Talking Point anxious, impotent bleating from the IMF, the Fed and the World Bank

Talking Point
Broadcast: 25/09/2011

ALAN KOHLER, PRESENTER: This week's panic on global markets is almost entirely a reaction to dysfunctional politics.

The long, slow default of Greece has left Europe's financial system on the edge of a precipice, but the political leaders have so far only been able or willing to come up with short-term solutions. Stop-gap liquidity is being provided, but its continuation is subject to uncertain political whim.

In the United States, they can't even manage short-term solutions to the fading economic recovery and the refusal of the labour and housing markets to recover at all. More monetary and fiscal stimulus is obviously required while the housing sector deleverages and the corporate sectors sits on its $2 trillion in cash, but Congress and the White House are engaged in a stand-off and now the Federal Reserve is firing blanks.

This week's action by the Fed was worse than useless, selling short-dated bonds and buying long-term bonds with the aim of getting the long-term mortgage rates down simply highlighted the fact that money printing, where you buy bonds but don't sell anything first, is finished.

Moreover, there's now an official chorus of anxious, impotent bleating from the IMF, the Fed and the World Bank. No wonder investors are panicking. It could get a lot worse from here.

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