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IMF Issues Dire Warning – ‘Great Depression’ Ahead?

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– “Large challenges loom for the global economy to prevent a second Great Depression” warn IMF

– Massive government debts and eroded fiscal buffers since 2008 suggest global dominos await a single market crash

– 2008 crisis measures cast long, dark “terrifying” shadow

by William Pesek via Asia Times

Is another “Great Depression” on the horizon?

It would be easier to dismiss these words from Nouriel Roubini, Marc Faber or other doom-and-gloom prognosticators. Coming from Christine Lagarde’s team, though, they take on a new dimension of scary.

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The International Monetary Fund head isn’t known for breathlessness on the world stage. And yet the IMF sounded downright alarmist in its latest Global Financial Stability report, stating that “large challenges loom for the global economy to prevent a second Great Depression.”

Even some market bears were taken aback. “Why,” asks Michael Snyder of The Economic Collapse Blog would the IMF use this phrase “in a report that they know the entire world will read?”

Perhaps because, unfortunately, the findings of other referees of global risks – including the Bank for International Settlements – hint at similar dislocations.

Ten years after the Lehman Brothers crisis, these worrisome warnings that will be explored in depth at this week’s annual IMF meeting in Bali. The tranquil setting, though, will offer few respites from cracks appearing in markets everywhere – from Italy to China to Southeast Asia, where currencies are cratering like it’s 1998 again.

Source: Wikipedia

Potential flashpoints and a long line of dominos

Italy is the current flashpoint – and the latest target of “domino effect” chatter in frothy world markets. China’s shadow-banking bubble, and the extreme opacity and regulations that enable it, also came in for criticism. And, of course, the 800-pound beast in any room where global investors gather these days: Donald Trump’s assault on world trade.

But the real worry is the health of foundations underpinning these and other risks.

As the BIS warned on Sept. 23, the global economy faces a potential “relapse” of the “Lehman shock” of 2008. “Things look rather fragile,” says BIS chief economist Claudio Borio. Equally worrying, he adds: “There’s little left in the medicine chest to nurse the patient back to health or care for him in case of a relapse.”

A similar connection of dangerous dots runs through the IMF’s latest report. The big problem, says Malhar Nabar, deputy chief of IMF research, is the one that investors tend to ignore or explain away: how much of the Lehman fallout is still with us.

“There are many countries, even today, that are operating below pre-crisis trends,” Nabar says. “And what’s interesting is not just countries that suffered banking crises in 2007-2008 but also other countries outside of that epicenter that were affected through trade links or through financial links.”

Increased inequality is one troubling side-effect. Yet Nabar highlights, “possible long-lasting effects of the crisis on potential growth” that might seem tangential to Wall Street’s crash – lower birth rates, lower fertility and even “some evidence of slower technology adoption.” All this, he says, “can affect productivity growth and potential growth going forward.”

There is no doubt that many of the official policy actions taken since 2008 “seemed to have helped limit the harm.” But the costs of those efforts are only beginning to get calculated.

2008 crisis measures cast long, dark shadow

Excessively loose monetary policies have exacerbated the widening inequality trends unfolding pre-Lehman crackup. At the same time, there’s been, in the words of the IMF, a “large accumulation of public debt and the erosion of fiscal buffers in many economies following the crisis point to the urgency of rebuilding defenses to prepare for the next downturn.”

Yet all the diplomatic speak in the world can’t sugarcoat the roughly $250 trillion crisis unfolding in slow motion. That’s the level to which the world’s debt burden ballooned since the Lehman crash. That’s 18 times China’s annual gross domestic product.

And with official rates from Washington to Tokyo still at ultra-low levels historically, there’s little ammunition to battle the next reckoning.

Italy’s debt woes are an obvious weak link. One reason: just as with US officials after 2008, Europe did more to treat the symptoms of its woes than address underlying causes.

So is China’s unbalanced economy, one being trolled by US President Donald Trump’s tariffs arms race. This year’s 6.4% drop in the yuan is raising eyebrows for good reason. For one thing, it coincides with a marked slowdown in exports, industrial production, fixed-asset investment and an 18% plunge in Shanghai stocks this year. For another, it raised the specter of sizable defaults on dollar debt, which would reverberate through the global economy.

And therein lies Asia’s problem.

