Posts Tagged ‘International Monetary Fund’
May 20th, 2011 at 1:12 pm
Why a European “Must” Run the IMF

In an email regarding yesterday’s post, reader Eric Coykendall sent this helpful article from Foreign Policy explaining why a European traditionally heads the International Monetary Fund (IMF): a so-called “gentlemen’s agreement” brokered by economist John Maynard Keynes.

The origins of the gentlemen’s agreement date back to shortly after the Bretton Woods conference in 1944, which established both the IMF and World Bank. According to Miles Kahler’s history, Leadership Selection in the Major Multilaterals, Bretton Woods architect John Maynard Keynes had assumed that his main collaborator at the conference, Treasury Department official Harry Dexter White, would run the IMF. U.S. President Harry Truman also supported White’s choice. However, Treasury Secretary Frederick Vinson, with strong backing from Wall Street, argued that an American should run the World Bank — Washington Post publisher Eugene Meyer got that job in 1946 — and that it wouldn’t be proper for the United States to run both of the world’s major financial institutions. White’s possible communist sympathies — he’s widely suspected today of having been a Soviet agent — may also have played a role in the decision. In the end, Belgium’s Camille Gutt was eventually appointed to run the IMF.

In the wake of scandal engulfing the recently resigned Dominique Strauss-Kahn from France, developing nations like Brazil and South Africa are pushing for a non-European to manage the world’s leading investment/bailout bank.  In the article sent by Coykendall,  FP makes this keen observation about the European double-standard likely to decide the outcome.

The question of nationality is sure to come up again if Strauss-Kahn steps down, but Europeans will not be eager to part with the position. Some, such as German government spokesman Christoph Steegmans, argue that owing to the IMF’s critical role in stemming Europe’s current financial crisis, the managing director should be someone who is familiar with “Europe’s particularities, the currency questions and also the political circumstances here.” Strangely, when the IMF was primarily giving loans to countries in Africa and Latin America, local knowledge didn’t seem to be quite as much of a factor.

May 19th, 2011 at 2:53 pm
Maybe an American Should Run the IMF

For some reason, the French are trying to maintain a death grip on leading the International Monetary Fund, newly headless after Director Dominique Strauss-Kahn resigned over an alleged sexual assault scandal.  Though Deputy Director John Lipsky, an American, is now serving as the interim head of the IMF, a move is already underway to install France’s Finance Minister Christine Lagarde as quickly as possible.

But not so fast, say a panel of French judges.  They are weighing whether to investigate Lagarde for allegedly intervening in a lawsuit against the government on behalf of a political donor to her party.  The announcement is clouding her candidacy.

First, the French had to endure the hypocrisy of the Socialist Strauss-Kahn staying in a $3,000 a night hotel suite.  (So far, the alleged attack is a lesser blemish in French circles with a majority believing Strauss-Kahn was set up.)  Now, his potential replacement is under fire for crony capitalism.

Is French disdain for America so great that the most obvious replacement is deemed unacceptable for the long-term because he happens to be from the United States?

July 9th, 2010 at 9:51 am
IMF To America: Raise Your Taxes!
Posted by Print

There is a strange element of humor when an international bureaucracy attempts to instruct the most prosperous and powerful nation in human history how to boost its economy.  The United States, after all, reached its status by maximizing economic freedom, not by following dynamism-sapping international norms.

Ignoring this reality, the International Monetary Fund (IMF) issued a statement yesterday instructing the U.S. to – you guessed it – raise taxes.  The IMF statement rightfully expressed concern over the nation’s debt that Obama is growing like a gigantic Chia Pet.  Unsurprisingly, however, the IMF failed to recognize this as an overspending problem, not an undertaxation problem.  More specifically, the IMF suggested “cuts in deductions, particularly for mortgage interest; higher taxes on energy; a national consumption tax; or a financial activities tax.”

Note how closely the IMF’s growth-killing prescription matches the Obama-Pelosi-Reid agenda, although at least the IMF didn’t take their “all of the above” position.  Regardless, the IMF (just like liberals in this country) apparently remains oblivious to the fact that incoming federal revenues actually reached their all-time high following the 2003 tax cuts, since lower taxes trigger economic growth, which in turn paradoxically increases revenues.  This is obviously a lesson that the “international community” still needs to learn along with Obama, Reid and Pelosi, but this episode provides yet another illustration why America is better off when it decides to be less like, rather than more like, the rest of the world.

October 31st, 2009 at 11:09 am
National Sovereignty vs. National Solvency?

So, what happens when a country increases government spending, enlarges its deficit, and causes an international lender to consider stopping payments for what it sees as an abuse of discretion? No, it’s not the Chinese trying to reign in the Obama Administration. But Ukraine’s decision to raise pension payments and its minimum wage is putting pressure on the International Monetary Fund (IMF) to decide whether its lending guidelines have any teeth.

At first blush, the IMF appears to be meddling in the internal affairs of a sovereign country. On further reflection, though, the IMF is really just a lender of other people’s money trying to get an increasingly bad borrower to stop charging the international community’s credit card. The dilemma posed by governments that spend money as though there is no consequence for perpetual deficits is that unlike private parties, a government cannot be foreclosed, bought, and sold. At least, not yet. Ukraine isn’t yet a failed economic state, but if the IMF decides to cut off lending it could be. Who knows; perhaps the Chinese government officials holding all that American debt are taking notes on how to control a client’s spending.