Gordon Brown’s Baldrick-style Cunning Plan for global finance involves using the International Monetary Fund (IMF) as an “early-warning system”. Great idea. When I was a business journalist, I remember the IMF early warnings – about how Brown’s switch to debt-fuelled profligacy post-2000 would end in tears. The key misjudgement made by both Brown and Greenspan was to try and get around the 2001 slowdown (which would have flushed out bad businesses and dodgy loans) by pumping the economy full of cheap debt. Pain delayed today means disaster tomorrow in financial markets. The IMF said in September 2001 that Brown’s spending spree was “regrettably pro-cyclical”. And since then? Here, via what Guido would call a co-conspirator, are some IMF “early warnings” Brown could have done well to heed…
September 2006: “A key risk on the demand side is that the continued cooling of advanced-economy housing markets will weaken household balance sheets and undercut aggregate demand.
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