Patrick Young: “BRICS building parallel IMF” – RT

Posted on :Apr 30, 2014

By: Patrick Young


April 30, 2014

The post war consensus on financing bodies appears to be breaking down as the West clings desperately to the reins of the IMF and World Bank. In exasperation, the BRICS nations are pushing forward with alternative institutions.

As arbiter of sound government finance, the IMF was once much  feared by profligate politicians. When IMF experts were  parachuted in as frontline fiscal rescue, the world clearly  recognized a major government economic policy failure. Britain  famously reached this nadir in the 1970s, when state spending  expansion reached a finite limit and Chancellor Healey was forced  into a massive policy U-turn endorsing monetarism and fiscal  discipline.

However, in recent years the IMF has become somewhat politicized,  losing track of its original goals. Having been a hugely useful  player alongside the European Bank for Reconstruction and  Development (EBRD) in helping rebuild the New Europe post-Soviet  collapse, the IMF of recent years has become a rather odd place:  headed by a succession of politicians who seem to regard their  role as being a prominent office to canvas for the French  Presidency while administering economics-lite.

Nowadays, the IMF has become rather a haven of discredited  Keynesian thinking, aka the endlessly meddling interventionist  superstate policies beloved of declining Europe, and indeed  Obama’s America. Typical of the leaderless zeitgeist overseeing  relative economic decline, the political classes have become used  to foisting a compromised European political figure into the top  job at the IMF. What the IMF really needs are strong technocrats  as opposed to the spineless politicians who generally operate  with (at the very least!) one eye on their next political  position.

Thus the IMF has gradually become less significant as it has  manifestly failed to take the fiscal initiative in recent years.  First the world’s leading champagne socialist Dominique  Strauss-Kahn and latterly Christine Lagarde have remained  beholden to the flawed policies of big debt and big government  which suits the cowardly political mood for kicking economic  realpolitik down the road.

What the IMF ought to be doing is behaving like a good doctor,  ensuring the patient takes their medicine and reforms in a  fashion which will ensure better health, not simply offering an  alcoholic a lower proof of vodka and telling them to keep  drinking! During recent European bailout negotiations, IMF  minutes suggest the political classes managed to ride roughshod  over the IMF in order to maintain the flawed (and still  crumbling) euro currency at all costs. In that sense, having a  weak European with ambitions for higher political office makes a  mockery of the idea that the International Monetary Fund is  anything more than an overdraft facility to be rigged in favor of  perceived western political interests. No wonder the rising East  is disillusioned.

  The US and Europe have maintained a stranglehold on the IMF/World  Bank C-suite not only in the face of a massive eastern  renaissance but also with a certain degree of abject hypocrisy  given the abysmal financial management of spendthrift US  governments for decades let alone the travesty of recent European  economic governance.

Thus the BRICS (Brazil, Russia, India, China and South Africa),  fed up with ongoing American stalling at reforming the voting  system in the IMF, have been working their way towards a genuine  new world order. Pivoting away from the influence of the  US-centric Western financial system, it makes sense to create a  counterweight to the IMF; a supranational bank for the emerging  east. Naturally, the proof of the venture will be in how it  operates. It must maintain sound doctrine that keeps government  spending under control and is able to mete out the required   ‘tough love’ – the classic toolkit involved debt default and  currency devaluation to rebalance economies which have failed –   in other words precisely the policies required in an economic  failed state like Ukraine. Above all else the BRICS-Monetary Fund  needs to mix politically neutral with sufficient government  support that it can operate without fear or favor.

Naturally this is likely to cause it to run up against the IMF  for as long as the US and EU insist on making the established  supranational financial institutions vehicles for managing  decline in the eurozone and elsewhere as opposed to actually  imposing policies to repair failure governments and re-establish  growth. That will mean strict budgets and creditors taking losses  – as opposed to the ludicrous move to corporate socialism in  Europe/US post 2008 where bankers speculate with impunity in the  expectation of taxpayer redemption if things go sour.

Gold Goliath is not your typical gold dealer.

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