The International Monetary Fund’s (IMF) Press section reports that their chief economist, Olivier Blanchard predicted on Tuesday the world’s recovery:

“The global economy is beginning to recover from the worst recession since the Great Depression, but sustaining it will require engineering greater U.S. exports and larger Asian domestic demand”. Blanchard said that two rebalancing acts will have to come into play: ‘First, rebalancing from public to private spending. Second, rebalancing aggregate demand across countries, with a shift from domestic to foreign demand in the US and a reverse shift from foreign to domestic demand in the rest of the world.’ …”

So…this reminds us of a cartoon that shows a business executive with a chart showing declining sales and simply drawing a new rising line on the chart.  Come on! The IMF is saying that all that has to happen for world recovery to occur is: 1.private demand must take over from the government and 2. Asia must buy more goods from the US than the US buys from Asia.  That’s all —-no problem – right?  When we see Dumbo fly!

The IMF’s recent report on Global Financial Stability:

“Without a thorough cleansing of banks’ balance sheets of impaired assets, accompanied by restructuring and, where needed, recapitalization, risks remain that banks’ problems will continue to exert downward pressure on economic activity. Though subject to a number of assumptions, ourbest estimate of writedowns on U.S.-originated assets to be suffered by all holders since the outbreakof the crisis until 2010 has increased from $2.2 trillion in the January 2009 Global Financial Stability Report (GFSR) Update to $2.7 trillion, largely as a result of the worsening base-case scenario for economic growth. In this GFSR, estimates for write downs have been extended to include other mature market-originated assets and, while the information underpinning these scenarios is more uncertain, such estimates suggest writedowns could reach a total of around $4 trillion, about two thirds of which would be incurred by banks.”

The Times reports:

“The IMF said in January that it expected the deterioration in US-originated assets to reach $2.2 trillion by the end of next year, but it is understood to be looking at raising that to $3.1 trillion in its next assessment of the global economy, due to be published on April 21. In addition, it is likely to boost that total by $900 billion for toxic assets originated in Europe and Asia.”

Only about $1 trillion of that have been written off so far.  Not to worry, though, Sheila Bair, Timothy Geithner and Ben Bernanke  have assured us that everything is under control and besides, the banks are going to hold all those assets to maturity and will not have to make any more write-downs …