Notes From Underground: Time to throw the French Finance Minister to the Dustbin of History

My turn. Everybody has had a comment on the appointment of the next IMF Managing Director. First, allow me again to voice my disdain for the IMF as it is usually late to the rescue party and its money and advice have done great harm to many in the the “emerging economies.” Most IMF actions have been to bailout the profligate creditors who made ill-thought out loans with the knowledge that there would be an international lending institution to backstop most losses. The post war world is replete with mal advice and ill-conceived programs that brought great pain to many economies in the underdeveloped world. Saying that does not mean that the IMF will be disbanded so the world is forced to engage the devil it knows.

The rise of the BRICS and the other G20 members means it is time to stop the neo-colonial drama of maintaining the HEAD of the IMF as a European and the World Bank President as an American. It is time to risk a change in global thinking and appoint an individual from an emerging nation.

It is widely held that Christine Lagarde is the favorite to replace Mr. Strauss-Kahn and if this comes to fruition it would mean that the corruption of global institutions by the developed world is not ready for change. Ms.Lagarde is a well-connected attorney (BAKER & MCKENZIE, Chicago) and carries much weight in the inner circles of power, but her knowledge of finance seems to be rather suspect. Lagarde has been on the wrong side of many of the issues involving the European debt crisis and her close ties to Sarkozy should automatically eliminate her.

I propose that the best choice for IMF MANAGING DIRECTOR would be TREVOR MANUEL, former Finance Minister of South Africa for 13 years. I had the pleasure of dining with Mr. Manuel and is exceedingly bright assistant, Maria Ramos, when the CME was getting ready to launch the South African RAND contract and the finance minister came to Chicago to work out the details. The discussions were very direct and the South Africans were very willing to allow the beginning of a floating currency program.

I asked Mr. Manuel if the S.A. Government was going to allow the removal of foreign exchange controls and Mr. Manuel maintained that the controls would be lifted slowly but would be removed. Prior to the black ascendancy, there has been very tight FX controls as the government feared massive capital flight for wealthy whites would rush to pull out their money and crush the economy.

It took great courage and risk to allow the removal of CAPITAL CONTROLS but as the South African economy gained its footing, the RAND floated and money was allowed to leave. It is time the IMF was placed into the hands of knowledgable risk takers from the emerging economies and begin to remove the colonial vestiges that taint all of the global financial institutions–French leadership should have been left at DIENBIENPHU.

In an interesting statement today, the OECD (Organization for Economic Co-operation and Development) suggested that the U.K. and the U.S. begin raising interest rates as the threat of deflation has ended. The OECD staff recommended that the FED and BOE follow the ECB by lifting rates by at least 1% before the year is out. It is interesting that the OECD is failing to acknowledge the DEFLATIONARY impact of the austerity programs being enacted in the PIIGS and the possible budgetary retrenchment in the the U.S. The OECD acknowledges the urgent need for U.S. budget restraint but at the same time calls for rates to rise.

It is so easy for academics to push for fixes that may prove disastorous if enacted together in a fragile economy. It is always interesting that the institutions for employment of economists–IMF and OECD–are so very often wrong when their policy designs are placed into action. What propmpts the timing of this policy suggestions should be a PHD DISSERTATION.

Tags: , , , , , , , , , ,

6 Responses to “Notes From Underground: Time to throw the French Finance Minister to the Dustbin of History”

  1. PBL Says:

    Since when do we need people in place that actually have working in the economy or have a proven track record. Dont you know the “central planning committee” has it all worked out for the good of the people? Ha

  2. Danny Says:

    So naturally if the emerging economies are to play an increasingly important role in the management of the IMF…it should follow that they be required to increase their funding levels to the IMF, right? I just sort of wonder what the unintended consequences of allowing some countries, who are increasingly using finance in the form of SWF’s to expand their own strategic interests, one more lever to pull that could potentially be utilized to only further expand their own self interests-at least with out mandating they grossly increase their levels of funding to the IMF. After all why should the U.S. be funding its own decline in world influence?

  3. Arthur Says:

    Ignore China, India, Russia, Brazil and South Africa at your peril.

  4. yra Says:

    Danny–the emerging nations will increase their funding to international organizations at some point but it must be remembered that much of the work of the IMF and other financial organizations has been done for the benefit of what was termed the center nations or developed –the times are changing but the “OLD LAGARDE” don’t want to allow the changes as they wish to cleave to the old order.

  5. Paul Says:

    Yra

    Very insightful comments.

    Perhaps in time when there is a reformed system of international payment settlement, your vision of greater influence on part of the emerging market group will come to fruition.

    Mr. Sinclair has alluded to an increased role of the monetary metals in the SDR in the future; however, this does not eliminate the possibility of that scenario having been planned for — I would not put it past the West. Retaining dominant control has significant internal benefits, hence the “old lagarde” you refer to.

    Requiring a change in our mode of thinking is required: that much is clear. Sadly, such changes must often be forged by external events.

  6. Risk and Public Policy | Points and Figures Says:

    […] of all stripes rarely take a risk-and they don’t understand it. This piece from Notes From the Underground got me thinking about risk and public policy. This is the part that really got me thinking, It is […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: