It did seem too good to be true. The International Monetary Fund last week issued its second paper in three months acknowledging that the damaging effects of austerity measures on economies is much stronger than previously assumed. Unlike October's quiet admission of error, however, this time IMF researchers say colossal miscalculations don't matter.
Perhaps the IMF is taking back the bureaucratically couched, quiet mea culpa it genteelly issued last October? Being an orthodox economist evidentially means never having to say you are sorry. It does mean that if reality doesn't match the theory, then it is reality that must be changed.
Readers may recall that in October 2012 the IMF slipped into its World Economic Outlook, in which it forecast that the global economic growth rate would continue to decline, this interesting line: "Public spending cutbacks and the still-weak financial system [are] weighing on prospects."
That is as close to an admission as we are likely to receive from the IMF, the World Bank or other financial institutions that the austerity that they relentlessly impose weakens economies. Perhaps some at the IMF are getting cold feet at such an admission, or, more likely, such ideologically inconvenient pronouncements received more attention than expected given the tepid language buried in an otherwise routine paper.
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