Friday, January 2, 2015

Chrsitine Lagarde: Accomodative Monetary Policy still needed while "Growth Remains Anemic"

IMF Chief Christine Lagarde issued these comments at year end 2014 as quoted in this Reuters article. These new comments suggest that the IMF still thinks global growth is weak. Also, she warns that despite increased regulation in the banking industry, a "shadow banking" industry still exists and that "more effort was needed to fill the shortfall of data on the financial sector". Below some quotes from the article and then a comment. Please read the full article linked above.


"Accommodative monetary policy will remain necessary for as long as global growth remains weak, IMF managing director Christine Lagarde said in a newspaper article published on Wednesday."

"Accommodative monetary policy will continue to be necessary while growth remains anemic, although we must pay very close attention to the risk of potential spillover," Lagarde wrote in an opinion piece for Italian business daily Il Sole 24 Ore."

"Lagarde said progress had been made in regulating financial services but that countries must now pursue reforms and improve banking supervision."

"She called for tighter control over "shadow banking", or non-bank credit and off-balance sheet bank lending, and said more effort was needed to "fill the shortfall" of data on the financial sector and allow for better regulation."
My added comments:
This brief statement tells you a lot. The IMF sees world growth as "anemic". Also, they are still concerned about potential problems in the banking system from "shadow banking". This is defined as "non-bank credit and off-balance sheet bank lending".
Consider that for a moment in light of the trillions of derivative products out there in the global system. When you have "shadow banking" and "off-balance sheet bank lending" that means NO ONE knows what all the true risks are out there in the global banking system. You can't assess the risk of something not reported or disclosed to the public.
Why such bank lending and transactions are permitted to be done "off- balance sheet" is a reasonable question to ask. Especially if they can threaten the stability of the entire banking system as many believe.

Coming Later Today - The Mainstream Forecast for 2015

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