View Full Version : IMF Counter-report Says U.S. Recovery A Mirage

Oct 19th, 2003, 06:02 PM
Responding to the publication of the IMF’s “World Economic Outlook”, Ann Pettifor, editor of nef’s “Real World Economic Outlook” said

“We do not share the IMF’s optimistic view that ‘the balance of risks’ for the global economy ‘has improved significantly’”. The US stock-market bounce-back and the upsurge in consumer confidence are like mirages in the desert, based as they are on an extremely fragile credit bubble.

“We find the outlook for the global economy deeply alarming. In our first counter-report on the global economy, we predict that US interest rates must, and will rise soon. America’s creditors are already losing patience with the Bush Administration’s profligacy. Scepticism about the creditworthiness of the US government, corporates and consumers is pushing up long-term interest rates.

“The US economy, perched precariously on a mountain of debt, is at a dangerous tipping point. We believe higher interest rates will push it over the edge. The US could be the next to face an emerging-market style financial crisis. Given its role as the engine of the global economy, this will have grave implications for the rest of the world.”

Real World Economic Outlook (RWEO), published by Palgrave Macmillan, notes that three decades of financial de-regulation have led to one of the biggest credit bubbles in history – hyper-inflating asset values and generating massive debts. It is this credit bubble, RWEO demonstrates, that has propped up the US economy and US consumption.

Romilly Greenhill, author of Chapter Two of Real World Economic Outlook, said,

“The US is able to indulge in excessive government and consumer spending to an extent that emerging markets can only dream of. This is because the rest of the world, particularly the thrifty savers of Asia, is willing to make low interest loans to the US, in the form of dollar reserve holdings, mostly US Treasury Bills. China and other Asian countries are selflessly handing over their savings to prop up an international system not of their choice, but one they are effectively forced to maintain. Yet, incredibly, these countries are now being attacked by the US, architect and beneficiary of the system. There can be no better example of a country biting the hand that feeds