MercoPress. South Atlantic News Agency

Nobel Prize Stiglitz: crisis should be less serious than 1929

Stiglitz: It's bad, is going to get worse but it won't be terrible

The crisis now gripping world financial markets should be less serious than that of 1929, Nobel Prize laureate Joseph Stiglitz said on Monday because new monetary and fiscal “instruments” could prevent a Great Depression.

"The general view is that we have instruments, monetary and fiscal policy, that we know how to prevent another great depression" he said. A devastating stock market crash in the United States in October 1929 sparked a worldwide economic slowdown, which came to be known as the Great Depression. However, Stiglitz, a former chief economist at the World Bank and long-standing critic of the International Monetary Fund, cautioned that "knowledge is not always translated into actions". He argued, as an example, that during the Asian financial crisis of 1998 the "IMF had the knowledge how to prevent Indonesia from going into depression but took measures that actually led it into depression". Meantime from Egypt International Monetary Fund Managing Director Dominique Strauss-Kahn said that the fallout from the global financial crisis is not over and more consolidation could occur in the financial sector. "The consequences of the financial crisis are not over but ... the root causes are for a large part behind us" he told a news conference in Cairo. Central banks mobilized worldwide on Monday as stocks sank after the bankruptcy filing of Lehman Brothers and sale of Merrill Lynch -- Wall Street giants which many people once considered too big to fail. "Probably we will see consolidation in the financial sector" added Strauss-Kahn indicating that the financial sector after the crisis will be smaller. However in an optimistic note the IMF chief said that the global economy had proved more resilient than had been expected and could begin recovering in 2009. But before this happens according to Strauss-Khan, commodity prices can be expected to fall back from the high levels this year and that US housing prices must still find a bottom and then recover.