IMF–WORLD GDP ESTIMATE FOR 2012–ADVICE FOR US, AS WELL

As I write this Post (around 3:45 PM), the Dow Jones Industrial Average is down by just 54 points, which is not too bad since the DJIA rose by 168 points last Friday. Also, Retail Sales fell for the third month in a row, the EuroZone Debt Crisis is still Unsolved, and the LIBOR Manipulation Scandal has continued to unfold. In London, at least one more Barclay’s Executive is being questioned by Parliament and this Scandal should be expected to spread to some other very large banks elsewhere in Western Europe and the U.S..

Also, today the IMF (International Monetary Fund) maintained the 2012 Projected GDP (Gross Domestic Production) Growth Rate, of 3.5% for 2012; but, it lowered it Projection for 2013 to 3.9%, down from the 4.1% estimated just last April. (GDP is the Total of All Goods and Services Produced by an Economy.) The IMF had mixed comments for the U.S.

To an extent, much of the reduction in GDP Projections–Worldwide–are a spill-over from the EURO Debt Crisis. The IMF noted that solutions are not working. (Remember that that situation started in February of 2010.) Then, in an article by Annie Lowrey, in the NY Times, “I.M.F. Clips Global Growth Forecast for 2013 to 3.9%”, http://www.nytimes.com/2012/07/17/business/economy/imf-clips-global-growth-forecast-for-2013-to-3-9.html?hp,

“The Fund had stern words for American Policymakers: Avoid the Fiscal Cliff and lift the Debt Ceiling promptly”, citing the uncertainty caused by the Political Maneuvering last year, “for the sake of the United States Economy as well as the World’s”.

“The I.M.F. estimated that a failure to extend some of the Bush Tax Cuts and to reverse some of the automatic, across-the-board government spending cuts looming at the end of the year would cause the economy to stall on the brink of recession, with significant spillovers. ” The IMF further cautioned that the U.S. must address its Debt Problems, in the Medium-Term, or face higher borrowing costs in the future.
Although the report and the column do not specifically state as such, there appears to be an implication that Austerity is not the way for the U.S. Economy to go forward. I infer that from the following points in the IMF Report: the Policies (generally Austerity) have not been working in Europe; the Recommendation to raise the Debt Ceiling and the Suggestion that the Budget Deficit be addressed in the Medium-Term. It appears that the Fund is suggesting not to Shrink the Economy at this time.

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