Enter the IMF (Debt Crisis New Round) - Tilted Forum Project Discussion Community

roachboy · 10-01-2008, 06:42 AM

first, a context bit from this morning's guardian---which routinely reports on stuff the american press forgets to look at...

Quote:

IMF adds to pressure on Congress to approve bail-out

• FTSE 100 continues to bounce back
• Asian stocks also gain on deal optimism

The International Monetary Fund has added to the growing pressure on the US Congress to approve the Wall Street bail-out, as stockmarkets rose on optimism that a deal will be hammered out this week.

Dominique Strauss-Kahn, managing director of the IMF, warned last night that the US must take urgent steps to protect its economy from the ongoing financial crisis.

"We're right at the moment where action is needed," warned Strauss-Kahn. "A non-perfect plan is better than no plan at all," he added, in an interview with Reuters in Washington.

The prospect of a deal this week sent shares up in London, where the FTSE 100 continued yesterday's bounce-back. After leaping by 92 points in early trading it was up 82.5 at 4985 at 1.30pm. Asia was also more buoyant, where Japan's Nikkei recovered some of yesterday's heavy losses to close almost 1% higher. Hong Kong's Hang Seng index gained 0.75%.

But the Dow Jones industrial average is expected to fall by around 100 points when trading begins on Wall Street.

The House of Representatives sent shockwaves around the world on Monday when it voted down the $700bn (£390bn) rescue plan, under which the US government would cleanse the banking sector's balance sheets.

With politicians worldwide demanding action, the US Senate is due to buck convention and vote on an amended version of the rescue plan this evening – before the lower house has given its approval. In an effort to win Congress's backing, it now includes a clause to raise the government's guarantee on savings from $100,000 (£56,000) to $250,000.

But in a sign of the problems facing the financial industry, JP Morgan warned that Europe's banks will take fresh asset writedowns totalling €28.4bn (£22.5bn) before the end of this year.

The research note predicted the following writedowns:

• Lloyds TSB (including HBOS): £4.5bn
• Deutsche Bank: £3.6bn
• UBS : £2.1bn
• Barclays: £2.9bn
• Société Générale: £2.1bn

Strauss-Kahn demanded that Europe draw up contingency plans in case its own banking system needs to be rescued. Unlike in America, there is no single regulator overseeing the system.

"Developing a contingency plan does not mean it's announcing a lot of trouble coming. But they're not totally immune … and so they need to organize," he added.

But the president of the European Central Bank, Jean-Claude Trichet, has rejected the idea that Europe should organise its own bail-out.

"We are not a fully fledged federation with a federal budget," Trichet pointed out. "Each country has to mobilize its own efforts."

He also echoed calls for rapid action on the bail-out.

"It has to go, for the sake of the US and for the sake of global finance," Trichet said.

Both presidential candidates have also called for a new push to get the rescue plan through.

On the campaign trail yesterday, Barack Obama warned of "catastrophic" consequences unless a deal is reached soon.

"We cannot risk another week or another month where American businesses are afraid to extend credit and lend money," he said.

There was also renewed optimism on Wall Street that the treasury would eventually be able to hoover up "toxic" mortgage-related assets.

"Cooler heads are prevailing - we'd had a little bit of panic at the close yesterday," said Anthony Conroy, head trader at BNY ConvergEx in New York. "There's anticipation that some sort of deal will be passed by Congress in the next day or two."

The US public has blamed the shambolic handling of the bail-out plan on both Congress - whose approval rating has fallen to 10% - and president George Bush, who is accused of caring about "fat cats" rather than ordinary people.

IMF adds to pressure on Congress to approve bail-out | Business | guardian.co.uk

it seems to me that congress is pretty thoroughly boxed in now, that the time fir screwing around is over with, that the rightwing republicans made their move and we'll see if it makes an already problematic bill even more so.

notice too that the televisual talking head set was in panic management mode last night, trying maybe to assuage folk so they'll stop calling congresspeople.

that one of the implications of this crisis is the outstripping of nation-states, that capital flows are too big and too fast for old-=style regulatory mechanisms and old-style political units is not something that i am just making up. this statement from the imf outlines the same basic position, and proposes that the next world bank-imf meeting be used to begin putting together a transnational-level regulatory mechanism.

