Guardian UK: We are in the worst financial crisis since Depression, says IMF

[marmar]

We are in the worst financial crisis since Depression, says IMF
Governments will have to pay for more bailouts, says Fund as it slashes growth forecasts and warns of global recession

Heather Stewart
The Guardian, Thursday April 10 2008


The US mortgage crisis has spiralled into "the largest financial shock since the Great Depression" and there is a one-in-four chance that it will cause a full-blown global recession, the International Monetary Fund warned yesterday.

As finance ministers and central bankers arrived in Washington to discuss ways of tackling the crisis, the IMF warned, in its twice-yearly World Economic Outlook, that governments might be forced to step in with more public bailouts of troubled banks and cash-strapped homeowners before the crisis was over.

"The financial market crisis that erupted in August 2007 has developed into the largest financial shock since the Great Depression, inflicting heavy damage on markets and institutions at the core of the financial system," it said.

After warning this week that the world's financial firms could end up shouldering $1trn (£500bn) of losses from the credit crunch, the IMF said it expected the US to experience a "mild recession", notching up GDP growth of 0.5% in 2008 and 0.6% in 2009. It expects house prices to fall by up to a further 10% before the downturn is over.

With the US sliding into such a recession, there is mounting pessimism about the ability of the rest of the world to escape unscathed. The IMF shaved its forecast for growth in the global economy by half a percentage point, to 3.7% for this year, and by 0.6% - to 3.8% - for 2009.

Although the Washington-based body expects most emerging economies to continue to grow strongly over the next two years, it admits that efforts to tackle the knock-on effects of the credit crunch could be hampered by fast-growing commodity prices. "Inflation has picked up around the globe, mainly reflecting sharp increases in food and energy prices," it said. ......(more)

The complete piece is at: http://www.guardian.co.uk/business/2008/apr/10/useconomy.subprimecrisis

[skooooo]

1. I dunno...

..I just don't think the downturn is going to be as catastrophic as at least some people are saying. I don't think we're going into a Depression. Then again, I guess it comes down to your personal experience.

[napoleon_in_rags]

2. Its all about the commodities, man.

The whole market works on top of energy, which in turn produces all the rest of the commodities. If there is a global rise in energy prices no amount of Juju will get us out until we've really changed the way we live. I don't expect a big crash, but I expect a very long long downturn based on global oil realities.

[The Traveler]

3. Recent reporting on rice supply

indicate big trouble brewing. Fuel costs are a factor there, as well as the economic pressure to turn grains into fuel. But the biggest single driving factor appears to be that growth in demand (population) have outstripped growth in supply. The growth in supply has been impacted by a number of factors, ranging from drought to fuel costs ... but the salient point is that population growth now exceeds growth in the production of staples necessary to sustain life.

It feels to me that this signals the approach to yet another tipping point. A global economy that cannot support the growth of global population faces some major hurdles even more fundamental than a mortgage melt down.

** Edited to fix a screw up. **

[napoleon_in_rags]

4. Wow.

Yes, that is fundamental. Its scary to think that we could be very close to there, that point we knew was coming for so long when the population is high enough that food riots start. And yes, I've also heard of numerous other issues ranging from clean potable water shortages to top-soil damage from farming converging to make this happen sooner rather than later.

There was an intelligence guy who an anti-war article in 2002, and a line always stuck out in my head:

No amount of Western-style "nation building" can hold together nations that never should have been nations in the first place and shouldn't be now. And no amount of American muscle can police a world destined for a century of conflict over resources, religions, identities, and whatever else people care to massacre each other about.

(emphasis mine.) These were scary words to hear from somebody who had access to quality information....a CENTURY OF CONFLICT. I wanted to ignore it at the time, but I am not seeing any short or pretty way these things are going to play out.

http://www.seattleweekly.com/2002-09-11/news/an-anti-war-movement-of-one.php?page=full

[The Traveler]

6. Exactly

Rapid climate change, over fishing, over cultivation, all these things drive us towards the collapse of ecosystems. Ecological collapse elevates risk of a failure of agriculture. A failure in agriculture implies food shortages and all the political/social/economic disruptions that got along with that. At some point, large numbers of people begin to die ... and larger numbers of people start fighting over the means of sustenance. In the face of this reality, the Libertarian abstractions of the Greenspans of the world shrivel to irrelevance. Libertarianism, which denies the existance of "the public", is a luxury that can be afforded only by societies with a thriving public sector.

[tama]

7. Yup

Just like the Club of Rome told us in 1972 about the limits of growth - the limit is PO and we have reached the highest plateau, next step is steady decline in oil production. Which has lead and will lead to peak food and peak population. This is not just a recession or just a depression, this is the Collapse that is now really beginning.

[Amonester]

5. And, of course, all the little guys will end up with the burden of,,,

paying
paying
paying
with their hard earned little salaries (if we still have a job)

all the while the small minority of deep pocket$ who R responsible for the whole mess will...

(guess what)

yep... they will get away scott free of paying any taxes to any government, as usual...

and they'll be laughing all the way to the (offshore) bank...

watta world