Results 1 to 2 of 2

Thread: IMF Report: Economic Dangers of Govt. Debt

  1. #1
    Senior Member
    Joined
    Aug 2008
    Location
    Reality, usually
    Posts
    179
    Thanks
    19
    Thanked 44 Times in 31 Posts

    Default IMF Report: Economic Dangers of Govt. Debt

    A new issue of the IMF Fiscal Monitor presents evidence indicating that current public debt, if not reduced to levels before the financial crisis, will result in depressed economic growth for years.



    http://blog-pfm.imf.org/pfmblog/2010...ges-ahead.html

    “The key points made in the May 2010 Fiscal Monitor are the following:

    - In many countries, fiscal adjustment will require a sizable, and sometimes unprecedented, effort. The Monitor presents a broad outline of policies to achieve this adjustment. While the economic recovery is proceeding faster than expected, fiscal balances are not improving commensurately.

    - Excluding financial sector support, headline and cyclically adjusted fiscal balances are expected to worsen further in advanced economies this year, contributing to a sustained rise in public debt. By contrast, deficits remain markedly lower in emerging economies. Here too, however, progress in reducing deficits has been slower than expected.

    - As economic and financial conditions normalize, support to financial sectors is being unwound and asset recovery has begun.

    - Risk of spillovers of sovereign risk across advanced countries is significant, at a time when advanced countries will need to tap bond markets in unprecedented amounts.

    - New research on government debt and growth indicates that high public debt may hamper growth, mainly through its impact on domestic investment and productivity.

    - Fiscal strategies should aim at gradually but steadily and significantly—reducing public debt ratios, rather than just stabilizing them at their elevated post crisis levels. Failing to do so would ultimately weaken the world’s long-term growth prospects. [emphasis added]"



    Some may find the potential solutions outlined by the report to be just as frightening as the debt itself. They include instituting a VAT, taxing carbon emissions, and raising property taxes. To be fair, however, the report also suggests cracking down on tax evasion, freezing discretionary per capita spending, and moderating expenditures on public pensions.

    The report is long at 91 pages. But I strongly suggest reading the “Foreword” and “Main Themes” sections, at the very least, if you care about this issue and its potential consequences. The report is especially interesting in light of Europe's evolving debt crisis.

  2. #2
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: IMF Report: Economic Dangers of Govt. Debt

    I'm extremely encouraged to see that others are paying attention to 'global economic issues'. Indeed this IMF report 'officially' corroborates a conclusion that other sources have been attempting to make for quite a while now. Obviously that conclusion is that many govt's around the world are spending too much money, and are doing so via the assumption of ever increasing levels of gov't debt as opposed to increased tax revenues.

    Unfortunately, in the opinion of many ( including myself ), the IMF's stated approach to reduce gov't borrowing levels is not for gov'ts to reduce their spending levels in significant ways, but instead for gov'ts to increase their tax revenues by instituting new taxes and raising rates for existing taxes. The latter option would reduce gov't debt levels, but would arguably be no better in terms of growth stimulus.

    (snip)Forewarned is Forearmed

    by Lee Adler

    What happens when people no longer believe the con, when they decide that they are no longer willing to play the game? We’re in the first stage of finding out. Suddenly the mainstream has awoken to the issue that we have been so worried about for the past two years, government’s assumption of massive amounts of private risk backed by insufficient or non existent collateral. Suddenly people are realizing that the problem is not, and was never, liquidity. The problem is solvency. The recognition is growing that the system is insolvent, and you cannot borrow your way out of insolvency. Government guarantees cannot fix the problem, they can only burden the public with obligations it did not ask for and cannot shoulder."(snip)

    from

Similar Threads

  1. Replies: 0
    Last Post: 05-26-2011, 02:48 PM
  2. Replies: 0
    Last Post: 08-19-2010, 01:53 AM
  3. Replies: 3
    Last Post: 01-31-2009, 04:17 AM
  4. IMF
    By Deogol in forum Dollar Den
    Replies: 6
    Last Post: 07-01-2008, 03:56 PM
  5. Replies: 6
    Last Post: 10-10-2007, 10:36 PM

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •