Skip to content
Catholic Online Logo

By Catholic Online (NEWS CONSORTIUM)

1/5/2014 (7 months ago)

Catholic Online (www.catholic.org)

Fund warns that the west must weather higher inflation and look to defaults in order to remain afloat

The International Monetary Fund has issued a sobering report for the western world. In short, the analysis maintains that the world's wealthiest nations are deluded in thinking that austerity cuts will chip away at debt. The report is warning of massive write-offs and defaults in order for the world's economy to remain afloat.

Some of these methods are already in use, but not yet on the scale seen in the late 1940s and early 1950s as countries resorted to every trick to tackle their war debts.

Some of these methods are already in use, but not yet on the scale seen in the late 1940s and early 1950s as countries resorted to every trick to tackle their war debts.

Highlights

By Catholic Online (NEWS CONSORTIUM)

Catholic Online (www.catholic.org)

1/5/2014 (7 months ago)

Published in Business & Economics

Keywords: IMF< First World, debt, haircuts, war debt


LOS ANGELES, CA (Catholic Online) - According to the reports, the majority of the Western world will require defaults, a savings tax and higher inflation. Debt levels have reached their highest in more than 200 years.

Debt burdens in the First World have become extreme by any measuring stick. A wave of haircuts, either negotiated Depression Era-style write-offs or the standard mix of measures used by the IMF is required, the report argues.

"The size of the problem suggests that restructurings will be needed, for example, in the periphery of Europe, far beyond anything discussed in public to this point," Harvard professors Carmen Reinhart and Kenneth Rogoff say.

Overall, developed nations are working under the delusion that they are different from poorer nations and can therefore chip away at their debts with a blend of austerity cuts, growth, and tinkering. "Forbearance" is just another form of debt.

Advanced economies, many assume, "do not resort to such gimmicks" such as debt restructuring and repression, which would "give up hard-earned credibility" and throw the economy into a "vicious circle."

This line of thought, researchers say, rely on the "collective amnesia" of European and U.S. history. They are structured upon "overly optimistic" assumptions that risk doing far more damage to credibility in the end. This only drags on the crisis, blocking a lasting solution. "This denial has led to policies that in some cases risk exacerbating the final costs," it said.

Higher burdens are placed upon northern taxpayers with debt pooling in the eurozone. This could drag the EMU core states into a recession and aggravate their own debt and aging crises. Germany and the creditor core would do better to "bite the bullet" on big write-offs immediately rather than buying time with creeping debt mutualization, the paper argues.

Western debt burden is now so big that rich states will need same tonic of debt haircuts, higher inflation and financial repression, defined as an "opaque tax on savers" - as used in countless IMF rescues for emerging markets.

"The magnitude of the overall debt problem facing advanced economies today is difficult to overstate. The current central government debt in advanced economies is approaching a two-century high-water mark," they said.

Financial repression can take many forms, including capital controls, interest rate caps or the force-feeding of government debt to captive pension funds and insurance companies.

Some of these methods are already in use, but not yet on the scale seen in the late 1940s and early 1950s as countries resorted to every trick to tackle their war debts.



---


Pope Francis: end world hunger through 'Prayer and Action'


2014 - Distributed by THE NEWS CONSORTIUM

Pope Francis Prayer Intentions for August 2014
Refugees:
That refugees, forced by violence to abandon their homes, may find a generous welcome and the protection of their rights.
Oceania: That Christians in Oceania may joyfully announce the faith to all the people of that region.



Comments


More Business & Economics

Here comes a boom! $7 trillion in untapped funds to flood global market Watch

Image of A report suggests that corporations and equity firms hold nearly $7 trillion in cash reserves that could bolster the world's economy.

By Catholic Online (NEWS CONSORTIUM)

A new boost to the global economic recovery may happen soon, as corporate giants and private equity firms prepare to tap into cash reserves of $7 trillion, stored since the current financial crisis began back in 2008. LOS ANGELES, CA (Catholic Online) - Investors ... continue reading


OBAMA PARTIES AS ROME BURNS: U.S. wages down by 23 percent - while president takes a vacation Watch

Image of The timing of Obama's swank vacation has even the president's supporters worried.

By Catholic Online (NEWS CONSORTIUM)

Lots of negative news to go around - Ebola seems to be spreading worldwide, Islamic State is increasing its stranglehold on Iraq, a much beloved comedian and screen actor is found dead at home, an apparent suicide - U.S. President Barack Obama is in Martha's ... continue reading


Religious orders NEED to understand economics Watch

Image of A letter from two high-ranking Catholic officials requests that religious orders gain a better understanding of finance and economics.

