In an earlier post titled What Is The Systemic Effect? we said “ The trickle down effects of our economic crisis has no short term solutions and regardless of what deficits the government spends to try and bail it out the outcomes are massive inflation and a devalued dollar.
It isn’t time to panic rather it is time that “we the people” engage and think outside the box, get creative and create a new currency of trade that creates a new economy outside the bounds of the current economy. Otherwise the current trickle down effect will continue to impact everyone, everywhere and the economy will simply fuel itself systemically in a downward spiral towards depression”.
The IMF’s chief economist has warned that the global financial crisis is set to worsen and that the situation will not improve until 2010.
Olivier Blanchard also warned that the institution does not have the funds to solve every economic problem.
“The worst is yet to come,” Blanchard said in an interview with the Finanz und Wirtschaft newspaper on Saturday, adding that “a lot of time is needed before the situation becomes normal.”
He said economic growth would not kick in until 2010 and it will take another year before the global financial situation became normal again.
The International Monetary Fund on Friday promised to help Latvia deal with its economic crisis after it assisted Iceland, Hungary, Ukraine, Serbia and Pakistan.
But Blanchard said the IMF was not able to solve all financial issues, in particular problems of liquidity.
Withdrawals of capital leading to problems of liquidity “can be so significant that the IMF alone cannot counter them,” he said, adding that massive withdrawals of investments from emerging countries could represent “hundreds of billions of dollars.
“We do not have this money. We never had it,” he said. The IMF had spent a fifth of its 250 billion dollar fund in the last two weeks, Blanchard added. He also urged central banks around the world to cut interest rates, after the Swiss National Bank made a surprise one percentage point rate cut on Thursday.
The central banks “should lower interest rates to as close to zero as possible,” he said.