Global Economic Crisis

Economic and financial history seems to be repeating itself, in an utterly surreal example of hubris and mockery. When residential real estate prices in the U.S. began collapsing and the sub-prime mortgage market imploded, Federal Reserve Chairman Ben Bernanke and his then sidekick, Treasury Secretary Hank Paulson, boasted that their brilliant intervention had “contained” the crisis, preventing it from spreading into the broader American economy. Well, in hindsight, they were partially right. The sub-prime debacle did quite spread, or rather only spread, to the wider U.S. economy. It merely metastasized across the world, bringing about the global economic crisis. It now appears that the head of the International Monetary Fund is doing the same thing.

Dominique Strauss-Kahn, the scandal-prone managing director of the IMF (he had previously been involved in a highly publicized intimate tryst with a female employee at the IMF, triggering a legal investigation into his conduct) has just offered his pontification on the potential systemic risks connected with the ongoing Greek public debt and deficit crisis. He told the news agency Reuters that “there was no reason to expect that Spain and Portugal will need external financial support to get to grips with their public debt.” The IMF boss, in essence, claims that the Greek debt crisis will not spread to other regions of the Eurozone experiencing high levels of public debt to GDP.

His calming words will probably fool few investors. Obviously, Dominique Strauss-Kahn has engaged in PR spin, as his attempts at downplaying the growing public debt to GDP ratios throughout the Eurozone and in the UK, not to mention the United States, are absurd beyond all measure. More importantly, he has illustrated  in his own uniquely obtuse fashion that the IMF is an increasingly irrelevant institution as the mounting public debt levels ensure that a massive sovereign debt crisis is ahead of us all.