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Thursday, December 22, 2016
Bloomberg: IMF Doubles Down on Lagarde as Trump Aims to Upend World Order
As we noted here recently, IMF Director Christine Lagarde was issued a statement of full support by the IMF Board after her recent quilty verdict in France. Despite the verdict, the court found that she did not deserve any actual consequences in terms of serving time or even ending up with this on her record. It appears the court felt she technically acted in violation of the law, but without bad intentions.
Bloomberg now runs this article which is the first we have seen to raise the same kind of question we have been raising here. How will a Trump Administration view the IMF in the future? Below are a few excerpts from the article and then a few added comments.
"The International Monetary Fund’s executive board caught a glimpse this week of what life might be like in the wilderness of a rapidly shifting world order. It didn’t take them long to slam the door.
Christine Lagarde’s conviction on Monday of negligence in a French court cast uncertainty over her ability to continue as the IMF’s managing director. Within hours of the judgment, in which she escaped any punishment, the fund’s 24-member executive board put to rest any speculation that she might have to resign, praising her “outstanding leadership” and the “wide respect” she commands around the world.
But the episode raises the question of how the IMF would select a leader at a time when traditional alliances are fraying among developed economies and popular opposition is growing to the lopsided benefits of globalization. One of the biggest wild cards would be how the IMF’s role is viewed by U.S. President-elect Donald Trump, who campaigned on a promise to put America’s economy first and look past traditional U.S. allies in Europe toward warmer relations with Russia.
“It’s anybody’s guess who the next occupant of the White House would pick,” said Martin Edwards, an international relations professor at Seton Hall University in New Jersey. “They could pick someone who wants to downsize the organization.”
My added comments: It's kind of interesting that this Bloomberg article talks quite a bit about what a Trump Adminstration might prefer in a new IMF leader when the current term for Christine Lagarde does not even expire until 2021. Of course we don't even know if Trump would be President in 2021. The IMF has made it pretty clear she will stay in her current position at least until then.
The real question (which the article does touch on some) is how does Trump view the IMF role in the world (and the World Bank)? Does he see them as vital pieces of US influence or does he view them as institutions promoting a "globalism" that he has campaigned against quite forcefully?
And then we still have the nagging question of what happens if we get the kind of major global financial crisis Jim Rickards predicts during Trump's term of office? Would he accept the solution Jim says will be put forward at that time to have the IMF step in as the global lender of last resort and use the SDR to replace the US dollar as global reserve currency? I suspect Jim is watching this just like we are to see what really happens.
Lots of questions, but not much information available yet to give us a hint as to the answers.