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What’s the IMF’s Point?

12:00 AM, Apr 20, 2013 • By IRWIN M. STELZER
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They come, they meet, they confer, they dash from television studio to television studio. Whether all of this to-do at the meetings here of the International Monetary Fund and the World Bank signify anything very much in the world outside of policymakers’ conference rooms is unclear. The IMF did get attention when it lowered its forecast of world growth this year from 3.5 percent to 3.3 percent, a testimonial to the faith of the Fund’s economists in the precision of their forecasts. These forecasters now think that the U.S., UK and China will grow more slowly than they anticipated only a few months ago; that the eurozone will have a more pronounced slowdown; and that Japan will awaken from a decades-long slumber as the new head of the Bank of Japan cranks up the printing presses to speeds that make the Federal Reserve Board’s Ben Bernanke look like a hard-money advocate.

What’s the IMF’s Point?

Here is a summary of the IMF’s 2013 revisions and its forecasts for 2014.

                     Original                     New       2014      

U.S.                2.1%                     1.9%       3.0%

UK                  1.0%                     0.7%       1.5%

China              8.1%                     8.0%       8.2%

Eurozone       -0.1%                    -0.3%       1.1%

Japan             1.2%                     1.6%       1.4%

World              3.5%                     3.3%       4.0%

More revisions to follow when the IMF rethinks its most recent rethink.

More important are the policy debates that bubbled up at the meetings and seminars held around Washington this past week. Christine Lagarde, managing director of the IMF, applauded Japan for adopting a policy of quantitative easing twice the size of America’s, relative to the size of its economy -- “a welcome step” in support of world growth. Odd, that, since when the IMF moves beyond its managing directors’ speeches appealing for a relaxation of austerity to real world situations such as those in the eurozone, it always signs on to severe austerity programs. There are millions in Greece, Spain and elsewhere who prefer the Lagarde of the speech circuit to the Lagarde of the bailout deal.

Lagarde’s talk in the run-up to and during the meetings puts the IMF on the side not only of prime minister Shinzo Abe and the new head of the Bank of Japan, Haruhiko Kuroda, but of Barack Obama, who sent Jack Lew, his new treasury secretary to Europe to preach the need for expansionary monetary and fiscal policies to stimulate growth. Lew won no converts from faith in austerity.

Lagarde’s attacks on proponents of austerity line her up against German chancellor Angela Merkel and Britain’s chancellor of the exchequer George Osborne, who believe that austerity is the route to sustainable economic growth in their countries. The disagreement between Lagarde and Merkel is not the first, and will not be the last dispute between French and German politicians over what policy is best for the future of Europe.

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