The new advisor to the U.S. Treasury Department, David Zervos, stated on Thursday that before criticizing U.S. fiscal policy, the International Monetary Fund ( IMF ) should first examine its own forecasting record.
“When we see reports about IMF, it’s best to remember how chaotic their past predictions were,” Zervos said in a comment to an email sent to CNBC.
This former Wall Street economist is responding to the remarks of President Kristalina Georgieva. On Wednesday, Georgieva warned at the IMF and World Bank Annual Meetings held in Bangkok that the strong economic growth in the United States is not sufficient to put the continuously rising federal debt on a sustainable track.
The statement from Georgieva is in response to the U.S. Treasury Secretary Scott Bessent. In August of this year, Bessent stated that after government debt exceeded $40 trillion, the United States could "get rid of" the continuously rising ratio of debt to GDP.
Zervos, who formerly served as the Chief Market Strategist at JPMorgan Chase, said on Thursday: "In 2008, the World Economic Outlook predicted global growth to be 3%, but a year later we witnessed the first global contraction in modern world history. Before the Southeast Asian crisis in 1997, they were very optimistic about Southeast Asia."
In 2022, we saw them being very pessimistic about Russia, yet Russia hardly experienced any significant decline before its economy began to rebound strongly. We also saw them become very optimistic after Argentina received a massive bailout of $57 billion. However, by 2020, Argentina once again defaulted on its debts. There are many similar examples in history, whether it's the case with Greece or their initial assessment of inflation in the United States as being 'temporary.'
“So, a discount needs to be applied to all of these,” he added.
Many economists warn that the rising interest payments and high deficits in the United States increase the risk of debt entering a unsustainable spiral. However, they disagree on whether the U.S. will be pushed into a real fiscal crisis.
Georgieva of IMF has also issued similar warnings about the need for fiscal consolidation in other large economies. On October 7th, she told CNBC that her message to France is: 'Take care of your own domestic affairs.'
Other economic institutions are also issuing warnings about the rising costs of global debt repayments. Global debt exceeded $365 trillion in the first half of this year. In a report in September, the International Finance Institute pointed out that a "vicious cycle between elections and short-term expedients" regarding debt issues is weakening the ability to fund public services.