Quote:

IMF Head Urges Greater Regulation of Financial Sector

IMF Survey Online

September 29, 2008

* IMF head calls for global reform of financial system
* Welcomes U.S. authorities' plan to "put out the fire"
* Urges systemic response to crisis affecting global economy

IMF Managing Director Dominique Strauss-Kahn called for a global solution to the U.S. financial crisis, saying coordination of the reform effort "is a job for the IMF." .

Reform of the international financial system could begin when finance ministers and central bankers convene in Washington next month for the IMF-World Bank Annual Meetings.

In an interview with France's Journal du Dimanche newspaper—one of several he has given to international media over the past few days—he said a proposed U.S. $700 billion bailout plan should be a first step toward reform of the global financial system, and called for greater regulation of financial institutions and markets.

"It's because there were no regulations or controls, or not enough regulations or controls, that this situation was born," he said. "We must draw conclusions from what has happened—that is to say regulate, with great precision, financial institutions and markets."

"This (U.S.) plan is welcome because it's comprehensive. But it has to be the first step of international political action," said Strauss-Kahn, a former French finance minister who took over as head of the Fund in November last year

IMF-World Bank Annual Meetings

He said the IMF would be happy to coordinate the global reform process, which could begin next month when finance ministers and central bankers convene in Washington for the annual IMF/World Bank meetings on October 11-13.

Without the will to reform, there was a danger that the state would be seen as running to the "rescue of incompetent managers and greedy speculators", he said, noting the criticism in parts of Europe about banking profits being privatized but their losses being nationalized.

Defending the IMF's role in the crisis, Strauss-Kahn said the Fund had estimated in April that there would be $1 trillion in financial sector losses and had predicted a sharp slowdown in the global economy. "But people did not want to listen to us. We were criticized for being pessimistic," he said. The IMF has recently raised this estimate to $1.3 trillion.

Proposed multilateral consultation

The interview with the French weekly was one of a series of media interviews on the financial crisis over the past few days.

Speaking to the New York Times, Strauss-Kahn called for a multilateral consultation—involving the United States, Europe, China, and other financial powers—to develop a coordinated response to the crisis.

"We're facing a systemic crisis, and it needs a systemic response," Strauss-Kahn told the paper last week. "The IMF is the right place to organize a global response to weaknesses in the global financial system."

His remarks built upon his call in an op-ed in the Financial Times for a systemic solution to the crisis.

Understandable U.S. response

In other remarks, Strauss-Kahn spoke about the speed and effectiveness of the U.S. response to the crisis to the Singapore Straits Times:

"It's absolutely understandable that the government in any country, when the first wave hits, says that it's a small wave and we'll manage. And then comes a bigger wave and they say we'll fix it. And then when the tsunami comes, it's too late. So I understand the way the American authorities wanted to address this step by step.

"Of course it's easier to say now that the Americans should have chosen a more comprehensive plan earlier. The IMF did, in June, propose to the U.S. a more comprehensive plan. It is in the report we made on the American economy under the Article IV consultations. We said things are going that badly that you should organize a comprehensive solution—like they are talking about today. And that was only three months ago."

On the difference with the Asian crisis

"What originated in Thailand and spread to Korea, Indonesia, and other countries was mainly a balance of payments problem. That was our core business. This crisis, even if it is a huge crisis, is different. It has had almost no impact on the exchange rate, on the dollar. You could have expected the dollar to fall but it did not. This is a different kind of crisis, so the solution to be applied is not the same. The main actors today are the central banks and treasuries; the main actors in the Asian crisis were institutions like the IMF."

Speaking to the Brazilian news magazine Veja, he spoke about the likely impact of the crisis on the financial sector:

"It will look very different. For the first time, the crisis did not originate at the periphery, but at the center of the system. This crisis has originated in the U.S. housing market, but it has deeper roots. The expansion in the financial market has far surpassed the growth in the real economy in the last decades, with a complexity never seen before, while banking supervision and regulation have not been prepared for such a challenge.

