Christine Lagarde , the president of the International monetary Fund, spoke to political and economic leaders in Davos earlier this week and issued a warning that those assembled at the Swiss ski resort would do well to heed: Policymakers need to be on the guard against asset bubbles and deflations remain a lingering threat to prosperity. Those bubbles are springing up in places where they are least expected. In Argentina , a currency crisis is in full-blown meltdown, bringing back bad memories once more of the South American nation's default in the mid-1990s. She also has first-hand knowledge of the efforts it took to bring the heavily debt-burdened Eurozone economies of Greece , Cyprus , Portugal and Ireland in line. Indeed, only Ireland has fully emerged from bailout and has successfully floated its borrowing needs at low yield rates in international bond markets. With that in mind, Lagarde warned policymakers that deflation remained a looming threat. With unemployment rates — particularly among those under 25 — high, she sees a real risk of deflation. House values, traditionally a gauge of growth, broadly have not recovered to pre-financial crisis levels. But it is not all doom and gloom. She acknowledges that the economy globally is going in the right direction — but the disparity between regions is a cause for alarm. Even across Europe , there is a distinct disparity between northern and southern economies. Her words of warning should be heeded.
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