Asia’s exposure

In general, the region has journeyed a long way since the darkest days of 1997 and 1998. Financial systems are stronger and governments are more transparent. Currencies are more flexible. Foreign-exchange reserves have been rebuilt. That leaves advanced economies from South Korea to Singapore reasonably well equipped to withstand fresh turmoil.

But there are cracks in the region’s developing markets, as the ferocity of currency plunges in India, Indonesia and the Philippines show. Investors may argue they’ve learned from past misstates, but still fall prey to herd mentalities.

It’s an urgent wakeup call for India’s Narendra Modi, Indonesia’s Joko Widodo and Rodrigo Duterte of the Philippines to narrow current-account and budget deficits. Leaders also need to devise macroprudential firewalls against global contagion.

The problem for Asia: contagion could come as much from the West and its own backyard.

Trump’s fiscal incompetence – including a $1.5 trillion tax cut America didn’t need – could roil global rates and the dollar. A recent spike in 10-year yields to 3.2%, the highest in seven years, could be a bad omen. Trump, too, is publicly dueling with his hand-picked Federal Reserve chairman. And given Trump’s legal woes, the odds of new tariffs or even military action to distract voters can’t be ruled out.

Any new assault on China could devastate Japan’s reflation effort. True, epic Bank of Japan easing and a weaker yen boosted exports. It pushed Nikkei 225 index stocks to 27-year highs. Yet Asia’s No. 2 economy is in harm’s way if the US-China brawl trumps the region’s key growth engine.

Even before most policymakers and financiers arrive in Bali this week, the IMF is signaling that global growth has plateaued. It downgraded output to 3.7% from 3.9%.

That not the end of the world, per se. But with trade battles intensifying and dormant old devils re-emerging, all bets could soon be off.

That is a lot more than depressing: it’s terrifying.

Thousands Of Affordable Gifts For The Outdoors-man On Your Christmas List 

IMF Global Financial Stability Report (2018) can be accessed here

News and Commentary

Gold prices hold steady as investors wait for Fed minutes (Reuters.com)

Asian markets jump following Wall Street’s big gains (MarketWatch.com)

U.S. industrial output rises, but momentum slowing (Reuters.com)

Hungary Boosts Gold Reserves 10-Fold, Citing Safety Concerns (Bloomberg.com)

Hungary raises gold reserves tenfold on safety concerns (RT.com)


Source: Bloomberg

Art mania and tech stocks – The financial canary’s desperate last gasp (MoneyWeek.com)

China May Have $5.8 Trillion in Hidden Debt With ‘Titanic’ Risks (Bloomberg.com)

S&P Reveals $5.8 Trillion In “Hidden” Chinese Debt With “Titanic Credit Risks” (ZeroHedge.com)

Your shout: how gold could bring stability to volatile crypto markets (WhatInvestment.co.uk)

October Doesn’t Disappoint: Volatility Is Back After a Tranquil Third Quarter (GoldSeek.com)

Gold Prices (LBMA AM)

16 Oct: USD 1,228.85, GBP 931.35 & EUR 1,061.73 per ounce
15 Oct: USD 1,233.00, GBP 937.70 & EUR 1,064.45 per ounce
12 Oct: USD 1,218.75, GBP 922.11 & EUR 1,052.15 per ounce
11 Oct: USD 1,201.10, GBP 910.31 & EUR 1,040.27 per ounce
10 Oct: USD 1,186.40, GBP 902.02 & EUR 1,033.00 per ounce
09 Oct: USD 1,187.40, GBP 910.26 & EUR 1,036.01 per ounce

Silver Prices (LBMA)

16 Oct: USD 14.76, GBP 11.16 & EUR 12.74 per ounce
15 Oct: USD 14.74, GBP 11.19 & EUR 12.71 per ounce
12 Oct: USD 14.60, GBP 11.04 & EUR 12.60 per ounce
11 Oct: USD 14.40, GBP 10.90 & EUR 12.45 per ounce
10 Oct: USD 14.38, GBP 10.92 & EUR 12.50 per ounce
09 Oct: USD 14.33, GBP 10.98 & EUR 12.51 per ounce

https://news.goldcore.com/

http://news.goldseek.com/GoldSeek/1539783765.php

Read more great articles here: GoldSeek

 

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    Total 4 comments
    • wheeties

      you took the bait–trump has told his treasury guy he is going to blame him–its all part of the plan–china has 5.8 hidden debt? try about 40 trillion and the world has about 270/280 trillion on “paper” of debt and maybe 800 trillion of future obligations–usa has about 200 trillion in future payments that will never be paid,good bye pensions–and trumps tax cut is bringing home about 5 trillion of cash flow so the only incompetence is your writing(bs)–rising interests rates are going to destroy the bond market that idiots, fools of the past created by super low rates-5 percent has been the norm for hundreds of years–the coming bond wipe out will be the largest loss in world history–the world debt is the problem–the morons who created it are mostly going to be gone–who knows if we go full on “mad max”..its possible or ww3–got gold(or silver,my favorite)?

