The IMF’s rosy world economic forecast

In 2009, the International Monetary Fund (IMF), along with most other economic forecasters, was caught flatfooted by the global economic and financial market meltdown that occurred in the wake of the Sept. 2008 Lehman bankruptcy. The IMF’s main mistake was to ignore the likely world financial market consequences of the bursting of the U.S. housing and credit market bubbles.

Today, the IMF seems to be setting itself up to make the same forecasting mistake. It is doing so by downplaying the global financial market fallout that must be expected from the likely bursting of a global “everything” asset and credit market bubble that is much larger than it was during the earlier U.S. housing market bubble.

The IMF’s rosy world economic outlook is all the more surprising considering how very much more indebted the world is today than it was in 2008. It is also all the more surprising considering how very likely it is that an overly expansive U.S. fiscal policy will cause bubbles to burst soon by driving up U.S. interest rates.

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