The IMF's Lagarde Is Unaware What The IMF's Market-Moving Report Contains

Tyler Durden's picture

While the exquisitely tanned replacement of former IMF head and Sexcapade-extraordinare DSK, Christine Lagarde, who may or may not have nationalized the entire UV-tanning light inventory of CNBC's Fast Money show, is very much aware of what the latest fashion in leather jackets or what the most fashionable plumage of pret-a-porter Hermes sweaters of the Fall season is, she sadly has absolutely no insight into what the actual contents of the IMF's most watched semi-annual report are, as confirmed by the following exchange between her and an Irish Examiner journalist, that has to be seen to be believed. Critically, not only is it clear that Lagarde has not read the WEO report but the section that IE's Ann Cahill asks about brings up a critical systemic problem in the IMF's over-estimation of growth forecasts in a world of increasing fiscal consolidation - an asymmetric fiscal multiplier.


Christine Lagarde made three crucial mistakes during the Eurogroup press conference.

The first, and most obvious, was letting her guard down and showing off the elite toffee-nosed arrogance that pervades the entire European Council when she initially "who are you and where are you from?" dismissed the Irish Examiner's Ann Cahill, who while failing to hobnob with the Paris Fashion show glitterati, knows enough about finance to shame the head of the world's bailout organization.

The second, which was apparent from Lagarde's parrot-like generic response to Ann's well-thought-out question, was the obvious fact that Lagarde had not read the World Economic Outlook document...

Forward to 36:00 in the following clip to see the initial 'WTF' moment and then the stumble-bumble around the actual question


The third, and perhaps most critical given Lagarde's dismissal of it, is the fact that Ann Cahill's question was extremely astute and points out a huge potential problem of over-confidence in all of the IMF's forecasts.


In Box 1.1 - Are We Underestimating Short-Term Fiscal Multipliers? - the IMF undertakes an important investigation into the fact that their forecasts are consistently over-estimating growth in the real-world.

The main finding, based on data for 28 economies, is that the multipliers used in generating growth forecasts have been systematically too low since the start of the Great Recession, by 0.4 to 1.2, depending on the forecast source and the specifics of the estimation approach. Informal evidence suggests that the multipliers implicitly used to generate these forecasts are about 0.5. So actual multipliers may be higher, in the range of 0.9 to 1.7.

This might sound like a 'good' thing - but critically as Ann Cahill's question pointed to, in a world of fiscal consolidation, the 'under-estimation' of fiscal multipliers means the effect of a fiscal drag is under-estimated and so growth is over-estimated.


In fact, when we look at the errors (below), instead of the nice linear regression that they see in the chart, we notice (the red and green slopes) a much more pronounced asymmetry to the fiscal multiplier over-/under-estimation.


The forecast of fiscal consolidation rises (to the left on the x-axis), so the errors of over-estimating growth (up on the y-axis) increase; and vice versa.


What this means - simply put - is that it appears there is momentum in fiscal multipliers or at the very least, there is a much more marked downside to fiscal consolidation than upside to fiscal expansion.



Source: IMF

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
toady's picture

Exquisitely tan? Was there a missing /sarc?

When I see her I usually think disturbingly orange. Or is that annoying orange?

idea_hamster's picture

Sorry -- ZH doesn't spoon-feed us the <sarc> tags.  TD seems to leave it up to us to be "active readers."

As for Lagarde, I agree that she has that same creepy Oompa Loompa look that Mozilo has.

WonderDawg's picture

She looks like Mozillo's little brother.

Hulk's picture

AT last ! A cure for the 4 hour erection !!!

strannick's picture

The only thing worse than the greed of bankers is the earnest policies of academics

bank guy in Brussels's picture

The Irish Examiner reporter's good question to Lagarde about the fiscal multiplier, is a topic well-covered last week in an Ambrose Evans-Pritchard article, 'Multiplying Europe's fiscal suicide' -

In summary, the figures being used, to claim that cutting budgets is a good thing, are extrapolated from a few situations where countries have their own currency and can devalue, and also were able to lower interest rates from some higher levels ... and neither situation applies now to the Mediterranean countries in the euro-zone.

Evans-Pritchard writes:

« The entire EU austerity plan is based on a false premise. This disastrous error is now clear beyond any reasonable doubt.

The Teuto-Calvinists believe – or profess to believe, since much of their dogma is national self-interest dressed up as theory – that the fiscal multiplier is around 0.5.

That is to say, fiscal retrenchment worth 1pc of GDP will cut output by half as much, or around 0.5pc over two years. There is pain, but at least there is gain.

... [In fact] the multiplier is around 1.0 for the big countries ... The multiplier is nearer 2.0 for part of the Club Med bloc. ...

The IMF data – and indeed the more extreme theory of `expansionary fiscal contractions'  – is based on past cases where individual countries were able to claw their way out of trouble by exporting to a healthy global economy, usually by devaluing first and often by slashing interest rates as well. ...

Europe's manic determination to tighten further into recession to meet its bureaucratic targets is nothing less than suicidal. »

Acet's picture

Which is why the Portuguese and the Spanish started demonstrating against austerity measures even before they felt the full force of those: everybody is seeing through the example of Greece just how fucked up the idea of austerity for the sake of austerity is if a low productivity country is locked in a single currency zone with the likes of Germany.

Totentänzerlied's picture

"even before they felt the full force of those"

LOL ... meaning the 12th of Never?

"everybody is seeing through the example of Greece just how fucked up the idea of austerity for the sake of austerity is if a low productivity country is locked in a single currency zone with the likes of Germany."