      • beLIEve

        wheeties….quote….

        “….trump has told his treasury guy he is going to blame him…..”

        I will KEEP MY FINGER$ CRO$$ED for that one because….the TREASURY is “apparently” a PRIVATE BU$IMESS :evil:

        AND when the…….PRIVATE BANK$TER$……..are made to OWN their PERFIDIOU$ THEFT…. that will be the day to…

        Trevor Moore – Time For Guillotines

        https://www.youtube.com/watch?v=exnaY0l4XsM

        * * *

        The Arrests Begin — Treasury Dept Official Arrested For Leaking to Press

        Wednesday, October 17, 2018

        https://beforeitsnews.com/v3/survival/2018/2710446.html

    • Slimey

      Free money = Free debt.
      Phony money = Phony debt.
      Printed money = Printed debt.

      But they are gonna make a WAR out of it. :lol:

    • beLIEve

      ROTH$CHILD IS THE RECEIVER OF THE UNITED STATES BANKRUPTCY:
      The Rothschild International Bankers, The United Nations, The World Bank…….& The ROTH$CHILD….INTERNATIONAL MONETARY FUND. :idea:

      It is an established fact that the :idea: UNITED STATES FEDERAL GOVERNMENT HAS BEEN DISSOLVED by THE EMERGENCY BANKING ACT, March 9, 1933, :idea:
      48 Stat. 1, PUBLIC LAW 89 – 719; DECLARED BY PRESIDENT ROOSEVELT, BEING BANKRUPT and INSOLVENT. :idea:

      H.J.R. 192, 73rd Congress m session June 5, 1933 – Joint Resolution To Suspend The Gold Standard and ABROGATE The GOLD CLAUSE DISSOLVED The SOVEREIGN AUTHORITY OF the UNITED STATES…AND…. :idea: The OFFICIAL CAPACITIES OF ALL UNITED STATES GOVERNMENTAL OFFICES…….OFFICERS…and….DEPARTMENTS….AND I$ …… further EVIDENCE that….The UNITED STATES FEDERAL GOVERNMENT EXISTS TODAY……..IN NAME ONLY. :idea:

      beLIEve comment…..All “government” OFFICES & OFFICERS….dissolved in 1933….YET the RAT$child PRIVATE IRS…..has been
      EXTORTING TAX……in the name of “government” for….85 YEARS :roll:

      The RECEIVERS of the UNITED STATES BANKRUPTCY are the INTERNATIONAL BANKERS…..via the UNITED NATIONS…..the WORLD BANK…..and the…….INTERNATIONAL MONETARY FUND. :idea: :lol:

      All UNITED STATES OFFICES, OFFICIALS, and Departments ARE now OPERATING within a de facto status IN NAME ONLY under
      EMERGENCY WAR POWERS……..

      With the CONSTITUTIONAL Republican form of GOVERNMENT now DISSOLVED……

      the RECEIVERS OF the BANKRUPTCY :roll: HAVE ADOPTED a NEW FORM of GOVERNMENT for the United $tates. :idea:

      This new form of government is KNOWN A$ DEMOCRACY…. being AN ESTABLISHED $OCIALI$T/COMMUNIST ORDER under a NEW

      GOVERNOR for America.

      :idea: * * * :evil: * * * :?: :?: :?: * * * :evil: * * * :idea: This

      THIS……”ACT”…..WAS instituted and E$TABLI$HED…..(beLIEve comment….UNDER WHO$E so-called “AUTHORITY” :?: )

      BY transferring and/or PLACING the OFFICE OF the SECRETARY OF TREASURY…………..