"Most investment banks lowered their risk analysis criteria to increase their profits, without proper oversight. Therefore, one of the probable outcomes of this crisis will be to have a smaller financial system, more compatible with the real economy and in a more controlled and regulated environment."

On the dollar

"The curious thing is that, even with the US economy today facing many different blows at the same time, there is no panic with regards to the dollar, which would have been expected. On the contrary. The dollar's status has remained intact."

Finally, in remarks to the Straits Times, Strauss-Kahn looked at the impact on the real economy.

"One of the effects on the real economy has been a sharp slowdown. Nevertheless it is only a slowdown, not a recession. Two or three years ago, if you had asked the experts, `We will have a trillion dollars of distressed assets in the financial sector—what will be the consequences on the world economy?', many would probably have said there would be a huge recession. But we don't contemplate that; we contemplate a slowdown.

"The linkages between the financial sector and the real economy are not as easy to understand. The IMF is in a unique place to try to take into account this connection, and that is probably the reason why our forecast is more accurate.

More resilient economy

"We see recovery in 2009. The economy is more resilient than expected. Our forecast is that commodities will stabilize in 2009: oil and food prices will not be as high as their peaks in past months. We see the U.S. housing market finding a bottom in the coming months.

"So we have good reason to expect that growth will come back. There are some downside risks, of course, from the financial sector and the (lack of) confidence in the corporate and housing sector. That's why it was important to propose a comprehensive solution which appears reliable to people. When you are sorting the problems one after another, you don't give the impression you are managing the whole problem. I hope the plan now being proposed in the U.S. will restore investor confidence next year."

IMF Survey: IMF Head Urges Greater Regulation of Financial Sector

what do you make of this?

aceventura3 · 10-01-2008, 01:24 PM

I think the IMF is irrelevant.

roachboy · 10-01-2008, 01:36 PM

it is and it isn't.
it is to the extent that it is primarily an instrument of american economic policy.
it isn't to the extent that what strauss-kahn is advocating is the setting up of a transnational regulatory body that would be in the position that obviously nation-states are no longer in: able to regulate in an effective manner trans-national capital flows.

the uk is already arguing for such a body---the eu is currently unable to quite figure out how to co-ordinate actions on a transnational scale as it lacks the authority even as, in principle, it is an already existing institutional structure.

i think we are reaching the end of the era of nation-states, bit by bit---if such a transnational regulatory body gets set up, it's status will be curious, but the effect of it would be to transfer fundamental aspects of nation-state prerogatives regarding economic policy/regulation to the international level.

what this means is not yet obvious, but it's a logical direction to move in.
what is clear is that this is a Real Problem for conservatives more than for any other ideological sector, because if you undercut the status of the nation-state, what else to they have to talk about? i would argue nothing. and so you'll see a dissolving of the space from which contemporary conservatisms speak and an atomizing of its politics.
this is not the same thing as the republican party--for that, what i expect you'll see is something like you're already seeing in europe: an increasing drift center with the result of an increasing interchangablity of political positions---so conflict will become over tactics.

all that is required to start thinking about this is the recognition of an obvious fact or two---whatever is being proposed as a "rescue" (word of the day) or "bailout" (yesterday's bad meme) is a provisional and partial action---the solutions, if there are any, to the underlying problems this crisis has exposed are going to take a while to unfold--and if it turns out that capital flows are in fact too big and too fast and too deterritorialized for a nation-state to adequately manage on its own, then the transnational direction is the only logical way to go.

and if this doesn't come under the aegis of the imf/world bank system---which would make it more controllable for the united states---it'll come from somewhere else--which would be less so.

so if the writing's on the wall and you like the american empire and the way of life it's enabled, you had better hope that the imf is not irrelevant.

Charlatan · 10-01-2008, 02:25 PM

I am not sure what it means but there is a some huge irony that the IMF should get involved in this "crisis". The chickens have surely come home to roost.

Baraka_Guru · 10-01-2008, 04:06 PM

Yes, so the IMF hasn't been relevant enough.

