IMF

At times of economic hardships many countries look up to the International Monetary Fund (IMF) for solutions. Ideas and methods in which their national economic system can be kick started back up to its former performance before the economic crisis of 2008.

However, with Greece on the verge of bankruptcy and other eurozone countries such as Spain which face many economic difficulties, for example dealing with a high unemployment rate, the IMF's job proves to be very difficult. Spain had an unemployment rate of 24.1% in March, what this means is that out of all the people who are able to work and are looking for work, 24.1% of them can not find a job, comparing this to  Spain's unemployment rate at the end of 2007 when it was just 8.8% just shows how hard Spain has been struck by the recession. As you can see, nearly a quarter of the labour force are not active, this makes it not only an economic problem but a social problem also. It has a negative effect on society as at times of high unemployment more people tend to drift to robbery, black markets grow larger and other negative influences to society arise. Furthermore, the Spanish government will also suffer as it will face an increasing budget deficit due to factors such as more unemployed benefits being issued, whilst at the same time trying to find a solution to their existing problem.

England has also had a hard time since the crisis, but luckily it kept its monetary independence. Although it faced levels of inflation which were higher than the targeted 2% (plus or minus 1%) and poor economic growth, it has managed to keep inflation at 3% thus reaching its target,  also reaching its lowest since February 2010. Nevertheless, due to quantitative easing (when the Bank of England buys financial assets in order for there to be a new flow of money in the economy, hence giving the economy an extra boost) it should face higher levels of inflation in the future. 

The IMF has recently instructed George Osborne to go to "Plan B" in order to combat weak economic performance. What "Plan B" consists of is cutting interest rates and introducing more quantitative easing. One doesn't have to be in the Monetary Policy Committee (MPC) or IMF to tell you that adjusting interest rates and quantitative easing are the most effective ways to stimulate the economy, other than those, the Bank of England (BoE) doesn't have many other tools in its disposal. Let's have a brief look at the statistics. Interest rates are already at an all time low at 0.5% reducing it to just 0% won't have a large effect on the economy, if there hasn't been a big change in the economy from the 0.5% interest rate then reducing it to 0% will not miraculously increase economic growth. Quantitative easing already totals 325 billion pounds, increasing that further will just result in a higher inflation rate in the future, which will be acting against the MPC's objectives. Furthermore, don't forget that when Gordon Brown was in power and claimed economic stability, the IMF lauded his administration of the British economy, yet look at the state of the economy now. Hence, the economy in England should be "fixed" by the use of fiscal policy (in collaboration with monetary policy). Although it's hard for the government not to make cut's, it must in order to help with the already going boost which the monetary policy has started. A country can not efficiently overcome a crisis on just one of its two methods of dealing with the economy, it can control the economy using both monetary (supply) and fiscal (demand) policies, and it should combine both in order to gain economic prosperity.

Nevertheless, it is important to note that this is an international crisis, affecting many countries across the globe. Therefore, we should all work in unity to try and overcome this crisis because in the long run, although individual countries may face their own little problems, every country will be better off. And when the crisis is over, then individual countries should tend to their own problems.