"Global Risks Are Rising, But There Is a Path to Recovery": Remarks at Jackson Hole
«Les risques s’accentuent dans le monde, mais le chemin de la reprise n’est pas fermé» Allocution prononcée à Jackson Hole
By Christine Lagarde
Managing Director, International Monetary Fund
Jackson Hole, August 27, 2011
As prepared for delivery
Let me first thank Tom Hoenig for inviting me to participate in this remarkable conference in Jackson Hole. Tom has served the Federal Reserve System with great distinction, and has made a significant contribution to economic and monetary policy discussion. And let me also recognize my friend John Lipsky who, after five years of distinguished service as First Deputy Managing Director of the IMF, will be stepping down—and who has been so generous in giving up his speaking slot to me today.
Listening to the many wise voices here over the last day or so, I am struck by several salient themes. The global economy continues to grow, yet not enough. Some of the main causes of the 2008 crisis have been addressed, yet not adequately. There remains a path to recovery, yet we do not have the luxury of time.
Two years ago, it became clear that resolving the crisis would require two key rebalancing acts—a domestic demand switch from the public to the private sector, and a global demand switch from external deficit to external surplus counties. On the first, the idea was that strengthened private sector finances would allow the engine of growth to switch back from the public to the private sector. On the second, the idea was that higher demand in surplus countries would make up for a lower spending path in deficit countries. But the actual progress on rebalancing has been timid at best, while the downside risks to the global economy are increasing.
Those risks have been aggravated further by a deterioration in confidence and a growing sense that policymakers do not have the conviction, or simply are not willing, to take the decisions that are needed.