IMF's top economist warns of another Great Depression

John Aravosis over at Americablog has a really interesting post about a warning made by the IMF's top economist.

AFP

The IMF's top economist, Olivier Blanchard, maintained that governments around the world should boost domestic demand in order to avoid another Great Depression similar to the global downturn that shook the world in the 1930s."Consumer and business confidence indexes have never fallen so far since they began. The coming months will be very bad," Blanchard said in an interview with the French newspaper Le Monde."

It is imperative to stifle this loss of confidence, to restart household consumption, if we want to prevent this recession developing into a Great Depression," he added.

John Aravosis writes about this news, and there were some interesting points he makes about the original Le Monde article.

Actually, I found the article in Le Monde, and I think the economist was even more vehement than the AFP translation. I'm also not convinced that AFP totally explained what the economist was suggesting - he wasn't just saying that we need to restart consumer demand, he was saying that governments have to consider boosting their own spending to REPLACE consumer demand, if necessary, even if it leads to larger deficits.

Here is what Le Monde says:
Dominique Strauss-Kahn, le directeur général du FMI, pousse les gouvernements à multiplier les dépenses budgétaires pour soutenir la croissance. Or, le Fonds était un grand ennemi des déficits.

Pourquoi ce revirement?

Nous sommes en présence d'une crise d'une amplitude exceptionnelle, dont la principale composante est un effondrement de la demande. Les indices de confiance des consommateurs et des entreprises n'ont jamais autant chuté depuis qu'ils existent. Du jamais-vu !...Les mois qui viennent vont être très mauvais. Il est impératif de juguler cette perte de confiance, de relancer et, si nécessaire, de remplacer la demande privée, si l'on veut éviter que la récession ne se transforme en Grande Dépression. Bien sûr, en temps normal, nous aurions recommandé à l'Europe de diminuer ces déficits. Mais nous ne sommes pas en temps normal.

What the economist appears to be saying is that governments need to consider REPLACING the loss of consumer spending with GOVERNMENT spending, if necessary, regardless of whether it leads to deficits.

Dominique Strauss-Kahn, the head of the IMF, is pushing governments to increase their own spending in order to support growth. The IMF has always been a big enemy of deficits. Why the reversal?We are facing a crisis of an exceptional breadth, the basis of which is a collapse of demand. The consumer and business confidence numbers have never fallen this much since they've first been recorded. We've NEVER seen this!...

It is imperative to curb the this loss of confidence, to relaunch it and, if necessary, replace private demand, if we want to avoid a recession that turns into a Great Depression. Of course, in normal times, we would recommend that Europe reduce its budget deficits. But these are not normal times.

Sarah Palin's 18 lies Last Night

John Aravosis of Americablog has posted the 18 lies of Sarah Palin from the debate.

SARAH PALIN’S 18 LIES

1. FANNIE MAE/FREDDIE MAC: Palin said “it was John McCain who pushed so hard with the Fannie Mae and Freddie Mac reform measures,” but fact checkers say that’s “Quite A Stretch” And “Barely True,” and that McCain was a “latecomer” to the discussion.

2. FUNDAMENTALS ARE STRONG: Palin tried to say “John McCain saying our economy was strong” but McCain has used the phrase “The Fundamentals Of The Economy Are Strong” At Least 16 Times This Year.

3. PARTISAN POLITICS: Palin said McCain is “known for putting partisan politics aside to just get the job done,” but he has voted with Bush 90% of the time in the Senate and bragged about his support for Bush on important issues.

4. TAXES ATTACK: Palin repeated the attack that Obama voted for higher taxes 94 times, which the New York Times says is “false,” CNN says is “Misleading,” and FactCheck.org says is “inflated.”

5. TOBACCO REGULATION: Palin said to “look at the tobacco industry” as an example of McCain pushing for even harder and tougher regulations. But McCain opposed expanding the SCHIP children’s health insurance program for 5.8 million
children because it would increase tobacco taxes.

6. SPENDING INCREASES: Palin said Obama is is proposing “nearly a trillion dollars on new spending,” but didn’t mention that he has also proposed cuts to balance it out, an attack CNN has already debunked as “misleading” and that ignores the far larger cost of McCain’s tax cuts and spending hikes.

