The IMF has issued a warning to governments across the globe that the world economy is in a delicate place and policymakers, along with central banks, should be very careful how they proceed. With the world economy on somewhat of a knife edge, the IMF believes countries that are in the black, such as Korea and Germany, are in a position to provide a lot of stimulus, however, are choosing not to. Only a few days ago the IMF also called on Switzerland to increase its public spending.
The warnings come on the back of reports that the EU is considering hitting the US with tariffs of over EUR10bn in retaliation over subsidies to Boeing. This follows a US proposal to seek damages of over USD11bn from the EU over its claim that Airbus has received state aid. This dispute between the two plane making giants has been ongoing for 14 years, with both believing the other gets unfair government support. Pierre Moscovici, the European Commissioner of economic affairs, believes level heads are needed and it’s time for both the US and the EU to ‘cool down’ and do whatever is possible to avoid a trade war. He called the thinking that the US should consider the EU a threat like China ‘absurd’.
Speaking on Friday to Bloomberg, David Lipton, the IMF’s First Deputy Managing Director warned ‘We see downside risk and that means one has to be very careful’ adding ‘With trade tensions, not knowing where monetary policy is going to go, not knowing how Chinese growth will turn out, it’s time to make sure policymakers do no harm’.
We also note that over the weekend, the leader of the free world took to Twitter once again to attack the Fed, once again. This time he ranted ‘If the Fed had done its job properly, which it has not, the Stock Market would have been up 5,000 to 10,000 additional points, and GDP would have been well over 4% instead of 3%, with almost no inflation. Quantitative tightening was a killer, should have done the exact opposite!’.
Almost every country in the developed world would kill for the same growth rate as the US… there is just no pleasing some people!