IMF official says the world’s advanced nations are already in a depression

IMF Managing Director Dominique Strauss-Kahn’s spoke to reporters after a speech on February 7 in Kuala Lumpur, Malaysia.  He said something ominous, esp coming from a senior IMF official.  File it under “slow but eventual recognition of the obvious.”Also Strauss-Kahn’s speech gave no hints that he considered the situation so dire.  Nor did his accompanying press release.  But the press conference was a barn-burner according to the following reports.

Note that he did not explain what he meant by a “depression” (there is no standard definition).  A “depression” is far different than a “Great Depression”.

(1)  Dow Jones News says (dateline Kuala Lumpur):

“We are already in depression … at least for advanced economies,” he told reporters at a briefing. … Strauss-Kahn said there is still downside risk to global economic growth forecasts and the “worst cannot be ruled out.”

(2)  Bloomberg article says (no dateline, by reporters based in Singapore and Kuala Lumpur):

Advanced economies are already in a “depression” and the financial crisis may deepen unless the banking system is fixed, IMF Managing Director Dominique Strauss-Kahn said. … “The worst cannot be ruled out. … There’s a lot of downside risk.”

(3)  The Daily Telegraph (UK) has an article by its Economics Editor, Edmund Conway, that says (with no hint of the source):

Mr Strauss-Kahn also indicated that the world’s advanced economies were now tipping from recession into full-blown depression, cementing fears about the scale of the economic slump in rich nations. … He warned that the economic crisis would intensify unless the financial system was repaired, saying that although he hoped the world could avoid a repeat of the Great Depression, the “worst cannot be ruled out. There’s a lot of downside risk.”

(4)  The Wall Street Journal reports something similar (but no dateline):

{Straus-Kahn} said the world’s advanced economies — the U.S., Western Europe and Japan — are “already in depression,” and that the IMF could slash its global growth forecasts further. The “worst cannot be ruled out,” he said.

Don’t panic, not yet at least.  Wait for government policy mistakes to convert the crisis into a disaster.  There will be many opportunities:  continued slow incremental action, inappropriate actions, and craziness (like protectionism or “beggar thy neighbor” policies).

Afterword

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To read other articles about these things, see the FM reference page on the right side menu bar.  Of esp interest these days:

Here is the most recent Situation report about the global economy, as the flames break thru the firewalls, 26 January 2009.

Other posts about the crisis on the FM site:

  1. Can the European Monetary Union survive the next recession?, 11 July 2008
  2. The coming collapse in business spending – made visible today, 15 October 2008
  3. More reasons why the government will be taking over allocation of America’s capital, 27 October 2008
  4. The US economy must go to Defcon 1, 13 November 2008
  5. A certain casualty of the recession: the US Government’s solvency, 25 November 2008
  6. The greatness of John Maynard Keynes, our only guide in this crisis, 4 December 2008
  7. Three people look at America’s economy, 5 December 2008
  8. About the state of economic science, and advice from a famous economist, 8 December 2008
  9. Future generations will never understand our shopping madness, 13 December 2008
  10. Destroying houses in order to boost home prices
  11. “A depression is for capitalism like a good, cold douche.”, 17 December 2008
  12. President Bush: “I’ve abandoned free market principles to save the free market system”, 20 December 2008
  13. Words of wisdom about the global recession, from the greatest economist of our era, 29 December 2008
  14. An Epistle to the good savers of America, 6 January 2009
  15. A warning from Paul Krugman of what should be blindingly obvious (but is not obvious to many experts), 7 January 2009
  16. “We are likely enduring a depression today”, 27 January 2009

Originally published at Fabius Maximus and reproduced here with the author’s permission.