IMF: 20% stock drop coming

By WND Staff

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The International Monetary Fund is expecting a 20 percent plunge in the markets in the United States, United Kingdom, Eurozone and China over the coming 24 months, according to a report in the Telegraph.

Jose Vinals, the chief of the organization’s financial stability division, said there are several contributing factors, including a huge “loss of market confidence” that would drag down the markets.

The IMF report, addressing global financial stability, said “financial and economic stagnation” looms unless governments find a way to avoid the “pernicious feedback loop of fragile confidence, weaker growth, low inflation and rising debt burdens.”

The Telegraph called it the “bluntest warning to date on the costs of policy inaction,” and outlined how investors can “lose faith in policymakers’ ability to revive the global economy.”

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Vinals predicted the resulting slowdown could knock 4 percent from the world’s output, “relative to current expectations over the next five years,” and he noted a $1.3 trillion corporate debt in China poses “potentially serious challenges to financial stability if defaults pushed banks over the edge.”

Under the scenario he sees possible, Vinals said stocks in the U.K., U.S., Eurozone and China all would lose “a fifth of their value over two years.”

At least partly because households and businesses both are “likely to save more and spend less in the uncertain global environment.”

Vinals characterized the hit on the global economy as “forgoing one year of global growth.”

The answer, he said, is a “more balanced and potent policy mix for improving the growth and inflation outlook.”

In Europe, he said banks need policymakers’ help to deal with loans where debtors are behind on payments, and in China, regulators need to be more aggressive.

“Much is at stake,” he told the Telegraph. “Additional measures are needed to deliver a more balanced and potent policy mix. If not, market turmoil may recur and intensify.”

The IMF said policies that are growth-friendly are needed to support an economic recovery and a stabilization will start to appear when spenders are willing again to take reasonable risk.

But IMF report did offer some stark warnings, estimating that more than 15 percent of commercial bank loans to companies in China were “at risk.” Those companies already are taking 72 days to pay suppliers, up from 53 days just four years earlier.

Nick Adams’ book, “The American Boomerang: How The World’s Greatest Turnaround Nation Will Do It Again,” is endorsed by the likes of Dr. Ben Carson, Glenn Beck, Dick Morris, Gov. Mike Huckabee and Dennis Prager

 

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