Saturday, April 12, 2008

Financial tail wagging the economic dog

Need a summary of IMF's latest WEO- listen to this interview with Simon Johnson.

QUESTION: I remember sitting here a year ago and you saying that you did not think that the financial tail would wag the economic dog. Now, today, you are saying that the world faces a one-in-four chance of a recession. How are we to know that you are not being overly pessimistic this year while you were being overly optimistic last year?

MR. JOHNSON: Well, I think that is a fair question. I think that we make a forecast and any forecast can be wrong; most forecasts presumably are wrong. We are giving you an honest assessment of how we see the world today.

I think that everyone has learned a great deal about financial dogs and their tails, and how exactly those worked over the past year. So, on the basis of what we know today, this is our best forecast. Do ask me again next year about how we have done.

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