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IMFSurvey Magazine: What readers say

Reducing Uncertainty

If we reduce uncertainty and get consumers and firms spending again, we can be on the path to recovery, says Olivier Blanchard (photo: Newscom).

GLOBAL ECONOMIC CRISIS

Reducing Uncertainty

March 18, 2009

Dear IMF Survey:

Your updates in an increasingly uncertain world are reassuring. My attention was drawn to Olivier Blanchard's statement in his guest article in The Economist (January 29, 2009): “On the portfolio side, establish a price, or at least a floor on the price, of the troubled assets. Ring-fence them or take them off bank balance-sheets.” This evokes one of the “known unknowns” troubling the Nigerian stock market: the size and composition of margin loans.

These loans were aggressively extended by Nigerian banks during the stock market boom. Now things have gone awry. Equities, especially bank shares, are trading at a record low. The same can probably be said of the collateral used in getting the margin loans—hence the bearish hold on the market.

Mr. Blanchard’s advice is as perceptive as it comes.

Tayo Fagbule
News Analyst, Business Day
Nigeria


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The IMF Survey welcomes comments, suggestions, and brief readers' letters, a selection of which are posted under What readers say. Letters may be edited. Please address Internet correspondence to imfsurvey@imf.org.