Redwood: IMF needs a euro rethink

Under Madame Lagarde, the IMF is having some second thoughts about cutting deficits.

Some are now worried cutting deficits by cutting public spending, or by putting up taxes, can make recovery difficult or impossible. If each extra pound of public spending or each extra pound of borrowed public money has a positive effect on the economy greater than the value of the money spent, removing that stimulus means lower output. If the private sector does not spring into life and replace the public spending cut, a public spending cut can lower total output. The IMF used to think too much public spending crowded out private sector spending, and depressed confidence in the priv...