IMF warns against deflation
The International Monetary Fund's (IMF's) Managing Director Dominique Strauss-Kahn was quoted on Sunday as saying the risk of deflation was more of a threat to the economy than inflation, at least in the near future.
"In the short term, the risk of inflation is zero, today we have rather the problem of deflation," he told Germany's Handelsblatt business daily in an interview to be published on Monday.
It was unclear which countries he was referring to. He also said countries around the world were too slow in acting to clean up banks' balance sheets.
"Whether we are talking about Germany, other European countries, or the United States, this subject is moving too slowly," he said, Reuters reported.
The solution proposed by Finance Minister Peer Steinbrueck is to allow banks to create their own individual "bad banks" to park these assets. Steinbrueck's plan distinguishes between toxic or worthless assets and "illiquid" assets, which banks are finding difficult to sell in today's clogged-up markets but which could eventually rise again in value.
"In the short term, the risk of inflation is zero, today we have rather the problem of deflation," he told Germany's Handelsblatt business daily in an interview to be published on Monday.
It was unclear which countries he was referring to. He also said countries around the world were too slow in acting to clean up banks' balance sheets.
"Whether we are talking about Germany, other European countries, or the United States, this subject is moving too slowly," he said, Reuters reported.
The solution proposed by Finance Minister Peer Steinbrueck is to allow banks to create their own individual "bad banks" to park these assets. Steinbrueck's plan distinguishes between toxic or worthless assets and "illiquid" assets, which banks are finding difficult to sell in today's clogged-up markets but which could eventually rise again in value.
