IMF Chief Economists Blames Problems on Investors

Olvier Blanchard is a very well-respected academic economist, and currently also Chief Economist at the International Monetary Fund. He sees today’s current big problems primarily due to investors.

  • Self-fulfilling outcomes of pessimism or optimism, with major macroeconomic implications.
  • Incomplete or partial policy measures can make things worse.
  • Financial investors are schizophrenic about fiscal consolidation and growth.
  • Perception molds reality.

So, the unsustainability of Euro member fiscal policy is supposedly irrelevant, compared to the insane, self-fullfilling prophesies of investors. As John Cochrane noted, the Euro leaders keep looking for the Big Announcement that will soothe markets into rolling over another few hundred billion euros of debt. Alas, the problem is reality, not psychology.

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About Eric Falkenstein 136 Articles

Eric Falkenstein is an economist who specializes in quantitative issues in finance: risk management, long/short equity investing, default modeling, etc.

Eric received his Ph.D. in Economics from Northwestern University , 1994 and his B.A. in Economics from Washington University in St. Louis, 1987

He is the author of the 2009 book Finding Alpha.

Visit: Eric Falkenstein's Website

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