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Fiscal Support Or Bankruptcies And Unemployment

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EDITOR NOTE: According to the IMF, America has two choices: ramp up government spending or face a major wave of unemployment and bankruptcies. IMF Managing Director Kristalina Georgieva may be right, but what she’s ultimately asking is that we take a socialistic approach to solving the problem. This doesn’t go without some major disparities. For the government to increase the national debt, all Americans will have to pay for it in the future. All businesses, whether capable or poorly run, will be receiving what’s essentially a bailout. Nevertheless, you (and every other American) will be coerced into making an investment. When the strong companies recover, you, as an individual, may not directly benefit from what you had been forced to “invest” in. However, for the top wealthy Americans who have a stake in the stock market, their asset values will see a massive increase throughout the entire process. That is, until inflation sets in. They may be hurt by the coming inflationary trend, but many have enough diversified hard assets to withstand it. As for you, however, unless you own gold and silver, your purchasing power will likely get crushed. Hence, the IMF is asking the US to accelerate this “wealth transfer”--money from your pockets to the government, corporations, and the top wealthiest people in the nation.

The head of the International Monetary Fund on Friday warned that the United States faced a possible “dangerous wave” of bankruptcies and unemployment if it did not maintain fiscal support until the coronavirus heath crisis ended.

IMF Managing Director Kristalina Georgieva told reporters the United States, the world’s biggest economy, had scope to take further action and doing so would provide positive spillover effects for the global economy.

Asked if she supported President Joe Biden’s $1.9 trillion relief plan, Georgieva said the IMF supported the plan’s focus on vaccinations, health care, support for the unemployed and aid to state and local governments.

Despite the economy’s nascent recovery, Georgieva said risks remained, especially if support was not maintained long enough.

“There is still that danger that if support is not sustained until we have a durable exit from the health crisis, there could be a dangerous wave of bankruptcies and unemployment,” she said.

In 2020, she said U.S. bankruptcies were lower than average in normal years due to fiscal support and it was important to continue to calibrate that support in 2021 while preparing carefully for the moment when some businesses did not survive.

“We want to see careful, well-calibrated policy action. We are keen for policy support to be there,” she said, adding, “Great care is necessary so we don’t find ourselves in a difficult situation.”

Georgieva acknowledged concerns raised by former Treasury Secretary Lawrence Summers about a possible overheating of the U.S. economy, but said she was confident that new Treasury Secretary Janet Yellen would keep a careful eye on those risks.

“Indeed we have to be watchful of risks, but we have the best possible Secretary of the Treasury for this potential risk, she said, “And I’m confident that there will be a lot of attention being paid on anticipating and, if necessary, taking appropriate action to address these risks.”

Originally posted on Reuters

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