IMF Warns Wealthiest Nations About Debt

22 Mar

From the New York Times:

In a speech at the China Development Forum in Beijing, the I.M.F. official, John Lipsky, who is the deputy managing director, offered a grim prognosis for the world’s wealthiest nations, which are at a level of indebtedness not seen since the aftermath of World War II.

For the United States, “a higher public savings rate will be required to ensure long-term fiscal sustainability,” Mr. Lipsky said.

Mr. Lipsky said the average ratio of debt to gross domestic product in advanced economies was expected this year to reach the level that prevailed in 1950. Even assuming that fiscal stimulus programs are withdrawn in the next few years, that ratio is projected to rise to 110 percent by the end of 2014, from 75 percent at the end of 2007.

Indeed, the ratio is expected to be close to or to exceed 100 percent for five of the Group of 7 countries — excluding Canada and Germany — by 2014.

Mr. Lipsky warned governments not to try to inflate their way out of their debts.

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