I apologize for the brevity of this diary entry; monetary policy is not my field. However, since I have not seen the topic blogged anywhere – I would like to bring your attention to the ongoing Annual Meetings of the International Monetary Fund (IMF).
The developing nations are sticking it to the industrialized world, and the irony is breathtaking:
“Allow me to point out the irony,” Brazilian Finance Minister Guido Mantega told the annual meeting of the IMF and World Bank in Washington. “Countries that were references for good governance, of standards and codes for the financial systems, these are the very countries facing serious problems of financial fragility, putting at risk the prosperity of the world economy.”
More below:
The article continues:
At the gathering yesterday, finance ministers and central bankers from the Middle East to Asia expressed resentment at past conditions the U.S. and IMF demanded in return for loans. Pledges of asset sales, budget cuts and greater regulatory oversight were usually extracted before cash would be channeled to shore up currencies and banking systems.
Brazil, Argentina, Uruguay, Bolivia, Ecuador, Venezuela and Paraguay this month agreed to establish Banco del Sur, an independent development bank. Venezuelan Finance Minister Rodrigo Cabezas said Oct. 8 the institution won’t impose the same restrictions the does IMF when it opens next month.
It will be interesting to see whether the same rules will be applied to all nations.
While finance ministers from the Group of Seven rich nations club were locked in talks in Washington, trying to find a cure for turmoil in global financial markets, their G24 developing nations counterparts said their economies were largely untouched by the ill effects of the cash crunch.
With members like India and Brazil, the G24 said in their final communique that developing nations were the new driving force, as well as stabilizing forces, in the global economy.
[…]
“Ministers noted the vulnerability of the U.S. subprime mortgage market and its financial and real spillover effects,” the G24 communique said.
“They underscored the need to improve the fund’s surveillance of advanced economies, putting as much focus in evaluating their vulnerabilities as it does in emerging market economies.”
EVENHANDED TREATMENT
Oscar Tangelson, secretary of economic policy in Argentina, which chairs the G24, said the forum agreed all members should be treated evenhandedly under the IMF’s updated currency surveillance rules and analysis of economic policies.
“It is very important that that kind of analysis be applied to all,” said Tangelson, speaking through an interpreter. “We also have to see what the prospects are for international financial stability, given the levels of imbalances that are found in some of the developed countries,” he added.
“This can have significant long-term effects if these imbalances are not addressed,” he said.
An effort to create a fund to rescue the greedy bankers from the brutal realities of the free market is meeting with resistance also from other quarters:
WASHINGTON (Reuters) – Bankers remain wary of plans to launch a massive investment rescue fund to soften the blow of the U.S. subprime meltdown, saying it could interfere with a market recovery and stall a resolution to the credit crisis.
Carl Stalberg, executive chairman of Swedbank (SWEDa.ST: Quote, Profile, Research), said on Saturday he doubted the fund would be an effective way for banks to liquidate billions of dollars in structured debt in markets where buyers have effectively gone on strike.
“It might be better to let the markets work it out. Trading platforms like that are always a difficult task,” Stalberg told Reuters on the sidelines of a banking conference.
Such bad news over the weekend after a major Friday drop in the stock market do not bode well for the financial markets when the open again tomorrow.
Watch out!
