Wednesday, January 07, 2004

Bad and good economic news, the IMF weighs in

The bad news is that the IMF in a NYT article declares the US fiscal policy to be a threat not just to its own economic prosperity but could threaten world economic performance. The good news is that the IMF has declared the US budget and deficit prospects to be ill-favored. This is good news because through the 90's the IMF had a track record of prescribing budget austerity and market liberalization. Robbed of the Keynesian tools to curb economic shocks from becoming full blown crisis, and subject to speculative instability because of deregulated markets open to foreign investment, many countries became economic basket cases. Argentina is still that way. In fact, the countries that defied best meltdowns like the Asian Economic Contagion Currency Crisis back in the late 90's were the ones like Malaysia that discarded such advice. Since the IMF has a track record of being wrong, that's good news for the US economy. Call it a leading converse indicator. Whatever way they fall on a subject, think seriously about betting the other way. This ironically is a backhanded vote of confidence for the Bush II Admin fiscal policies that I have strongly advocated against earlier.

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