Earlier today, the IMF with its usual several year delay, discovered what pretty much everyone else had known for years: that emerging markets have massively overborrowed, according to the IMF to the tune of $3 trillion, most notably in China. Of course, this is one of the many things we have been cautioning about for the past 6 years, perhaps nowhere more vividly than in this November 2013 infographic showing "How In Five Short Years, China Humiliated The World's Central Banks." So now that the IMF has finally caught up with what our readers knew two years ago, here are some more of its "profound" observations: This dangerous over-leveraging now threatens to unleash a wave of defaults that will imperil an already weak global economy, said stark findings from the IMF's twice yearly report. The Fund warned there was no margin for error for policymakers navigating these hazardous risks. "Policy missteps and adverse shocks could result in prolonged global market turmoil that would ultimately stall the economic recovery," said Jose Viñals, financial counsellor at the IMF. And just when one thinks there is hope yet for the IMF, and it is almost on the same page as the BIS (the same BIS whose board of directors is comprised of all modern central bankers of course), the IMF goes and says what its policy recommendation is: engage in the same policies that have not only failed, but led the world to the brink, but not just one where the market can plunge 20%, 40%, or more percent, but where the entire neo-Keynesian/fiat/fractional reserve system is ultimately left discredited in the garbage heap of history, where it belongs. The world's major central banks should ensure policy remains "accommodative" for fear of setting off a new wave of instability that would see bond prices rise and asset prices collapse, said the IMF. In fact, just do more QE. Best of all, just paradrop money right; after all that $200 trillion in global debt (and a few quadrillion in derivatives) won't inflate itself away, right? Whoever wishes to, can waste their team reading the full report here. One person who didn't read it, but had no choice but to engage in damage control was China's deputy PBOC governor Yi Gang, who had the following absolutely comical retort to the IMF: "I would say, don't worry," said Yi Gang, deputy governor of the People's Bank of China, after the International Monetary Fund warned of risks in China's economic challenges. "China will still have pretty much middle-to-high growth in the near future," said Mr Yi, speaking in Lima, where the IMF-World Bank annual meetings were beginning. "A lot of people are considering a slowdown of the Chinese economy," he said, referring to how the downturn has helped send global commodity prices plummeting, hurting the economies of exporters. But he insisted that Chinese imports of raw materials for its industrial economy will grow steadily in the future. We won't even dignify this utter gibberish with a comment, but instead will give the word to a far more credible and serious policy maker, former IMF chief economist and current India central bank governor Raghuram Rajan, perhaps the only sane central banker anywhere these days, who realizes it is now too late for "macroprudential policy", and certainly far too late "not to worry." Instead he called for a "global safety net" backed by the IMF to provide support to economies "that might experience liquidity crises in the future, especially given that such problems might be triggered by the reversal of years of highly accommodative, post-crisis monetary policy in advanced economies such as the US." Look what he did there, IMF? He did not call for more QE/NIRP/ZIRP or money paradrops: instead he realizes when the game is over, and when it is time to move on to the next, far less pleasant stage in the global lifecycle. What is this safety net Rajan proposes? Without such a safety net, governments were reluctant to approach the IMF because of the stigma attached to such a plea and the implication that they were undergoing a full-blown solvency crisis rather than a temporary shortage of liquidity as billions of dollars of capital rushed for the exit. Mr Rajan said one possibility was a multilateral swap arrangement among central banks — of the sort that already exists between the emerging Brics economies and in the $50bn Japanese credit line for India, for example — guaranteed by the IMF. “I think a lot of emerging markets would like to see something like this,” he said, but admitted there was no appetite for the idea among advanced economies. Of course there isn't: it would mean reducing the equity return for the shareholders of DM central banks. And that must be avoided at all costs, even if the currency said shareholder plans to liquidity asset holdings into will not exist for much longer. Finally, Rajan's summary of the state of the global economy was far less cheerful and far more credible than that of Yi Gang: The world economy, he said, was "looking grim." So, perhaps then, worry?