IMF Managing Director Strauss-Kahn feels the global economy is emerging from a deep downturn, but the recovery will be sluggish and unwinding stimulus measures too soon could derail an upswing.
The official is concerned about the risks of a rise in unemployment, which he feels could lead to a decline in potential growth and worrying social consequences.
While he believes the time is right for policymakers to develop exit strategies, he urges them to “err on the side of caution” when deciding when to begin implementing them.
Strauss-Kahn feels central banks could face challenges to their independence as the global economy emerges from the crisis, including political pressure to “inflate the debt away.” These pressures are to be resisted.
The official is also concerned that an improvement in financial markets is leading to complacency in dealing with the problems in the banking system, including reform of compensation practices.
Strauss Kahn feels the increase in the dollar’s value during the crisis has shown its status as an unrivalled safe haven asset, predicting the search for alternatives was a question that would be decided over the coming decades, rather than the coming months.
He feels as the global economy evolves we’re likely to see new currencies rise in stature and international usage, leading perhaps to a system with several co-equal anchor currencies.
