Tuesday, December 23, 2008

IMF Admits Great Depression 2 Coming

The IMF (International Monetary Fund) sees the Great Depression 2 coming, but continues the widespread error in recommending government spending as a solution. Debt spending and inflation got us into this problem, and more of the same will only drag it out and make it worse. The only solution at this point is the cancellation of all debt.

GD2 is being caused because we financed a massive oversupply of production with massive debt spending and inflation. In order for economic activity to proceed again, we need to liquidate the oversupply and the debt. By cancelling debt outright, right now, we would unattach the productive economy from the financial crisis caused by deflation and debt. If we let things take their natural course, the economy will continue to grind into a Great Depression, as debt is liquidated piecemeal in a deflationary environment. The Fed has foreseen this, and resolved to lead the world on course of hyper-inflation instead, which will kick in with a vengeance after our productive economy has been ground down to minimum productivity.

We can prevent this all quite simply: cancel our debt!

WASHINGTON (AFP) – The US economy shrank in the third quarter, official data confirmed Tuesday, as the IMF's top economist warned of a second Great Depression offering no respite from relentless gloom ahead of Christmas. The abrupt 0.5-percent contraction of gross domestic product (GDP) in the world's largest economy was seen as marking the start of a steep downturn for the United States after GPD growth of 2.8 percent in the second quarter. "This report is largely old news," said John Ryding at RDQ Economics, who forecast fourth-quarter data out next month would be far bleaker. "Given signs that the recession has deepened in the current quarter, we look for around a 6.0 percent drop in real GDP," he said.

Britain's economy also shrank by 0.6 percent in the three months to September compared to the previous quarter, against a previous estimate of 0.5-percent contraction, the Office for National Statistics said. The IMF's top economist, Olivier Blanchard, maintained that governments around the world should boost domestic demand in order to avoid another Great Depression similar to the global downturn that shook the world in the 1930s. "Consumer and business confidence indexes have never fallen so far since they began. The coming months will be very bad," Blanchard said in an interview with the French newspaper Le Monde. "It is imperative to stifle this loss of confidence, to restart household consumption, if we want to prevent this recession developing into a Great Depression," he added.

Retail sales in Italy went down 0.3 percent in October, Denmark's economy contracted 0.4 percent in the third quarter and the Dutch economy had zero growth, official data showed. Finland's unemployment rate rose to 6.0 percent in November from 5.8 percent in October and the Polish central bank cut its key lending rate by 75 basis points to 5.00 percent in a bid to fend off a recession. In Ukraine, thousands of people took to the streets for a union-led protest to demand higher wages and more social protection in the former Soviet republic, which has been hit hard by the global economic crisis. News of weakening growth also sent the British pound sliding under 1.0550 euros, nearing a record low of 1.0463 reached last week, as dealers bet on more interest rate cuts from the Bank of England and forecast parity with the euro.The dollar exchange rate also drifted lower against the euro and the yen.

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