherings of the decade — or more. The question is important with good results – or important as a missed opportunity? Go here for a quick look at the results of the G-7 meeting.
While waiting for experts to analyze the implications, let’s examine the output of the International Monetary and Financial Committee (IMFC) of the Board of Governors of the International Monetary Fund.
(1) The official Communiqué – They don’t deserve to have expenses reimbursed for so few results. Let’s hope there was more action behind the scenes.
(2) Transcript of IMFC Press Briefing – Not worth reading; thin gruel.
(3) Statement by Dominique Strauss-Kahn Managing Director, IMF — Excellent summary of the situation, plus the IMF’s mild forecast.
(4) The IMF World Economic Outlook (WEO): Financial Stress, Downturns, and Recoveries, October 2008 — Excellent data and analysis.
Excerpts from (1) and (2)
(1) The official Communiqué – They don’t deserve to have expenses reimbursed for so few results.
- The IMFC strongly endorsed the G-7’s commitments.
- The Committee calls for further intensive Fund engagement across the membership to discuss and develop robust policy responses to the crisis.
- The Committee calls on the Fund … to take the lead, in line with its mandate, in drawing the necessary policy lessons from the current crisis and recommending effective actions to restore confidence and stability.
(2) Statement by Dominique Strauss-Kahn Managing Director, IMF – Excellent summary of the situation, plus the IMF’s mild forecast. Let’s hope the IMF’s forecast proves accurate (I doubt it).
The world economy is now entering a major slowdown as a result of the most severe shock to mature financial markets since the 1930s, adding to pressure on global economies from high prices for oil and other commodities. Advanced economies face several quarters of near-zero growth, before recovering very gradually later next year.
- On an annual basis, global growth is expected to moderate from 5.0% in 2007 to 3.9% in 2008 and 3.0% in 2009.
- For advanced economies, projected growth would slow to about 0.5% in 2009.
- Emerging economies have thus far been less affected by the shocks, with many commodities exporters benefiting from improved terms of trade. But they will also feel the effects of tightening credit and reduced demand. Accordingly, their real GDP growth is expected to slow from around 8% in 2007 to 6.1% in 2009.
The combination of rising slack and stabilizing commodity prices is expected to bring inflation in advanced economies back below 2% in 2009. In emerging and developing economies, which suffered more from the rise in food prices, inflation is projected to recede to about 6¼% in late 2009.
The financial crisis that originated in the collapse of U.S. subprime mortgage market in August 2007 has deepened further and is now affecting many parts of the global financial system, including emerging markets. Intensifying solvency concerns about a number of the largest U.S.-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown since mid-September.
The United States and European authorities have taken extraordinary measures, including massive liquidity provision, intervention to restore weak institutions, extension of guarantees. Legislation has been enacted in the United States to use public funds to buy troubled assets from U.S.-based banks. And there have been coordinated policy rate cuts from a number of advancedeconomy central banks. But these measures have not yet achieved the goal of stabilizing markets and bolstering confidence. Thus, additional moves will likely be needed in the coming months.
If you are new to this site, please glance at the archives below. You may find answers to your questions in these, such as the causes of the present crisis. I have been writing about these events for several years; since November 2007 on this site. As you will see explained in these posts, the magnitude of the events now happening is beyond what most Americans have — or can — imagine.
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For more information from the FM site
To read other articles about these things, see the FM reference page on the right side menu bar. Of esp interest these days:
- about the Financial crisis – what’s happening? how will this end?.
- about The End of the Post-WWII Geopolitical Regime.
- A solution to our financial crisis
Originally published at Fabius Maximus on October 12, 2008 and reproduced here with the author’s permission.