What the IMF says about the World Crisis
Subject: Economy, finance, global finance
Info Source: Global bank losses likely to reach $4.1 trillion, says IMF, by Larry Elliott , The Guardian, guardian.co.uk, Wednesday 22 April 2009.
The global financial sector faces write-downs of $4.1tn (£2.8tn) from the toxic assets that have crashed in value since the start of the credit crunch 20 months ago, the International Monetary Fund said today .
In its first comprehensive study of the impact of the crisis on banks and other financial institutions, the Fund said that it had increased its estimate of the potential losses in the US from $2.2tn to $2.7tn as a result of the deepening economic slump over the past three months.
Europe and Japan between them account for $1.3tn of the write-downs, with UK banks facing losses of up to $316bn (£216bn). The Treasury last night disputed the UK figure, saying the IMF had offered a range of costs between 6% and 13% of GDP, and that £216bn was at the highest end of this range
The key challenge was to break the “downward spiral” between a weakened financial system and the global economy. The Fund set out a detailed program of reforms, including curbs on credit growth during booms, tougher regulation of a limited number of institutions considered “too big to fail” and better cross-border supervision.
In its breakdown of the losses on toxic assets, the IMF said two-thirds of the write-downs affected banks. But the FSR warned that pension funds had seen the value of their assets
Comment: This report could be interpreted as the first formal evaluation of the worldwide Crisis deepness and reach. However in despite of its dramatic tone it could be considered too optimistic. See our next entry SP0014 about the effect of “politically correct” measures in times of crisis. From a “systems” point of view the recovery trajectory towards the next future looks highly improbable. The history tells us that society inertia is so “high” that recoveries, whether occurred, take decades.
We mean that the failure is so big and extreme that a new system should be buildup and it takes time.
Tags: IFM, GDP, WEO, the guardian, guardia.co.uk, Larry Elliot, global bank losses, politically correct, credit crunch, society inertia, global economy, global finance, FSR,