World has to restore sound public finances sooner or later: IMF’s Lagarde

CEAT Kelani Holdings Managing Director Ravi Dadlani (right) and Lanka Ashok Leyland CEO Umesh Gautham exchange the OEM agreement

Apr 13, 2012 (LBO) – The world has to restore sound public finances, while some are forced to cut deficits fast others have to do it slowly, Christine Lagarde the managing director of the International Monetary Fund has said. Lagarde said loose monetary policy (money printing) could support where inflation remains in check but emerging nations should be careful of credit bubbles.

Emerging Credit

“Monetary policy can also support growth where inflation remains in check—as is the case at present in virtually all advanced economies,” Lagarde said.

“For emerging economies, a bit more caution is required, especially if rising oil prices and extended credit booms begin to test the bounds of inflation.”

A US economic and credit bubble crashed in 2007 following years of state intervention to keep interest rates low by printing money by the Federal Reserve, amid a large deficit to fight wars.

Classical economists have said that that Europe, in a bid to not let the Euro appreciate too much to pander to exporter interests, also printed too much money and fired a bubble.

Only countries like Australia and Canada which kept interest rates high despite pressure from exporters and other and allowed s

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