Are the IMF stupid?
July 10, 2010
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The IMF have revised down growth forecasts for the UK for next year based, apparently, on the recent emergency budget and the threat of austerity measures stifling the domestic economy. This is the same budget that the IMF initially endorsed. Except now, in the words of Today's economics editor Stephanie Flanders:
It's interesting, each time that governments have come forward saying they're going to bring down their deficits, by and large the IMF have said that's the right idea; but they're now adding up all of these plans and as a result of the plans in Europe over the last few months they also revised downwards the forecast for next year for the Eurozone, and they do say that one of the big downside risks for the next few years is that countries will rush through these consolidation plans, as they call them, and that they will come together and bring down global growth.
The IMF have finally cottoned on that if everyone retrenches at the same time, then nobody's got any money to spend to on anyone else's products, and everyone loses. (This is obviously a very simplified version. I do not really understand economics, but even I understand the basics behind this.)
Actually, it's not just the IMF. To quote Ms Flanders again:
A lot of the people who've been most keen on Britain bringing down their deficit, when I talk to them they say look, we did really like Mr Osborne's budget but when we liked it we didn't know so many other countries would be doing it at the same time.
They're all idiots.