Thursday, May 29, 2014

Paul Volcker's speech to the Bretton Woods Committee - Part I

Here is a link to the full text of the keynote speech  given by Paul Volcker at the Bretton Woods Committee Annual Meeting held on May 21st. Interestingly, the title of this speech is "A New Britton Woods???" Let's take a look at it.

First some background. Here is a section from the "about us" section of the Bretton Woods Committee:

"The Bretton Woods Committee is the nonpartisan network of prominent global citizens, which works to demonstrate the value of international economic cooperation and to foster strong, effective Bretton Woods institutions as forces for global well-being.
The Committee was created in 1983 at the suggestion of two former Treasury officials - Secretary Henry Fowler and Deputy Secretary Charls Walker, a Democrat and a Republican - who saw the need for an organized effort to ensure that leading citizens spoke about the importance of the international financial institutions (IFIs).
Committee members are leaders at the top of the business, finance, academic, and non-profit sectors, including many industry CEOs, as well as former presidents, cabinet-level officials, and lawmakers who share the belief that international economic cooperation is essential and best served through strong and effective IFIs. Through the Committee, they champion global efforts to spur economic growth, alleviate poverty, and improve financial stability.
The Committee organizes frequent conferences, seminars, and educational activities. Many of these events are designed to reach a broad public audience, while others offer members the opportunity to provide important advice, support, and constructive criticism to the management of the IFIs. Working closely with successive U.S. administrations, the Committee also reminds elected leaders that global economic prosperity and lasting national security are closely tied to continued progress on multilateral issues.
The Committee relies solely on the funding of its members and does not accept funds from governments or the multilateral institutions."
Some well known members are:  Zbigniew Brzezinski, Mohamed El-Erian, Lee Iacocca, Henry Kissinger, Walter Mondale, Ross Perot, Jr. , Colin Powell, David Rockerfeller, Nouriel Roubini, General Brent Scowcroft, George Soros, and Paul Volcker. Here is a full list of members.
The Committee is made up of influential people from all areas of society and favors global institutions like the IMF and World Bank. Clearly this group influences the international monetary system which is why they are of interest to us here on this blog.
What is striking about the speech given by Paul Volcker at this latest annual meeting is how seemingly pessimistic he is about mutual global cooperation as it relates to the international monetary system. In my next post I will paste some quotes from the speech to illustrate what I mean. 

This is interesting in light of the many analysts who are expecting some kind of imminent change in the system (even as early as this year). Many were expecting some kind of "reset" that might include a currency "reset" of some kind this year. They cited remarks by Christine Lagarde of the IMF and others that seem to suggest a reset was coming soon.
But Volcker's comments seem to suggest the opposite. When we also look at the recent EU elections we see a sharp rise in influence for the political parties that are opposed to giving the EU more political power (and are opposed to global institutions in general for the most part). 
This is just the opposite of what would be needed to increase the influence of the IMF over the monetary system. The political winds in the US suggest a possible strong showing by Republicans this fall. Again, this seems like a headwind to approval for the IMF reforms in the US Congress for the next several years (at least until 2016).
Perhaps all this is the reason for Mr. Volcker's comments and the overall theme of disappointment expressed at the annual meeting this year. In the following post (Part II) I will paste some quotes from the Paul Volcker speech and add a few concluding comments.

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