IMF head says recession is ending, but unemployment isn't

×

The good news is that the recession is ending. The bad news is that recovery is going to take a long time, and unemployment is poised to get worse before it gets better.

This basic message, which has been touted by numerous economists and experts gained a new voice on Friday, when International Monetary Fund chief Dominique Strauss-Kahn joined the chorus.

In his speech before Berlin's Sixth Annual Bundesbank Lecture, he noted that the recovery is currently being driven by "policy stimulus and restocking." Strauss-Kahn went on to point out that consumer demand remains "weak." In terms of government-driven stimulus, this means that, in his words, "premature exit" from the programs could cause the recovery to "stall."

In a similar vein, he encouraged "international coordination of exit strategies," suggesting that, just as countries went into the recession together, they can work their way back out together.

Strauss-Kahn also touched on the subject of unemployment, agreeing with other experts that the ranks of the jobless are likely to swell, as "economic growth falls short of potential." He further stated that this is yet another reason that governments should "err on the side of caution" when deciding how to end their stimulus programs.

In a larger context, he repeatedly returned to the theme of international cooperation of economic strategies. Noting that American savings rates are growing, he suggested that Asia needs to pick up the consumption slack by increasing its "structural efforts that boost domestic spending." These would include greater credit extension, and larger investment in social security, education, and infrastructure.

Additionally, he called on countries to manage their exchange rates in order to encourage the flow of goods and services across borders.more flexible exchange rate management" to encourage "rebalancing" of worldwide trade and consumption.

While Strauss-Kahn endorsed a wide range of regulatory policies, his key point seemed to be that the financial crisis is, a worldwide problem and that a worldwide response to it could enable the global economy to emerge stronger and more closely integrated.


Increase your money and finance knowledge from home

Asset Allocation

Learn the most important step in structuring an investment portfolio.

View Course »

Introduction to Economic Indicators

Measure the performance of the economy.

View Course »

Add a Comment

*0 / 3000 Character Maximum