The IMF and the G20: Time for a rethink?

For those ER fans out there, imagine the following scene:

Capitalism is seriously ill after bingeing all night long on a heady mixture of CDOs. Not content with living sensibly, it had even borrowed to indulge its addiction. However, nothing could satisfy its appetite for In the end, when it couldn’t pay its suppliers, they stopped supplying. Faced with this terrible illiquidity, it went into shock and slipped out of consciousness. It’s been rushed into intensive care and is awaiting a transfusion of ideas and cash.

The G20 are the guys in dark blue. The "Gee, We're Screwed" are the guys in light blue and just about everybody else...

That’s really in short what the forthcoming G20 meeting is all about. But that’s also where the problem starts.

The patient will be surrounded by some 20 doctors, many of whom with rather different ideas of how to nurse capitalism back to life. Some are keen on more ideas, such as better regulation and others are keener on more cash in the form of stimulus packages. The doctors have chosen an odd time to have a philosophical debate.

http://online.wsj.com/article/SB123702789137730081.html

Much as I am fan of the US, it is a well know fact that patient capitalism is in the current dire straits that he’s in because of the US doctor. It was he who got capitalism used to free credit drugs with endless easy prescriptions little or no regulation. And it was also the US doctor who was always against too much intervention, preferring to let capitalism find his own balance. Now the US wants to replace the bad drugs with more good ones, and lots of them to create the necessary stimulus. It is a bit akin to heroine replacement, using methadone instead of heroine under the pretext of making the sure the patient does not go “cold turkey”. The European doctors, on the other hand preach a stricter regime. They want more regulation of the drugs, and they are not keen on pumping more cash into the patient. They want to end his addiction altogether with tight monitoring.

http://www.ft.com/indepth/g20

The irony of the situation should not be lost on us. The US was always the country of small government and big capitalism. Now, it has become the most vocal supporter of big government and stimulus packages. There was a time not so long ago, when the Americans used to make fun of the European (the French in particular) for their proclivity for government aid to their companies and state intervention.

The philosophical issue that rankles the most with the Europeans is Treasury Secretary Geithner’s call for greater stimulus spending by all major economies to the tune of at least 2% of their GDP. In Shakespeare speak, the European dilemma can be summed as “Two percent or not two percent, that is the question”. The Europeans’ point is that they have no interest in racking up the kind of government debt the US now has thanks to its big, albeit vague and potentially inconclusive, stimulus package. They want more regulation.

http://www.iht.com/articles/ap/2009/03/11/business/Obama-Geithner.php

You know something is up when Geithner (who is still taking tax-paying classes after his nomination troubles) is now suggesting that America might, in an unexpected change of heart, want to expand and reform the IMF. He wants to increase tenfold the emergency fund of the IMF to USD500bn (a figure just bigger than Citibank’s toxic debt tally) to help countries in distress. And he is also willing to give more say to the developing world over the IMF, long seen as just another organ of US global financial policy. In return, he wants the IMF to do the US’s bidding and force other countries, such as the Europeans, to increase fiscal stimulus via the backdoor. Put differently, doctor US is trying to bribe the other doctors by shipping in nurses for them to sleep with and bigger accreditations, in order to get them to deal with Capitalism America’s way.

http://www.foxnews.com/politics/first100days/2009/03/12/europeans-balk-geithner-spending/

I can only imagine that at some stage, Geithner will ask developing countries to put in more money into the IMF to have more say. But why should the poorer countries have to pay the price of the mistakes of richer ones? The bigger IMF kitty would supposedly be used to help countries like Hungary for example, which has made some rather bad bets recently. It would the equivalent of letting the Hungry bail out Hungary.

But how come there is only one dark blue here? What does this dark blue mean?? Does that mean that you screw up and still get to run the show? Man, being a superpower sure does come with some good perks

The G20 meeting should focus our mind and make us question what we have taken for granted for so long. At a time when taboos likes nationalisation have been shattered, why don’t we go a little bit further and question other instruments such as the World Bank and the IMF? Are they relevant to our world today?

The last thing patient capitalism needs is more doctors. Too many doctors are as bad as too many cooks. Yes for coordinated action, but no to opaque international organisations that force their will on others and are not fair nor representative. If not Capitalism will make an appearance as a corpse in CSI instead.