But the IMF must be relevant if we want to get out of this mess. And the mess I refer to is the general global situation that's far worse than just America's current financial "crisis."

The IMF was created to avoid situations of which we see now in the global economy. Something must be done to give it clout. Failing that, another organization should be created to carry out the transnational regulations roachboy discussed.

Why should the U.S. remain in the driver's seat? Unless they can prove themselves worthy otherwise, perhaps it's time for such a regulatory makeover as globalized as our current markets.

Oh, and can we have a moratorium on the chickens' roosting metaphor? I've read it on this board at least four times in the past week or two.

Charlatan · 10-01-2008, 04:17 PM

Quote:

Originally Posted by Baraka_Guru

Oh, and can we have a moratorium on the chickens' roosting metaphor? I've read it on this board at least four times in the past week or two.

I was sort of laughing as I typed it...

"hen's have come to nest"
"bats are ensconced in the belfry?"

Quote:

Originally Posted by Baraka_Guru

The IMF was created to avoid situations of which we see now in the global economy. Something must be done to give it clout.

John Maynard Keynes was the father of the IMF but it was taken over by the students of Milton Freidman. The IMF no longer seeks to avoid these situations. The IMF and other organizations like the World Bank and USAID seek to purposefully skew the numbers in their client states.

They help foster a climate of crisis... provide massive loans with big strings attached in order to open foreign markets to "free enterprise". It has been central to the US foreign policy since the late 60s.

It is just ironic to see the same game being played on their home court.

tisonlyi · 10-01-2008, 07:32 PM

[ Bankers are completing their terms?

]

The IMF was created as part of Bretton-Woods. Bretton-Woods was devised to maintain, beyond doubt, the Western dominance in the Post WW2 political system, specifically in Europe...

roachboy · 10-02-2008, 05:21 AM

tisonyli: that's self-evident. what's been less so is the transformation of the imf since the abandonment of bretton woods. you'd have thought that it'd have been dismantled as the arrangement was, but instead it was given a kind of incoherent purview of currency stabilization, which morphed as the new american empire---god that hardt & negri term annoys me, so vague, so nothing except a device that allows for the maintenance of other terms like imperialism, but ripped out of lenin's analysis of monopoly capitalism and made trans-historical---just what neo-marxists need is a repetition of the most dysfunctional aspect of diamat---anyway----as the new american empire/global capitalist order took shape, the imf became a shock institution the primary function of which was to exploit currency crisis and debt problems as a device to forcibly "integrate" southern hemisphere countries into the neo-colonial order that we laughingly call globalization--so it transformed from being a brake on crisis to being an engine for crisis and its exploitation.

so the statements coming from strauss-kahn are in a sense strange---but that they're only vapor as far as the american press is concerned is predictable--within the current arrangement, the one which is falling apart, the imf is transparently an arm of american neo-colonialism. but in the emergent order, the one that will more or less have to include transnational regulatory institutions (and probably some type of international law to lean on), the imf--still an arm of american neo-colonialism--is jockeying for position as the jump-off point. that's why i made this thread, really---as a way of starting to track this joickeying for position, which will have everything to do with the nature and characteristics of these new mechanisms.

that they're coming is getting more and more obvious.
to wit:

Quote:

Economists call for EU-wide banking rescue operation

* David Gow in Brussels

A group of leading economists today called on EU leaders to mount a coordinated Europe-wide rescue operation for the continent's banks to prevent a "once-in-a-lifetime" crisis spiralling out of control.

The 10 economists, including Willem Buiter, a professor at the London School of Economics and a former Bank of England rate-setter, warn that Europe faces a repeat of the 1930s, with the savings of hundreds of millions threatened unless governments act together.

Their "call to action", published by the DIW institute in Berlin, comes as France summons British, German and Italian leaders to an emergency summit in Paris this weekend to draw up a common response to the financial crisis.

The French finance minister Christine Lagarde last night rebutted reports that president Nicolas Sarkozy, the current EU president, would present a €300bn (£236m) bail-out plan similar to the US rescue scheme, dubbed a "Euro-TARP" or troubled asset relief programme.

