“We are talking about the things that still need to be solved and here it became clear that the global economy’s risks are very evident, as is clearly stated in the communiqué. The economic growth outlooks are not as good as we would hope.”-Angela Merkel, Chancellor of Germany

The German leader made the statement on 30 October 2012, after reading a report from the Organization for Economic Co-operation and Development, World Trade Organization, International Labour Organization, International Monetary Fund and the World Bank.

The IMF boss, Christine Lagarde, admitted that economic growth will be pathetic: “I would characterize the situation as that of a laborious recovery out of the financial crisis through some degree of stabilization by way of tepid growth.” 

The IMF also pushed developed economies to further consolidate their fiscal policies. This is another way of saying government deleveraging (typically in the form of austerity) should be increased.

(deleveraging began for individuals and small businesses with the 2008 Credit Crisis/Crunch. It’s one of the causes behind all the Sears & Kmart store closings in the U.S.)

The IMF is specifically targeting the United States, saying the U.S. needs a credible fiscal consolidation plan, implemented “at an appropriate pace” in order to stabilize a “fragile” world economy.

Just two days ago, the IMF, along with European lenders, told Greece that they could not provide anymore financing unless more drastic changes were made, such as drastic changes in Greece’s labor/wage laws.  The Greek coalition government is showing signs that it would rather default than make anymore compromises.

The paradox is that while world economic organizations want increased deleveraging of individuals, small businesses and governments, they also want employment to somehow increase and people to somehow spend more money buying stuff they don’t need (domestic consumption)!

And it’s not just developed countries being told to axe their government spending, even oil rich Arab countries are being told to do the same: “A rapid deterioration in the global economy could bring about developments similar to what the region experienced in 2009, including a sharp fall in oil prices and disruptions to capital flows.”-IMF

The IMF explained that as the world economy worsens, demand for oil is going to drop to such lows that the the six Gulf Cooperation Council economies of Saudi Arabia, United Arab Emirates, Kuwait, Qatar, Oman and Bahrain could experience an economic crash.

The IMF projects that the price of oil could drop by $30 USD per barrel in 2013, and continue dropping!  This might sound like good news, but it’s because people won’t have the money to buy it at any price!