IMF: The U.S. Consumer cannot save the global economy, crisis not over

The IMF Director gave an interview on the state of the financial crisis and global economy. Guess what? The crisis is not over.

The global economic crisis will continue and countries must do more to adopt financial market regulations, International Monetary Fund Managing Director Dominique Strauss-Kahn told a German magazine on Saturday.

"The global economic crisis will continue, even if Germany and France had some good figures in the second quarter," Strauss-Kahn was quoted as saying in an advance copy of an article to be published in Der Spiegel on Sunday.

Strauss-Kahn said he wanted to see more action from nations to curb bankers' pay and tighten capital requirements in the banking sector.

Maybe he's reading EP for we're saying that, most recently by this post.

From AFP:

He argued that global economic growth can no longer be expected to come from such macro-economic imbalances as US indebtedness.

In the United States, hard-hit by recession, "the household savings rate, which was practically zero, is now at 5.0 percent ... Good news for the deficits. But who will replace the US consumer to power global growth?"

He recalled that the United States accounts for 25 percent of global output.

We also said Don't expect that consumer to save you.

Beyond tightening financial regulation and requiring more capital reserves, the IMF head specifically mentioned executive pay needs to be curtailed.

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And a Lehman Reminder

Over at the Naked Capitalism site they have an article on the attempt to unwind the derivatives/counterparties positions from their undocumented software --- please note Lehman's derivatives amount in the excerpted para. below:

"Unwinding derivatives is a complex task at the best of times. In the case of Lehman, one of the biggest dealers in some of the most complex derivatives markets, this has been even more so. Lehman’s global derivatives book included contracts with a notional face value of $39,000bn and deals with 8,000 different counterparties when it went bust. The derivatives business was actually split into multiple strands, backed up by between 20 and 30 different systems."

That sure appears to read $39 trillion if I'm not mistaken. And that is why the consumer won't be any help whatsoever in the infinite layers of securitization (I believe someone once counted up to over 3,200 some securitized instruments now extant!)

[Bretton Woods Committee update: I did come across one brief listing of a small number of those counterparties and they all appeared in the membership pages of the Bretton Woods Committee, everyone's favorite lobbyist group for the ultra-rich.]

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there is a saying

a definition of insanity is doing the same thing over and over expecting different results.

If you want to focus on anything, learn about which financial reforms should be passe by Congress immediately.

We try to write this up, from a layperson's/Populist/main street viewpoint as we see them.

But yes it is confusing and believe me, those opposing financial regulation are banking on that....that this will disappear from the public consciousness.

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