By Catholic Online (NEWS CONSORTIUM)

In a letter addressed to members of religious communities, Vatican officials requested that these groups should not be ignorant of economic realities connected to community life and a mission of serving the world in the name of the Church. LOS ANGELES, CA ... continue reading


THANKS, BARACK! Federal debt up $7 TRILLION under your watch. Watch

Image of By the close of business on July 31, 2014, it had risen to $17,687,136,723,410.59, up $7,060,259,674,497.51 since Obama first inauguration day.

By Catholic Online (NEWS CONSORTIUM)

Thanks, Barack! The total federal debt of the U.S. government has increased more than $7 trillion during the slightly more than five and a half years Barack Obama has been president. That's more than the debt increased under all U.S. presidents from George ... continue reading


Live Catholic - Shop Catholic - Guess who now accepts checks?

Image of Catholic Shopping .com now accepts checks via Dwolla!

By Catholic Online (NEWS CONSORTIUM)

Guess who now accepts checks? Catholic Shopping .com does! This new option now makes it easier for you to control how you pay for the things you like. LOS ANGELES, CA (Catholic Online) - Catholic Shopping .com is now accepting checks via the online processor, Dwolla. ... continue reading


Unemployment in the U.S. - never went away! Many still without work Watch

Image of The number of Americans not in the labor force dropped only slightly in July, down 119,000 from the 92,120,000 Americans not in the labor force in June.

By Catholic Online (NEWS CONSORTIUM)

It may have fallen off the radar of many news outlets - but joblessness is still a BIG problem here in the United States. Since President Obama took office in January 2009, 11.4 million Americans 16 years and older have left the workforce, according to data ... continue reading


INDEBTEDNESS: One in three U.S. adults have 'debt in collections' Watch

Image of One in three American adults are so far behind in personal debt that many of their accounts have been referred to collections.

By Catholic Online (NEWS CONSORTIUM)

Some call it the American way, and it's become a most uncomfortable fact of life for many Americans. Personal debt is at an all-time high, and at least one in three Americans, 77 million people, have had their debt referred to collection agencies as a result. ... continue reading


LUMP OF COAL - LITERALLY! Coal companies pushed to brink of insolvency by Obama policies Watch

Image of The very fuel that fed the Industrial Revolution and powered U.S. growth for much of the past century, the coal industry finds itself on the brink of insolvency, with many companies going out of business.

By Catholic Online (NEWS CONSORTIUM)

Dealing with cheap natural gas and tighter regulation, the U.S. coal industry has fallen on hard times. The very fuel that fed the Industrial Revolution and powered U.S. growth for much of the past century, the coal industry finds itself on the brink of ... continue reading


The poor getting power in U.S. - typical household is now worth a third less Watch

Image of The old saw goes that when only a few people are winning and more than half the population is losing, surely something is amiss.

By Catholic Online (NEWS CONSORTIUM)

The rich get richer - and the poor have children. But seriously, folks, the poor is getting even poorer in the United States. Recovery from the last big recession in 2007, hasn't really taken off as of yet. Recent studies show that the average American ... continue reading


HAIL BRITANIA! Britain declared fastest growing economy in developed world Watch

Image of Britain is now

By CNA/EWTN News

There will always be an England, as the old song goes. While the United Kingdom has experienced highs and lows, it's always recovered - and prospered. This was born out by the recent news that Britain will be the best performing major economy in the developed ... continue reading


All Business & Economics News

Newsletters

Newsletter Sign Up icon

Stay up to date with the latest news, information, and special offers

Daily Readings

Reading 1, Second Thessalonians 3:6-10, 16-18
6 In the name of the Lord Jesus Christ, we urge you, ... Read More

Psalm, Psalms 128:1-2, 4-5
1 [Song of Ascents] How blessed are all who fear ... Read More

Gospel, Matthew 23:27-32
27 'Alas for you, scribes and Pharisees, you ... Read More

Saint of the Day

Saint of the Day for August 27th, 2014 Image

St. Monica
August 27: St. Monica was married by arrangement to a pagan official in ... Read More

Inform, Inspire & Ignite Logo

Find Catholic Online on Facebook and get updates right in your live feed.

Become a fan of Catholic Online on Facebook


Follow Catholic Online on Twitter and get News and Product updates.

Follow us on Twitter