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Home Publications Blogs Beat the Press The IMF, Which Missed the $8 Trillion Housing Bubble, Warns About the Deficit

The IMF, Which Missed the $8 Trillion Housing Bubble, Warns About the Deficit

Friday, 28 January 2011 07:56

The Washington Post ran an article highlighting warnings about the budget deficit from the International Monetary Fund (IMF). It would have been helpful to inform readers that the IMF completely missed the $8 trillion housing bubble, the collapse of which collapsed the U.S. economy, leading to the worst downturn since the Great Depression.

This background would be helpful to readers in assessing the importance of the IMF's warnings.

Comments (6)Add Comment
hollow threats
written by frankenduf, January 28, 2011 8:11
also important to understand the IMF MO- issuing 'warnings' to third world policy makers to implement austerity measures implied the withholding of investment capital (blackmail, if you will)- the irony of such a warning to the us is that, as Dean points out, this type of threat is Orwellian by the fact that us bonds are still the default safe haven as evidenced by interest rates
ps- holy crap!! that captcha is freakin hieroglyph!!
written by Benedict@Large, January 28, 2011 8:15
The WaPo article simply proves that the IMF is completely clueless about the nature of fiat currency and its influence on a country's macroeconomic financing.

As for S&P's downgrade of Japan, could they please explain how Japan could ever default on yen-denominated debt? What is Japan going to do? Run out of yens?
written by skeptonomist, January 28, 2011 9:17
Also in deficit hysteria news, from NY Times headlines yesterday:

"S&P Downgrades Japan..."

"Moody's to Factor Pension Gaps in States' Ratings"

As Dean has pointed out before, the rating companies played an even more important role in the debacle with their incompetent overratings of mortgage securities.
written by fuller schmidt, January 28, 2011 10:39
Dammit Gumby, deficits do not matter.
Bubble collapse
written by djt, January 28, 2011 5:50
The existence of the bubble caused the collapse, no more no less. If you want to know what caused the collapse of the bubble, find the cause of the bubble blowing up. That is then the cause of the collapse.

I and many others saw the bubble blowing up; I knew it would collapse. Didn't know precisely when, or what the blowback would be since I wasn't familiar with all the newfangled financial products.

I did know the week of the bubble peak in my area the exact week it happened and was later proven correct; just couldn't predict it ahead of time. How did I know? Seeing 25% of homes for sale in a new development was one clue. The lead supervisor for the development telling me was another. He recognized it too.
No war, no deficit
written by Scott ffolliott, January 30, 2011 8:21
Depressing, isn't it?

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.