The current Great Recession, as International Monetary Fund (IMF) managing director Dominique Strauss-Kahn calls it, was predicted right here in Singapore three years ago at the IMF-World Bank meeting.
"In 2006/2007, we forecasted the meltdown but the developed countries dismissed us, saying we were wrong,” Strauss-Kahn said yesterday at the University of Dar es Salaam, reported Tanzania’s Citizen newspaper.
And, yes, the alarm was sounded by the IMF at the Singapore meeting on September 19, 2006.
The then IMF managing director Rodrigo de Rato warned:
We are enjoying a period of rapid global growth and low inflation that has not been seen since the 1960s… We expect 2007 to be another year of solid and broad-based growth.
However, the global growth cycle may be close to its peak. Educated and skilled labour is in tight supply, and the scope for continuing productivity improvements may be diminishing. The best hope for continued high growth lies in further increases to international trade. If this does not happen, the outlook is less encouraging. In fact, I see three clear risks to global economic prospects. First, high oil prices could still lead to higher inflation. Second, there is the continued risk that global current account imbalances will unwind in a disorderly way. Third, there is a growing risk that protectionist sentiment will overwhelm good sense. If it does, all other risks loom larger.
His speech can be read on the IMF website along with other press releases issued at the Singapore meeting.
Singapore’s Prime Minister Lee Hsien Loong quoted the economist John Maynard Keynes and said:
How can we make globalisation work for everyone? How can we mitigate the downside risks and reap the upside opportunities? The first precondition is a stable and open global environment that gives all countries access to growth and development opportunities. Next, we must have good governance that enables countries to benefit from globalisation, and ensures that these benefits reach all segments of the population. Only then will countries support policies which promote globalisation, and enter a virtuous cycle where everyone has a stake in an open system that delivers prosperity for all.
The IMF was not alone in fearing the worst. The New York Times reported last year:
On Sept. 7, 2006, Nouriel Roubini, an economics professor at New York University, stood before an audience of economists at the International Monetary Fund and announced that a crisis was brewing. In the coming months and years, he warned, the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession. He laid out a bleak sequence of events: homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt. These developments, he went on, could cripple or destroy hedge funds, investment banks and other major financial institutions like Fannie Mae and Freddie Mac.
Related posts:
