Wednesday, April 22, 2009

Economic Ignorance at the IMF

Came across this today and couldn't help but roll my eyes:

WASHINGTON (Reuters) - The International Monetary Fund on Wednesday slashed growth forecasts for every major country and urged governments to take forceful action to ensure the world economy's recovery from a severe recession.

In its latest World Economic Outlook, the IMF said the global economy would likely contract 1.3 percent this year in the deepest post-World War Two recession by far.

Growth is set to re-emerge at a sluggish 1.9 percent next year but the pick-up depends on aggressive measures to repair a poorly functioning financial system. "The longer this goes on, the longer and the deeper will be the recession," IMF chief economist Olivier Blanchard told a news conference.

Just three months ago, the IMF had projected global growth of 0.5 percent, although last month it warned of a deep recession.

The sentence that really hacked me off occurs a few lines later:
In offering new economic projections, the IMF said government measures to battle recession should be sustained, if not increased, in 2010, warning that premature withdrawal of stimulus could set back a recovery.
So, the IMF admits that its economic projections were completely wrong, not even close, in fact, then tells us that if we do not follow its prescribed actions, we are in for an even rougher ride. Why should we believe them? It wasn't long ago that the IMF was predicting 2.2 percent growth for 2009. Last November, in fact. That's a pretty big revision in only about six months Just in case you haven't figured it out yet: you probably shouldn't listen to the bureaucrats at the IMF, and pretty much all other such bodies, because they do not understand economics and have no idea what they are talking about. Either that, or they are deliberately lying for some ulterior motive. I'm beginning to suspect the latter, as it occurs to me that no sane person working for that place could possibly think that their economic models were correct at this point. If they were actually trying to do economics at that place, I'd have never guessed. Note that it is not even a debatable point whether or not "stimulus" is effective in "reviving" the economy. No, any point of view which questions the proposition that government action is necessary or even effectual, let alone ethical, in bringing about economic recovery is not even considered. It is not that it is suppressed; it is not that it is questioned. It is not even mentioned. Unless he is already quite astute and given to such questioning, such a train of thought escapes the casual reader. The thought never occurs to him. That's how the conspiracy works, boys and girls. Soon, the thought will have been erased from existence. The government gets control, because, well, that's just the way it works, after all. A good economy is the result of government policy, and if things go wrong, the government has to step in and fix things. Everybody knows that. Well, maybe not yet. But, if all goes according to plan, someday soon they will...

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