The Daily Bell
March 1, 2013
IMF is regaining trust … The International Monetary Fund has improved its image since the global financial crisis and should address member countries’ long-standing criticism to build on the regained trust, according to an internal audit. With a call for temporary fiscal stimulus to avoid a collapse of the world economy in 2008-09, the Washington-based IMF was seen as breaking away from a tradition of austerity, according to the report by the Independent Evaluation Office. “The global crisis was a watershed event for the fund,” which is now perceived “as more flexible and responsive,” according to the report released Wednesday. “The true test for the fund will be in periods of calm, when a trusted advisor role is even more critical for traction.” – TheNews.com
Dominant Social Theme: You can trust us. The IMF is always your friend.
Free-Market Analysis: The IMF is ready to pat itself on its collective back and has used an internal report to do so. According to a summary of the report that appeared in TheNews.com, the IMF is now seen as more of an international pal than a nagging nanny. An account of the report was also posted at Bloomberg, which identified the name as “The Role of the IMF as Trusted Advisor.”
Gone are the days – supposedly – when the IMF insisted on an austerity package of tax hikes, spending cuts and “privatizations.” The profile of a softer IMF has emerged worldwide, one that lends to troubled sovereign states without so many harsh preconditions.
Of course, when it comes to Europe, that doesn’t seem to be the case. Spaniards and Greeks have seen their very survival challenged by a noxious mix of higher taxes, lower state benefits and ongoing privatizations. The IMF, or at least its member countries, apparently make a distinction between the “world” and “Europe.” Here’s more from the News article:
With loans in 47 countries and resources that were increased twice in the past four years, the IMF regained the global relevance it had lost in the years leading to the crisis …
The internal auditor two years ago lambasted the IMF for failing to see the signs of the global financial crisis, saying the Washington-based fund was sometimes “in awe of” government officials’ reputation and expertise in nations such as the United States and Britain.
The report described a perception in some countries that the fund is still dominated by its largest shareholders, with conditions attached to recent loans in Europe being seen as “soft” compared with bailouts in the past.
Despite the IMF-induced turmoil in Europe, developing countries believe Europe’s various suffering nation-states received loans with “softer” terms than usual. In yet another irony, the IMF audit obviously implies that the way for the IMF to gain popularity worldwide is to endorse various global easing – and to encourage various large central banks to monetize debt rather than to find ways to cut national spending.
In reality, from what we can tell, the IMF is embarked on a perpetual campaign to expand its clout while popularizing its mission. There have been reports that the IMF has negotiated an additional trillion dollar injection of funds from member states to build a further monetary bank buffer for the EU. Additionally, the IMF continues to expand its SDR global receipts – perhaps with the idea of making it a true international currency that can one day supplant the dollar.
Conclusion: As for the IMF itself, top officials obviously harbor thoughts of developing it into a kind of worldwide central bank, one that manages a global SDR and acts as a lender of last resort to countries large and small. This would be most unfortunate, given the IMF’s profligate and ham-handed – even brutal – record when it comes to negotiating loans and collecting funds. Time will tell.