The 10 economists stop short of demanding a similar scheme, saying the key problem in Europe is high leverage among international banks rather than lack of liquidity. "Hence the EU contribution must be centred on a recapitalisation of the banking sector, through the injection of public equity or through mandatory debt-to-equity conversions," they said.

They added: "This has to be done at the EU level (eg through the European Investment Bank). The current approach of rescuing one institution after another with national funds will lead to a Balkanisation of the European banking sector."

In a dire warning to policymakers, they wrote: "Trust among financial institutions is disappearing and there are risks that fear will spread more widely. Turmoil in financial markets must be stopped before it causes major damage to the real economy. If the turmoil produces credit market paralysis, jobs and businesses will be destroyed on a massive scale.

"A further weakening of the real economy would put more loans at risk and create a vicious cycle of falling asset prices, deteriorating ability to repay loans and diminishing credit flows."

The signatories are: Alberto Alesina (Harvard), Richard Baldwin (Geneva), Tito Boeri (Bocconi, Milan), Willem Buiter, Francesco Giavazzi (Bocconi), Daniel Gros (CEPS, Brussels), Stefano Micossi (Rome), Guido Tabellini (Bocconi), Charles Wyplosz (Geneva) and Klaus Zimmermann (DIW, Berlin)

Economists call for EU-wide banking rescue operation | Business | guardian.co.uk

which is interesting as an indicator of the extent to which the creation of such institutions is beginning to seem the most logical and effective way to prevent other such crises from happening, and for dealing with the consequences of this one (which may be 2 different ways of saying the same thing).

and that is interesting as an index of the speed with which the neoliberal consensus, the monoculture, la pensée unique, is coming unravelled.

aceventura3 · 10-03-2008, 10:47 AM

Quote:

Originally Posted by Baraka_Guru

But the IMF must be relevant if we want to get out of this mess. And the mess I refer to is the general global situation that's far worse than just America's current financial "crisis."

Like most international organizations that rely on unequal participation or contribution by its members, the organization is as only as effective as the major participant(s) or contributor(s) allows it to be. So, the IMF can have an impact on Haiti but not the US. The US is the largest contributor, by a large margin, of a group of about 200 countries. If the US burps, the IMF goes...

... The IMF is too small and does not have enough power or influence to affect anything that happens in the US.

roachboy · 10-03-2008, 05:29 PM

i dont think you get it ace. if you imagine that the thread is only about the fact that strauss-kahn issued the statements in the op, you're mistaken. this is more about the movement to deal with the obvious, which is that a result of neoliberal practices, cheered on by the nationalist right in the states (the neo-fascist right would of course oppose this, but there's not line separating what would be neo-fascism in europe and good ole american conservatism in general) has produced conditions that outstrip the control of any nation-state. so the result will sooner or later be trans-national regulation of capital fows. the only question is the politics of it, not whether it'll happen.

10-01-2008, 01:24 PM	#2 (permalink)
aceventura3 Junkie Location: Ventura County	I think the IMF is irrelevant. __________________ "Democracy is two wolves and a sheep voting on lunch." "It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion." "If you live among wolves you have to act like one." "A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

