Posted By thestatedtruth.com on September 2, 2010

Key words here are…..”public debt had served for decades as the ultimate shock absorber — rising in bad times but not declining much in good times.”  Now things have to change as  the wealthiest nations face years of belt-tightening. 

International Monetary Fund Warns G7 on Debt
Thursday, 2 Sep 2010 
By: Sewell Chan

The world’s most developed economies, which have been racking up spending since the mid-1960s, face record levels of debt as a result of the 2008-9 financial crisis and have little room for maneuver, the International Monetary Fund warned on Wednesday.

Despite the stark warning and the prospect that the wealthiest nations face years of belt-tightening, the fund also said that the risk of default by heavily indebted European countries like Greece, Ireland and Portugal had been significantly overestimated.

In three new research papers, the fund’s economists offered stern admonitions while cautioning against an overreaction.

That mix of messages was reflected in one paper on the long-term trends in the public finances of the Group of 7 economies.

The authors, Carlo Cottarelli, director of fiscal affairs, and Andrea Schaechter, a senior economist, concluded that public debt had served for decades as “the ultimate shock absorber — rising in bad times but not declining much in good times.”

More at:  http://www.cnbc.com/id/38967851

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