7. HEALTH CARE: Palin claimed Obama’s health plan is “government run” which has been widely debunked as a “canard.”

8. HEALTH CARE. Palin says taxes wouldn’t go up under the McCain health care plan, a fact even his own campaign has acknowledged isn’t true.

9. TROOPS: Palin repeated what the AP called the “highly misleading” attack that Obama opposed funding for the troops, and Factcheck.org notes that the same
methodology would lead to the same conclusion for McCain.

10. GLOBAL WARMING: Palin said “I don’t want to argue about the causes” for global warming, when she has clearly taken the position that she doesn’t not believe it is man-made.

11. MCCAIN IS CONSISTENT: Palin said McCain” doesn't tell one thing to one group and then turns around and tells something else to another group,” when that is exactly what he has done on immigration, telling Hispanic leaders he was
for comprehensive reform instead of the enforcement focused approach he has taken with conservatives.

12. MCCLELLAN NOT MCKIERNAN: Palin referred to the US commander in Afghanistan, David McKiernan as “McClellan.”

13. MCKIERNAN ON “SURGE:” Palin said that [McKiernan] did not say a surge wouldn’t work in Afghanistan, when just yesterday he said “The word I don’t use for Afghanistan is ’surge,’ ” McKiernan stressed, saying that what is required is a “sustained commitment” to a counterinsurgency effort that could last many years and would ultimately require a political, not military, solution

14. KILLING CIVILIANS. Palin said “Obama had said that all we're doing in Afghanistan is air raiding villages and killing civilians and such a reckless, reckless comment and untrue comment again hurts our cause. That's not what we are doing there.” Unfortunately, the Associated Press says that Obama was right in discussing a critically important point about avoiding civilian casualties.

15. TEACHING: Palin said we need to make sure “that education in either one of our agendas, I think, absolute top of the line,” when McCain has repeatedly favored tax cuts for the wealthy over funds for more teachers and class size reduction.

16. PARTISAN APPOINTMENTS: Palin said “You do what I did as governor. And you appoint people regardless of party affiliation. Democrats, independents, Republicans, you walk the walk, don't just talk the talk” when she repeatedly
appointed friends and supporters to positions for which they weren’t qualified.

17. FOCUS ON CLIMATE CHANGE: Palin falsely claimed that she was the first governor to form a climate change subcabinet, when at least 28 states had already taken action.

18. DARFUR DIVESTMENT: Palin claimed that “when I and others” found out that the state had money invested in Sudan that “we called for divestment,” when the reality is that Palin’s appointees worked to kill a Darfur divestment plan.

Why I'm Still Concerned about Yesterday's Vote and its Impact on the Economy

John Aravosis (DC) of AmericaBlog has a great post about the economy, and why people should be concerned: Why I'm still concerned about yesterday's vote and its impact on the economy

"I find fascinating this entire discussion of whether or not voting down the bailout bill yesterday poses an economic danger to the US. Markos, quoting Davis Sirota, isn't worried. It's worth reading what Markos is saying, as I think it represents what many of our own readers believe. But I have to say, I still am worried."

"Sirota says that critics are saying that anyone who is against the bill wants to see America go into another depression. Perhaps some are, but that's not really the point. It's irrelevant what your motivation is for opposing the bill. All that matters if what the economic consequence is of that position. Markos points to the market being up a few hundred points today, and says this is a sign that all is not lost. But credit markets are still frozen."

"Practically no one in America can get a loan right now. No one. So I decided to use the Google and find out more about what this credit crunch really means.But first I talked to our own financial expert, Chris, who told me:"

A market moving up as it is today in NO WAY represents a positive long term direction. Often markets that are going down and are about to capitulate will have radical swings up and down before a big bottom. Many called this crazy movement a few weeks ago and I think I mentioned it at one point. It may or may not be the case this cycle but it's completely wrong, wrong, wrong to say the movement today suggests everything will be OK. Everyone's anger is understandable, but the bigger issue is lessening the impact of this very serious recession that's upon us.

John Aravosis has more that can be read here. He also pulls together a number of articles from different economists and market watchers who point out that there is a lot that is going on which will need to be fixed. We are not out of the woods.