10-01-2008, 01:36 PM	#3 (permalink)
roachboy Super Moderator Location: essex ma	it is and it isn't. it is to the extent that it is primarily an instrument of american economic policy. it isn't to the extent that what strauss-kahn is advocating is the setting up of a transnational regulatory body that would be in the position that obviously nation-states are no longer in: able to regulate in an effective manner trans-national capital flows. the uk is already arguing for such a body---the eu is currently unable to quite figure out how to co-ordinate actions on a transnational scale as it lacks the authority even as, in principle, it is an already existing institutional structure. i think we are reaching the end of the era of nation-states, bit by bit---if such a transnational regulatory body gets set up, it's status will be curious, but the effect of it would be to transfer fundamental aspects of nation-state prerogatives regarding economic policy/regulation to the international level. what this means is not yet obvious, but it's a logical direction to move in. what is clear is that this is a Real Problem for conservatives more than for any other ideological sector, because if you undercut the status of the nation-state, what else to they have to talk about? i would argue nothing. and so you'll see a dissolving of the space from which contemporary conservatisms speak and an atomizing of its politics. this is not the same thing as the republican party--for that, what i expect you'll see is something like you're already seeing in europe: an increasing drift center with the result of an increasing interchangablity of political positions---so conflict will become over tactics. all that is required to start thinking about this is the recognition of an obvious fact or two---whatever is being proposed as a "rescue" (word of the day) or "bailout" (yesterday's bad meme) is a provisional and partial action---the solutions, if there are any, to the underlying problems this crisis has exposed are going to take a while to unfold--and if it turns out that capital flows are in fact too big and too fast and too deterritorialized for a nation-state to adequately manage on its own, then the transnational direction is the only logical way to go. and if this doesn't come under the aegis of the imf/world bank system---which would make it more controllable for the united states---it'll come from somewhere else--which would be less so. so if the writing's on the wall and you like the american empire and the way of life it's enabled, you had better hope that the imf is not irrelevant. __________________ a gramophone its corrugated trumpet silver handle spinning dog. such faithfulness it hear it make you sick. -kamau brathwaite

10-01-2008, 02:25 PM	#4 (permalink)
Charlatan Getting it. Super Moderator Location: Lion City	I am not sure what it means but there is a some huge irony that the IMF should get involved in this "crisis". The chickens have surely come home to roost. __________________ "My hands are on fire. Hands are on fire. Ain't got no more time for all you charlatans and liars." - Old Man Luedecke

10-01-2008, 04:06 PM	#5 (permalink)
Baraka_Guru warrior bodhisattva Super Moderator Location: East-central Canada	Yes, so the IMF hasn't been relevant enough. But the IMF must be relevant if we want to get out of this mess. And the mess I refer to is the general global situation that's far worse than just America's current financial "crisis." The IMF was created to avoid situations of which we see now in the global economy. Something must be done to give it clout. Failing that, another organization should be created to carry out the transnational regulations roachboy discussed. Why should the U.S. remain in the driver's seat? Unless they can prove themselves worthy otherwise, perhaps it's time for such a regulatory makeover as globalized as our current markets. Oh, and can we have a moratorium on the chickens' roosting metaphor? I've read it on this board at least four times in the past week or two. __________________ Knowing that death is certain and that the time of death is uncertain, what's the most important thing? —Bhikkhuni Pema Chödrön Humankind cannot bear very much reality. —From "Burnt Norton," Four Quartets (1936), T. S. Eliot Last edited by Baraka_Guru; 10-01-2008 at 04:10 PM..

10-01-2008, 07:32 PM	#7 (permalink)
tisonlyi Nothing	[ Bankers are completing their terms? ] The IMF was created as part of Bretton-Woods. Bretton-Woods was devised to maintain, beyond doubt, the Western dominance in the Post WW2 political system, specifically in Europe... __________________ "I do not agree that the dog in a manger has the final right to the manger even though he may have lain there for a very long time. I do not admit that right. I do not admit for instance, that a great wrong has been done to the Red Indians of America or the black people of Australia. I do not admit that a wrong has been done to these people by the fact that a stronger race, a higher-grade race, a more worldly wise race to put it that way, has come in and taken their place." - Winston Churchill, 1937 --{ORLY?}--

10-03-2008, 05:29 PM	#10 (permalink)
roachboy Super Moderator Location: essex ma	i dont think you get it ace. if you imagine that the thread is only about the fact that strauss-kahn issued the statements in the op, you're mistaken. this is more about the movement to deal with the obvious, which is that a result of neoliberal practices, cheered on by the nationalist right in the states (the neo-fascist right would of course oppose this, but there's not line separating what would be neo-fascism in europe and good ole american conservatism in general) has produced conditions that outstrip the control of any nation-state. so the result will sooner or later be trans-national regulation of capital fows. the only question is the politics of it, not whether it'll happen. __________________ a gramophone its corrugated trumpet silver handle spinning dog. such faithfulness it hear it make you sick. -kamau brathwaite