Geithner Calls For Multilateral Focus On Economic Recovery

By AJ Swartwood

Treasury Secretary Timothy Geithner called upon nations Wednesday to continue to working together to sustain the tenuous global economy as it moves toward recovery. 

In a speech at the Brookings Institution, Geithner hailed the progress the world’s nations have made in collaborating on economic issues calling it “the most productive era of cooperation we have seen in peacetime.” Geithner urged continued efforts to keep the focus on unified, multilateral approaches to solving financial issues.

“The greatest challenge to the global economy today is that the largest economies under-achieve on growth,” he said, mentioning that that projected economic growth of the world in 2011 is projected at around 4%, with the large, developed economies lagging behind. 

Geithner addressed the issue of currency devaluation, with a particular focus on China, and called for an end to the increasingly common practice amongst growing economic powers of reducing currency value.

Although the House of Representatives recently passed legislation that would restrict China’s ability to keep their currency undervalued, concerns still remain, and Geithner acknowledged a need for more multilateral measures to solve the problem.

“China will be less likely to move, to allow its currency to appreciate more rapidly if it’s not confident that other countries will move with it.”

Geithner’s message of multilateralism was appropriate as the world’s financial leaders, the I.M.F. and World Bank are set to begin their annual meetings this weekend. 

American Dollars Should Not Help Fund Greek Bailout, Says Pence

By Justine Rellosa
Talk Radio News Service

On Tuesday House Republican Conference Chairman Mike Pence (R-Ind.) issued a definitive 'no' on the U.S. contributing any financial assistance to Greece.

"Instead of putting American taxpayers and future generations at further risk by bailing out European countries...our country should be tending to our own fiscal crisis," he said. "Where did this administration get the impression that we have the money to be bailing out fiscal recklessness in the European Union?"

The International Monetary Fund (IMF), of which the U.S. is a member, has agreed to contribute $39 billion of the total $140 billion rescue package to help Greece avoid defaulting on its massive debt. Pence said he fears the U.S. would be on the hook for billions as its status as the IMF's largest contributor.

As a result, Pence said he will lead a coalition of Republicans in drafting a bill designed to prevent the U.S. from participating in bailing out nations in the "Euro Zone."

"The [legislation] would block any funding that has not been borrowed by the IMF, from being used by the IMF, to provide loans to any nation that uses the Euro as its primary currency."

Pence added that House Republicans are determined to oppose more bailouts forced on the American public.

Pelosi: Democrats Stand By The IMF

By Celia Canon- Talk Radio News Service

Despite the uncertainties that Congressional Republican leaders have on the efficacy of the reform of the International Monetary Fund, House Speaker Nancy Pelosi is adamant that “The IMF will have a strong support from the Democrats.”

Pelosi defended the international organization today at her weekly press conference where she also mentioned the success of her recent bipartisan trip to China.

House Minority Leader John Boehner and Senate Minority Whip Eric Cantormay, backed by other House Representatives who fear that Democrats are fusing two very different entities, the IMF and a bill, together, said that "Weighing down this critical legislation with non-defense spending will only drag this process out further and cost it essential Republican support needed for passage."

Cantor added that “We should not be having this discussion. IMF funding has no business being included in the war supplemental bill,” while adding that the funding may result in helping terror-sponsoring states such as Pakistan.

The debate over funding of the IMF has stemmed from President Barack Obama’s announcement at the April Group of 20 meeting that $100 billion will be granted to the IMF as part of the U.S war-bill which should further the fight against the global economic crisis.

Obama also said that the U.S would support the IMF as it sell 400 tons of gold, whilst Pelosi reminded that “It [the IMF] has been reformed so that it will help the poor. They wanted to sell gold, we said you can, but the proceeds have to go to help the poor.”

Responding to Cantor’s allegations, Pelosi said “I don’t know why anyone would say that the money is going to the hands of terrorists, it’s simply not based on facts and is a scare tactic.”

Pelosi also said “There are two contradictory things: one says that one shouldn’t be on war funding, which is our responsibility to support our troops in the war in Iraq, end the war in Iraq, bring our troops home and fight terrorism where is it a threat to our country, which is in Afghanistan, and we know that we have to do that." She added that “The IMF, in its reformed state, can be a force for alleviating the despair amongst people in the world. It’s a very important national security initiative.”

“The issue of the IMF, I think, has strong support on the Democrats’ side; not any support we’re hearing on the Republican side,” Pelosi said.