Then common sense indicates they should demand their states withdraw from the EU/EMU and then proceed with aus- ... wait, no ... then they'd actually get the austerity they obviously don't want (gee I wonder whyyy...) and certainly are not getting.

Okay so I'm being facetious, but so are you - "austerity for the sake of austerity" LOL! More like "tell the Troika and core nations whatever they want to hear, the Fabian socialist Ponzi kleptocracy will continue as planned!" Okay, still not there? For you, austerity means your country's cradle-to-grave gold-plated welfare plan is not growing at a fast enough annual clip in terms of expenses/liabilities; for me, austerity means my country has never heard of welfare and could not cut social expenditures/outlays because there are none.

Europeans have been  ... living in a dream world, Neo.

WonderDawg's picture

Didn't even have to pay for a doctor's visit. She's not completely worthless, I guess.

Hulk's picture

Where yo been Dawg ???

WonderDawg's picture

Just hanging out, bro. Trying to make some money in this market. Mixed results but I'm winning more than I'm losing, so I got that going for me. Which is nice.

How you doing?

Hulk's picture

been doing good. sign into chat...

Shevva's picture

The up-side to a financial implosion is cheap hookers so not sure why you have a problem with a 4 hour woody, unless your paying for 2/3 at a time. My mate says you can get your lolly licked for a fiver.

Coke and Hookers's picture

"To view this content, please install Microsoft Silverlight"

Fuck Microsoft and somebody call those guys from Supernatural to salt and burn Lagarde's bones. We don't want vampires running around.

OttoMBMP's picture

Lagarde, Juncker, Rehn and all the other arrogant criminals will spend the rest of their lifes in gated communities.

At least some form of punishment.

Peter Pan's picture

I wish you had told me that her tan was orange a lot earlier. I just threw out my effing computer thinking it was going on the blink when I saw that orange colour. I wonder after that performance whether her surname is derived from the word Englsih word LAGGARD.

Peter Pan's picture

Or is Lagarde part of the orange revolution?

Chariots of the Feds's picture

I thought it was a given she was from planet beef jerky

vast-dom's picture

Romney pulls ahead of Obummer in latest Pew Research poll:



RSBriggs's picture

Fuck Obama.  I'm voting for Romney.

vast-dom's picture


lakecity55's picture

Why not? Do you have stock in a FEMA camp?

matrix2012's picture



Baritt Obomney for President :


*Any one less likely to go on war is the lesser evil!

samcontrol's picture

Fuck you , is BB any better? Fucking hillbilly.

Gringo Viejo's picture

Incompetent Mother Fuckers.

lakecity55's picture

One of the most foul, corrupt human beings (?) to ever infest the Congress....and that's saying a lot.

I hope she enjoys her gang-fuck by Hitler, Stalin, and Pol Pot when she gets there.

Ratscam's picture

a cunt lady that is not paying ANY taxes. All IMF and BIS employees are excempt from taxes, they can even deduct VAT, since they hace their own jurisdiction.. A very fair system indeed.

slaughterer's picture

Thos ex-McKinsey Eurocrats like Lagarde need the color black in their exterior armament just like at McKinsey:

McKInsey = House of Lies, Eurogroup = Group of Lies.  

nmewn's picture

(Lagarde) Details details. I need more staff!!!

max2205's picture

She's the spawn of Mozzello

nmewn's picture

All the IMF has ever been, is loan sharks housed in publicly funded marble buildings instead of hanging out in an alley by the dumpster.

chump666's picture

yes total gangsters, but as i have said before, i would rather hang with the real mafia, then these hypocritical, disgusting human beings.  i mean they are fleecing Greece to oblivion and saying 'we are doing this to save the world economy' what a pile of bs, the peasants of Greece, Spain and Portugal couldn't give a f*ck when the world goes into an economic meltdown.  just live off the land and drink wine, which they have been doing since all their empires collapsed in the last 500/1000yrs.   merkel goes there to show a good face, pure craziness.  some mad greek will blow himself up somewhere at some point.

nmewn's picture

Yes...did Ponzi teach the authorities his technique or did he learn it from them?

Since they were here before him, I'd have to say the latter...he was just un-licensed by them, therefore a criminal ;-)

Peter Pan's picture


Half_A_Billion_Hollow_Points's picture

OT, but crucially important:  ZH, please consider reporting Geoffrey West's work on collapse:

LawsofPhysics's picture

The NWO is in charge, the kicker is China and Russia are also in on it. I hope the southern hemisphere is ready for what is coming. These powers really have no other place to go.

CPL's picture

Gasses occupy the space given like problems.


You can literally see the point, to the micro second where she shits her pants and understands what horrible thing is coming next.  Her adam's apple bobs around under that thin leathery orange exterior.

Muppet Pimp's picture

The body language was screaming incompetence no doubt.  The house of cards is looking a bit more precarious every day.

TheFourthStooge-ing's picture

CPL said:

Her adam's apple bobs around under that thin leathery orange exterior.

I believe the technical term you're looking for is "dewlap".

Cognitive Dissonance's picture

Please....I'm begging you. Just make yourself stop with the tanning bed thingy.


Sunny side up

tip e. canoe's picture

love those swinging Hestia of her.

Zer0head's picture

not a tanning bed

just a holographic color saturation glitch


but rest assured Bloomberg's head of hair will be on the job in TOKYO talking up the NWO along with here esteemed colleague in NYC aka the bozo in the bow tie

RSBriggs's picture

Not a tanning bed - it's the same thing that turned John Kerry orange during the debates back in 2008.  Juicing carrots.