IMF: GMO between myopia and scarce credibility

Abstract

This essay examines the credibility of the International Monetary Fund (IMF) and of financial analysts' forecasts. It opens with a Gallup survey showing the lowest trust in the US media since 1972 and extends this doubt to financial forecasting. Drawing on research by IMF economist Prakash Loungani using Consensus Forecasts data, the author notes that only two of the 150 recessions recorded over three decades were predicted. The article contends that the IMF has become a “Genetically Modified Organism” whose current role runs opposite to its institutional aims, having moved from the Keynesian logic that established it to a monetarism that is an end in itself. Its forecasting models are described as deterministic, asymmetric to a probabilistic reality, and premised on reality adapting to models rather than the reverse. The author asks where the IMF stood during the sub-prime fraud, the manipulation of ratings and the spread of toxic financial products, and why it was ready for austerity measures without regulating them. The IMF and financial analysts are likened to the scientists of Laputa in Gulliver's Travels, detached from the real world. Citing Romano Guardini on power, the essay holds that the crisis is cultural rather than economic and that Western society must find the right way to respond to the problems strangling it.

Abstract prepared by the editorial office from the full text of the article; the authors did not supply one.