By John Ward
The economic world’s shift in balance towards the East and South is making the IMF increasingly irrelevant to economic and fiscal thinkers, a qualitative study conducted by The Slog suggests.
Last weekend and during the early part of this week, I devoted some time to taking the temperature of the IMF among economists, traders, senior executives in commerce and the odd politician here and there. The territories covered were the UK, France, Germany, Greece, Singapore, Spain, the US and Mexico. We’re talking small-scale research here, so the findings come with a big health-warning; also some key States like Brazil, Argentina and Italy weren’t included. But the consistency of findings will come as a shock to some, I think.
The attitudes ranged from visceral dislike in southern Europe to a general feeling of anti-BRIC bias in developing areas – and perhaps very significant, a sense that the IMF is underfunded and ‘lightweight’ from opinion leaders in the larger territories.
As it happens, some of this is already being reflected out there in the real world. Canada bluntly told the IMF’s CEO Christine Lagarde yesterday that not a single cent more would be contributed from that direction until Europe was off the salavation agenda. Jim Flaherty, Canada’s Finance Minister, said yesterday it was time the eurozone put its hands in its pockets. I think Mr Flaherty hasn’t been doing his sums on the contents of those pockets, but neverthless his view reflects that of many others.
The Slog study might also explain why much of what Lagarde had to say yesterday about Europe’s central importance to the global economy fell on deaf ears. The other reason is that, about fifteen months behind the music, she accepted for the first time that a eurozone breakup might be on the cards…and most of the MSM focused on that.
“The IMF is increasingly seen as a bit of a joke in my constituency,” said one UK credit bigwig, “and its economic ideas are, frankly, idiotic in the face of what’s happening.”
“I find the arrogance [of the IMF] both irritating and amusing at the same time,” said a Madrid contact, “the eurozone problem is far bigger than them, and the Brics will probably insist on more power there before too long – or start up their own operations”. Ironically, the EU itself has talked of doing the same thing. Predictably, Brussels has abandoned the idea….due to lack of interested investors.
“Out here, the feeling is that the IMF is fixated on Europe,” said an Asian respondent, “But the reality is that China has problems, and Brazil is showing early signs of a slow-down. The US starved the IMF for years, and now that’s coming home to roost. There’s no way they have the money or ideas to look at these big new strains in the global economy.”
There is a sense in Washington too that the Obama White House thinks the invention of the Universal Giant Bazooka by Tim Geithner has rendered the IMF pointless: that once the trillions thing became commonplace, the IMF was simply no longer a player. The President has flatly refused any more money for the eurozone via the IMF (he tends to deal it off the bottom straight to Mario Draghi at the ECB) and although Japan made a smallish eurozone commitment last month, it’s trade balance bombed last month, creating an 83bn Yen deficit.
When most Sovereigns in the world felt wealthy after 2001, the IMF should’ve gone round with the begging bowl then. In the event, it has turned into just another charity which, in a world being pauperised by debt monetisation, spends too much time protesting too much.
“Look,” said a Greek respondent summing the situation up very well, I thought, “the IMF likes lecturing people, but it doesn’t have any clout. The events [in the Greek crisis] this year have shown what Big League finance is about today. It’s about clinging on, and desperation, and the illegal punishment of government and citizens who had little or nothing to do with the big disasters. Lagarde is a hate figure in Greece today, but nothing like on the same scale as Merkel, Schauble and Draghi. In many ways, that’s a reflection of her irrelevance”.