Saturday, February 22, 2014

The IMF at the G20

Today we have two items to link to which provide everything you could possibly want to know about what the IMF position is at the G20 conference. One is the IMF briefing book done for the meeting. The other is a one hour Q&A session done by Christine Lagarde on Australian TV in front of a large audience.

Both of these are fairly long so I will try to offer a brief recap. Readers who are really interested should spend more time with them. The TV interview is probably easier to follow.

The overall message I see from the IMF is that they want to say that things are a little better and they can now forecast future global GDP at 3.7%. They say the worst of the financial crisis seems to be over, but warn we are not out of the woods. They issue specific warnings about moving to quickly to taper QE and about lack of communication and cooperation between countries. The say that miscalculations could lead to a return of volatility in world markets and currencies. So that is my overall take on their comments.

I will point out that on the link to the TV interview (on the right side of the page) there is a breakdown of the topics addressed so that you can skip directly to a specific topic if you want to. I would suggest listening to the segment that begins at 47:55 called "IMF Voting System". Here Ms. Lagarde again urges the US to approve the 2010 voting reforms to give the emerging/BRIC nations more power at the IMF.

I will limit my comments as readers can form their own opinions as to whether they agree or disagree with the IMF view and proposals. 

I will say that the comments on the IMF voting system segment illustrate to me the wide gap between what the IMF talks about happening and what really happens. If you listen to many of the questions put to Ms. Lagarde in this Q&A session, you can sense the frustration in other parts of the world that the the US FED is overly represented and has too much say in what goes on. Ms. Lagarde handles the questions pretty skillfully being in a somewhat middle ground position. You can tell she agrees, but does not want to irritate the US and the US FED. 

So, at the end of the day, all she can really do is empathize with the questioners and try to talk hopefully that things will change. But the reality as we posted below is that no substantial change is on the horizon. The US is not likely to approve the reforms anytime soon. As noted below, the nations have already given up on this until at least January 2015 (after the US 2014 elections). And the BRIC/emerging nations are moving forward to setup a system of their own that does not depend on the US FED and US dollar. That is a totally different view of the future than Ms. Lagarde wants to project in terms of "cooperation and communication".

I have to give props to Ms. Lagarde for taking tough questions in an open forum. Many of these global institutional leaders will not do that. And I have to feel a little sorry for her at times. She seems to want to try and bring people together for what she thinks will improve things, but it is obvious that as we noted in an earlier post it is a little like trying to herd a room full of cats. The comments by US FED officials about doing as they please in regards to tapering QE are an example of the reality versus the hopes that the IMF attempts to put forward.

While Ms. Lagarde talks about the need for "cooperation and communication" the US FED officials response is:  We will do what we want; deal with it. And the US Congress continues to say no to the IMF proposed voting reforms. 

Addendum: At the 53:35 mark in the TV program Lagarde is asked about Bitcoin and other digital currencies. She says that her concerns "at this time" are that they are unregulated. I will just note the the GSD the Kickex is working on will be regulated and in full compliance with the current banking system. So that would address her concern "at this time".

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