This war-bill, which involves military and diplomacy costs for Iraq and Afghanistan, will skyrocket to over $100 billion.

IMF Chair: Bank Balance Sheets Must Be Cleansed

Jonathan Bronsetin, Talk Radio News Service

Out of the International Monetary Fund’s, Spring 2009 meeting came a simple, but poignant message: the world is still in a recession. But the key to any recovery, according to the IMF, relied upon the restoration of the health of the banking system.

"You never recover before you completed the cleaning up of the balance sheet of the financial sector," said Dominique Strauss-Kahn, Chairman of the IMF.

Strauss-Kahn believes that any nation can postpone cleaning the banks balance sheet, but this will only postpone a full-fledged recovery.

"I don't underestimate the difficulties of the task, but the fact that it is difficult does not make it less necessary," said Strauss-Kahn.

Additionally, Strauss-Kahn applauded the efforts of governments to recognize and quickly deal with this recession through the implementation of successful economic stimulus's. He believed that the stimulus had a 1/3 greater affect because it occurred in a coordinated fashion.

Strauss-Kahn bluntly predicted. “Our [the IMF] belief is that the crisis is far from over, and there are long months of economic distress in front of us.”

IMF: Recession Will Not End In 2009

Jonathan Bronstein, Talk Radio News Service

The dreary, Washington, D.C. weather was matched only by the International Monetary Fund’s, IMF, Spring 2009 edition of the World Economic Outlook. This report was rife with sobering news regarding the future of the economy.

Echoing many statements made by various IMF economists over the past few days during the IMF’s annual Spring meetings, the report expects 2009 to be a year of negative growth, and a year in which many nations willingness to continue to maintain low interest rates and stimulate the economy will be tested.

The report predicted that the global economy will decline by 1.3 percent, as a whole during 2009, which is the greatest rate of decrease since World War II. This also marks a dramatic revision from the IMF’s last WEO report in January 2009.

Economists have recognized that the world is in the midsts of a economic slowdown, but the extent of the recession was worse than expected.

“Global GDP went down by an unprecedented 6 percent at an annual rate in the last quarter of 2008,” said Olivier Blanchard, an economic counselor and director of research at the IMF, “and as far as we can tell, will most likely decline almost as fast in the first half of 2009.”

The six percent contraction of the world economy in 2008 followed four percent growth the previous year.

However, “Growth is expected to reemerge in 2010, but at just 1.9 percent would be sluggish relative to past recoveries,” according to the report.

The WEO attributes this slow growth to financial market stabilization taking longer than to occur then perviously believed, despite the strong and effective efforts by policy makers. The reason for such a long and protracted stabilization of the financial sector is because the amount of “toxic assets” globally will reach $4 trillion, according to the Spring 2009 Global Financial Stability report, which greatly exceeds the previous estimate of $2.7 trillion made in January 2009.

Another piece of sobering news was in regard to the unemployment rate.

“As long as growth is below its normal rate, then unemployment will continue to increase, and therefore our forecast implies that unemployment will crest only at the end of 2010,” said Blanchard.

But all was not entirely negative in the report, as it did stress how the world’s governments have taken the proper steps needed to stem the damage of the recession. The main policy that was universally applauded was the employment of stimulus, which reached 2 percent of global GDP, a level that the IMF encouraged governments to strive for.

Such bold policies are key because they convince the markets that the economic crisis is being dealt with in an effective manner, which leads to “a revival in business and consumer confidence,” according to the WEO report.

Another issue the WEO has become concerned about is in regards to deflation, or a consistent decrease in the prices of all goods with the exception of food and energy. 

The reason deflation becomes so dangerous is that it drives down the prices of goods as people perpetually hold off on buying any goods until they deem that they have reached their lowest level. Thus, commodity prices fall, which ripples throughout the economy.

Economists point to deflation, as the root cause of exacerbating already destructive economic crisis, like in Japan in the 1990s and throughout the world during the Great Depression in the 1930s.

“An indicator of global deflation risk has now risen to well above levels observed in 2002-03, when deflation was also a concern,” according to the WEO.

But, as frightening as this deflation crisis sounds, the IMF believes that it remains but a problem on the distant horizon, which must be overlooked when dealing with problems that are more pertinent in the present, like stimulation of the economy.

Regardless of the morose news, Blanchard remained upbeat, when he said “The need for strong policies on both the macroeconomic and financial is as acute as ever, but with such policies in place there is light at the end of the tunnel. World growth can turn positive by the end of this year and unemployment by the end of next year.”