IMF piles pressure onto G20 meeting; forecasts worldwide recession

It's starting to appear that the rest of the world is counting on the April 2 meeting in London as a last resort. Sort of like risking the house mortgage on one roll of the dice.

The IMF's latest bulletin warned: "Delays in implementing comprehensive polices to stabilise financial conditions would result in a further intensification of negative feedback... leading to an even longer and deeper recession". Stimulus packages would also need to be maintained in 2010, the IMF said.

The fund also issued a stark warning that the collapse of some national economies in central and eastern Europe could still trigger another wave of banking failures.

The IMF's note, prepared for the G20, warns of a sort of domino effect running through the continent via the banking system as problems in nations such as Hungary, Romania, Bulgaria and the Baltic states knock down otherwise relatively healthy advanced economies – including those in Sweden, Austria, Switzerland, Belgium and the Netherlands.

That, in turn, could trigger a further international panic like the one seen on global stock markets last October.

The UK is among those especially exposed to further weakness in property markets, the IMF warned. "Falling home prices and rising defaults in the United States, United Kingdom and parts of the euro area are already exacerbating strains in the financial system," it said. "Mounting lay-offs would further dampen consumption and residential investment."

The Bank of England policy of "quantitative easing" is endorsed by the IMF, which is encouraging the G20 countries to adopt "unconventional measures" to unlock "key credit markets".

Global debasement of currencies doesn't appear to be a ticket out of this mess, but the IMF sees things differently than me.
However, we do agree on one thing.

The IMF said that it now expects the world economy to contract for the first time since the Second World War, by between 0.5 and 1 per cent, with the advanced economies leading the charge downward: they will see a slump of around 3 to 3.5 per cent – a "deep recession". The most shocking figure is the one published for Japan – a slump of 5.8 per cent in 2009, with a further decline of 0.2 per cent in 2010.

A few days ago, the IMF said that the UK would slide by 3.8 per cent this year with a further shrinkage of 0.2 per cent in 2010. The equivalent figures for the US are -2.6 per cent and 0.2 per cent, and for the eurozone -3.2 per cent and 0.1 per cent.

If this all sounds like something you once read out of a history book, you aren't alone.

Mr Darling has signalled that the meeting must not be allowed to mirror a 1933 summit in London which failed to halt the Great Depression. He said failure to agree co-ordinated action then meant that the Depression continued for years when it “need not have done so”.

The meeting he was referring to was the London Economic Conference in June of 1933.

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London Economic Conference 1933

Do you know the results of this or more details? It looks like FDR put the national interest above "globalization", i.e. the U.S. taking the hit for the global economic crisis, but not clear.

London 1933

According to Michael Hudson (the only account of this conference that I've read), our WWI Allies were desperate to get out from under their war loans. However, Wall Street was refusing to to accept that idea, and they held control over Washington.

The WWI loans were so onerous that other nations had to keep devaluing their currencies and raising tariffs, in order to gain trade advantages, which were then used to pay interest on those war debts.
The whole cycle was killing world trade, which was making the Great Depression worse.

Also, our allies were forcing Germany to live up to its crushing burden to England and France, because that was the only way that England and France could avoid defaulting on their debts to America.

By 1933 England and France had mostly depleted their gold reserves paying the war debts, and had in fact already paid more interest than the original principle. England and France were begging for help.
Hoover had hinted at letting our allies off, but never got around to doing. FDR never showed any mercy. He took at hard stance at the London Conference. The Conference was a complete failure.

Within a year both England and France had defaulted on their war debts to America.

war debt

Right the trade tariffs though as a pattern really were not that big of an effect, at least in the U.S. for the U.S. at that time was primarily a domestic economy.

Now what I find interesting that i have never read anything on.....

is tracing through the WWI war debt, national debt as a cause of the Great Depression.

I know in the United States we had a Ponzi scheme stock market ride but also massive consumer debt, everything was bought on credit.

I don't know precisely what the federal and state budget deficits were...

The reason I'm asking about this angle is it sure seems to me that all of these nations are now at risk of causing global default simply trying to prop up these derivatives, these fictional contracts of fictional money and pay them out.

I'm starting to think this entire system is completely hosed and the cause behind it are those hedge fund managers and other vested interests in keeping this shadow banking system, derivative Ponzi scheme alive.

i.e. beyond being a pure failure, the TARP plus the Federal Reserve actions, they are prescribing solutions that are trying to keep all of this toxic waste as valid instead of letting it collapse and die and rebuilding from there.

But it will not work, never could work because you cannot build an economy on fictional money.

I'm talking out loud but in terms of global war debt, the only nation I really am aware of is the Weimar Republic of Germany.

Excess Debt...

"In the Old Testament Book of Leviticus, God commands the children of Israel to observe a jubilee every 50 years. Nowadays we tend to associate the word with celebrations of royal anniversaries such as Queen Elizabeth’s golden jubilee in 2002. But the biblical conception of a jubilee was more precise: that of a general cancellation of debts.
This point is spelt out in Deuteronomy: 'Every creditor that lendeth ought unto his neighbour shall release it; he shall not exact it of his neighbour, or of his brother; because it is called the Lord’s release.' Such injunctions may strike the modern reader as utopian. How could any sophisticated society function if all debts were cancelled twice a century – much less, as Deuteronomy seems to suggest, every seven years? Yet we know that such general cancellations of debt really did happen in the ancient world. In 1788 BC, for example, about 500 years before the time of Moses, King Rim-Sin of Ur issued a royal edict declaring all loans null and void, wiping out some of history’s earliest known moneylenders."
--Niall Ferguson