Rocky Vega

The International Monetary Fund’s managing director, Dominique Strauss-Kahn, has pointed out that the global is economy is built upon a destabilizing and dangerous combination: emerging economies, where brisk growth has created two-tiered societies with rich and poor on hugely unequal footings, and developed nations, that are still wracked with high unemployment and have little relief in sight.

He suggests these imbalances are igniting the breed of deep-seated animosity that can lead to civil wars, especially in those countries with the largest wealth disparities and highest unemployment.

According to the Telegraph:

“‘It is not the recovery we wanted. It is a recovery beset by tensions and strain, which could even sow the seeds of the next crisis,’ he [Dominique Strauss-Kahn] said.

“‘Global unemployment remains at record highs, with widening income inequality adding to social strains,’ he said, citing turmoil in North Africa as a prelude to what may happen as 400m youths join the workforce over the next decade. ‘We could see rising social and political instability within nations – even war,’ he said.

“The IMF has published a paper entitled Inequality, Leverage and Crisis arguing that the extreme gap between rich and poor – with echoes of the US in the late 1920s – was an underlying cause of the Great Recession from 2008-2009. The paper, by the Fund’s modelling unit, warned of ‘disastrous consequences’ for the world economy unless workers regain their ‘bargaining power’ against rentiers. It suggests radical changes to the tax system and debt relief for workers.”

For the purposes of the IMF paper, the discussion focuses on how changes in income distribution can result in an abuse of leverage, and a build up to the kinds of crises witnessed in the 1920-1929 and 1983-2008 periods. However, the IMF’s more bottom-line warning seems to be that lower income groups, without bargaining power over income, are becoming more likely to respond with violence than with a traditional picketing. You can see more details in the Telegraph’s coverage of how the IMF is warning of civil wars as global inequalities worsen.

Best,

Rocky Vega,
The Daily Reckoning

Rocky Vega

Rocky Vega is publisher of Agora Financial International, where he advances the growth of Agora Financial publishing enterprises outside of the US. Previously, he was publisher of The Daily Reckoning, and founding publisher of both UrbanTurf and RFID Update -- which he ran from Brazil, Chile, and Puerto Rico -- as well as associate publisher of FierceFinance. Rocky has an honors MS from the Stockholm School of Economics and an honors BA from Harvard University, where he served on the board of directors for Let?s Go Publications, Harvard Student Agencies, and The Harvard Advocate.

  • NadePaulKuciGravMcKi

    The IMF is very very ready ~
    to help Egypt for a slight profit.

Recent Articles

4 DIY Halloween Costumes You Can Make in 10 Minutes or Less

Peter Coyne

Halloween is tonight! And just in case you waited until the last second to think about what you're going to wear, here are four costume ideas you can easily put together in about 10 minutes or less. With these costumes you'll be the hit of your friend's party - provided you're friends with a bunch of economists. (Downloadable masks included...) Happy Halloween!


Bill Bonner
4 Basic Truths to Help You Navigate the Financial News

Bill Bonner

The financial news is full of misinformation - reported by unreliable pundits and taken at face value by an easily swayed public that doesn't really no better. That's why today, Bill Bonner relays the four basic truths he's discovered during his 30 year career in the financial industry to help you make sense of it all. Read on...


Extra!
How YOU Can Help Pass the Swiss Gold Referendum

Grant Williams

For those who doubt the effectiveness of the Swiss Gold Initiative, Grant Williams has a few startling charts to show you. Today, he relays just how popular this movement is, and how you can actually influence the outcome... no matter where in the world you call home. Read on...


How Small Cap Stocks Saved the Market

Greg Guenthner

For most of the year, no one wanted small cap stocks in their portfolios. But over the last three weeks, few sectors of the market have performed better than small caps. Greg Guenthner explains how to use this to your advantage... and what to expect for the rest of 2014. Read on...


Why a Strong Dollar is the Mortal Enemy of Gold and Oil

Frank Holmes

Gold and oil are down because the US dollar is up, despite all the inflationary pressures the Fed has put on it. What's going on? Today, Frank Holmes, breaks down the U.S. economy’s current direction with several important charts. Plus, he's got a mining play for you that's prospering despite the current sentiment...