The skies over Lima are often grey. Last week was no exception, making it the perfect setting for the annual jamboree of economics and finance that accompanies the annual meetings of the International Monetary Fund and World Bank, the institutions created after the Second World War to provide balance to the global economy. Hundreds of finance ministers, central bankers, financiers and economists clogged the Peruvian capital’s already thick streets, as police escorts guided their shuttles and sedans to public talks and private meetings. They were a gloomy bunch. “The world is not in crisis, but there’s a great sense of unease,” said Tharman Shanmugaratnam, Singapore’s deputy prime minister.
Harvard University economist Lawrence Summers set the tone, using a newspaper commentary to label the current situation the most dangerous since the investment bank Lehman Brothers collapsed in 2008 and sparked a global financial crisis. The IMF last week openly discussed the possibility of stagnation, as it cut its outlook for global economic growth to a meagre 3.1 per cent. The meeting concluded with no clear commitment to do something about the situation, as there was no consensus on what could, or should, be done. What characterized the meetings was a sense of powerlessness. “This is a pretty unforgiving environment,” Bank of England governor Mark Carney said. “It’s not the type of economy in which one can make mistakes. And it’s not the type of economy in which, if one has some misfortune, or made a mistake, one has the luxury of time not to react.”
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