      TO that of…..THE GOVERNOR OF THE INTERNATIONAL MONETARY FUND. :?: :idea: :?: :?:
      Public Law 94-564, page 8, Section H.R. 13955 READS……IN PART: :idea:

      “The U.S. SECRETARY OF TREASURY RECEIVES NO COMPENSATION FOR REPRESENTING the UNITED STATES.”

      :idea: * * * :evil: * * * :?: :?: :?: * * * :evil: * * * :idea:

      A FEDERAL RESERVE NOTE is a DEBT OBLIGATION of the FEDERAL United States GOVERNMENT…..NOT…..”money” :?:

      The FEDERAL United States GOVERNMENT…AND…the U.S. CONGRESS were not and HAVE NEVER BEEN AUTHORIZED BY the CONSTITUTION FOR the UNITED STATES 0f AMERICA TO ISSUE CURRENCY OF ANY KIND, BUT ONLY LAWFUL MONEY……
      GOLD & SILVER COIN.

      IT IS ESSENTIAL that WE COMPREHEND THE DISTINCTION BETWEEN REAL MONEY…and….PAPER MONEY SUBSTITUTE.

      REDEEMABLE CURRENCY MUST PROMISE TO PAY…A DOLLAR EQUIVALENT IN…..GOLD or SILVER MONEY.
      FEDERAL RESERVE NOTES (FRNs)……MAKE NO SUCH PROMISES….and….ARE NOT….”MONEY”. :idea:

      http://www.jewworldorder.org/rothschild-is-the-receiver-of-the-united-states-bankruptcy-the-rothschild-international-bankers-the-united-nations-the-world-bank-the-NOWN othschild-imf/

      The BANK$TER$ have been $CAMMING…..EVERYONE. :roll:

      beLIEve comment……..

      The so-called…U.S. Secretary OF TREASURY……despite being a PRIVATE-SECTOR BUSINESS MAN……….AND……GOVERNOR OF the

      so-called……..PRIVATE :?: INTERNATIONAL MONETARY FUND………RECEIVES ALL U.S. TAX PAYMENTS……..EXTORTED BY the

      PRIVATE ROTHSCHILD :?: IR$.

      U.S “tax” DEMANDS are “apparently” requested under the name of…..The United States Treasury…..a PRIVATE BUSINESS :!:

      The “taxes” are then paid into a…….TREASURY GENERAL ACCOUNT….in a…..PRIVATE FEDERAL RESERVE BANK.

      *

      “The U.S. SECRETARY OF TREASURY RECEIVES NO COMPENSATION FOR REPRESENTING the UNITED STATES.”

      The U.S. Secretary of Treasury …..IN ADDITION to RECEIVING TAX…..EXTORTED by the PRIVATE IRS “Federal Reserve”……..

      WHAT….”REPRESENTATION”….of America, does he PERFORM :?:

      *
      Reference a comment in the article above…..

      I$……”a new GOVERNOR for AMERICA”……..the so-called…..GOVERNOR of the IMF….the so-called……PRIVATE businessman

      the SECRETARY of the U.S. TREASURY :?:

      *

      CONFLICT of INTEREST :lol: FRAUD & DECEIT :?: :wink: :idea:

      ROTH$CHILDS…PRIVATE IRS…….IS EXTORTING TAX…….with NO “governMENTAL” MANDATE :?:

      The “tax” is DEMANDED in the name of…..the SECRETARY OF the TREASURY…….a PRIVATE BUSINESSMAN.

      The PRIVATE BUSINESSMAN is also……GOVERNOR OF…..ROTH$CHILDS PRIVATE…….INTERNATIONAL MONETARY FUND :?:

      The PRIVATE BUSINESSMAN…may :?: ……..also be…a NEW “GOVERNOR” for America :?:

      ROTHSCHILDS PRIVATE IMF….IS….RECEIVER of the UNITED STATES BANKRUPTCY………whilst……the GOVERNOR of the

      IMF….a PRIVATE BUSINESS MAN is…..DEMANDING & RECEIVING…….tax remittances from the PEOPLES of USA…..and……

      paying them into a PRIVATE FEDERAL RESERVE ROTHSCHILD :?: BANK.

      INCE$TUOU$ …..or not :?:

      * * *

      U.S. Treasury is a PRIVATE BU$INE$$………apparently :idea:

      The Arrests Begin — Treasury Dept Official Arrested For Leaking to Press

      Wednesday, October 17, 2018

      https://beforeitsnews.com/v3/survival/2018/2710446.html

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