By Abid Aslam
WASHINGTON - Former French Socialist finance minister Dominique Strauss-Kahn is to head the International Monetary Fund (IMF) from November. He takes the helm amid deep division over how the agency is governed and its role in the global economy.
Strauss-Kahn will succeed Rodrigo de Rato, a former Spanish finance minister who said in July that he would leave in October, two years before the end of his five-year term, for personal reasons.
The IMF's 24-member executive board, made up of representatives of shareholder governments, last Friday chose Strauss-Kahn, who had been nominated by the 27-nation European Union, over Josef Tosovsky, a former Czech central bank chief and prime minister.
Russia had nominated Tosovsky to challenge the tradition whereby IMF chiefs have come from western Europe and World Bank heads from the United States, since the Bretton Woods siblings rose from the ashes of World War II. The fund's borrowers have called for a selection process more open to candidates from emerging markets and developing countries.
Even so, Strauss-Kahn was considered the likely winner, and his fate was sealed last week when the US gave him its 17% share of votes on the IMF executive board. Europe holds about one-third of votes on the board, and developing countries slightly less. Some of these countries backed the Frenchman over the Czech.
Strauss-Kahn, 58, lobbied hard for the job and cited borrowers' support in pledging to restore the institution's legitimacy and relevance.
"Given the strong legitimacy derived from the very broad support I received, notably from emerging-market and low-income countries, I am determined to pursue without delay the reforms needed for the IMF to make financial stability serve the international community, while fostering growth and employment," he said in a statement.
Chiefly, this would involve pressing on with governance changes aimed at giving emerging economies more voting power within the IMF. Strauss-Kahn also said he will seek to strengthen the fund's monitoring of the global financial system and of shareholders' economies.
Most of the reforms are already in motion, and so far China, South Korea, Mexico and Turkey have increased their stakes in the IMF. Plans to give other emerging economies a greater say in the fund's running remain under discussion.
The aid group Oxfam International urged further action.
"The question of whether to give a bigger voice to poorer members has been dragging on for too long and must be answered now," said Elizabeth Stuart, Oxfam's Washington-based policy adviser. "Measures currently on the table would deliver woefully short of a meaningful reform.
"He'll need to set the tone from Day 1 in the position to make it happen," Stuart said of Strauss-Kahn.
Even as the IMF strives to reflect a distribution of economic power very different from the Western-dominated world in which it was born, it also is seeking to forge new relationships with emerging and poorer economies that shun its loans because of the austere macroeconomic policy prescriptions that come with the money.
Asian and Latin American countries that borrowed from the IMF during the financial firestorms that started a decade ago have repaid all or most of their loans and have amassed foreign-exchange reserves in hopes of avoiding future bailouts by the fund.
African and other poor countries weary of taking direction from the IMF have begun to borrow from China instead. As a result, the IMF has lost operating income it used to earn from debt servicing and is considering staff layoffs and a sale of some of its gold reserves to plug a budget deficit.
Strauss-Kahn highlighted the potential seriousness of the situation during a recent interview with the fund's directors.
"What might be at stake today is the very existence of the IMF as the major institution providing financial stability to the world," he said.
Where policy prescriptions no longer are acceptable, the fund should offer its members the benefit of "ruthless truth-telling", he said. "As countries are reluctant to cede any control over their economic policies, the IMF must have as instruments the power of analysis and persuasion," he told the board during his September 20 interview.
While unhappy borrowers remain a pressing concern for the IMF, the fund also must contend with pressure from its biggest shareholders. The US administration, for example, likely will continue to press the fund to go after China, which Washington accuses of manipulating currencies to drive down the prices of its exports to the United States.
(Inter Press Service)
Wednesday, October 3, 2007
The not-so-tragic tale of dollar/oil disparity
By The Mogambo Guru
Junior Mogambo Ranger (JMR) Juan O writes to call my attention to the disquieting fact that "oil trades at a higher number than the USD index. How funny is that? Or maybe it's just tragic."
Naturally, I craftily respond, "Tragic? What in the hell are you talking about? Who the hell are you? Where am I? Why am I tied up like this?"
JMR Juan then says, seemingly by way of explanation, "USD 79.51. Crude Oil 79.91," which I naturally take to be a code of some kind, probably a message that he is sending help and that the odds are even.
I was relieved to hear this, and thus I was relaxed enough to idly notice that if the dollar index, which has been falling, was at rough parity to the price of oil, which has been rising, and now they are crossing, and that made sense, too! Oil exporters don't want dollars, see? They want units of buying power that they can use right now (like ordering some pizza and liquid refreshments for everybody), or to use in the future (to order some pizza and liquid refreshments as soon as The Mogambo goes home so he won't be hogging it all and we won't watch him eat, or, even worse, listening to him slobbering and gulping and belching while he gorges on it all).
And because these oil exporters, like everybody else, don't see the US dollar getting stronger in a real sense (because of economic vigor) or in a relative sense (because everybody else is debasing their own currencies even more tragically than we are), then the dollar going down would automatically make the price of oil rise, even though the true "value" exchanged would remain, theoretically, a constant!
So oil going higher as the dollar goes lower makes perfect sense, and I am glad that those stupid oil-exporting morons don't wake up and say, "Hey! We're getting screwed here by not raising the price of oil to compensate for the reduced value of buying power and reduced store of value of the damned dollar with which these deadbeats are paying for our oil, especially the part about the dollar being a 'store of value', so that by the time the damned Mogambo goes home and we can order some pizzas and beverages to get this party really started, the purchasing power of the dollar has dropped so much that we can't buy as much pizza and beverages as we can right now!"
They have a point! I mean, what Big Economic Moron (BEM) can't see the profound inequality of the value exchanging a barrel of oil today, which will be more valuable in the future, for 10 pizzas consumed today, versus the value of 9 pizzas consumed tomorrow? Or what is the relative value of 10 pizzas today worth, versus only 8 pizzas consumed next week? Or 6 pizzas next month? Or 1 pizza next year? What kind of idiot would hold dollars?
Likewise, what oil-selling nation would be so stupid as to constantly accumulate dollars, by exchanging a tiny bit of a finite amount of oil for them? Who would exchange their irreplaceable natural inheritance for a foreign currency when the value of that currency power was going down, down, down, down in buying power? Hahahaha!
Who would voluntarily accumulate dollars, and all your friends are laughing at you and chanting, "Hahahaha! Big oil-export moron selling oil for dol-lars! Devaluating dol-lars! Devaluating dol-lars! Mogambo him right! You are a big stupid oil-selling moron who doesn't get any pizza, and doesn't deserve any, because he was so stupid that somebody ought to come over there and slap your face until you stopped being so silly!"
I don't know if it is coincidence or what, but Kate "Short Fuse" Incontrera at DailyReckoning.com writes, "Also wearing on the greenback are rumors that the Saudi Arabian government are batting around the idea of de-pegging their currency, the riyal from the US dollar - a move that would be a disaster for the already down-and-out US currency."
And, even worse, it is not just oil and other imports that will cost more, but everything will cost more, too, even though it was made here, because our domestic production and exports will be so cheap to foreigners (thanks to their strong currencies) that prices will be bid up, tariffed-out, taxed, and boosted by demand.
For example, the CRB Index is a basket of 28 different tangible assets and other natural resources, and in the past seven months is up 14%! Hell, the Economist magazine's Dollar Index on the back page reports that "percentage change on one year" for "All items" is 21.5%!! Note the double exclamation points, which is a sure-fire way of detecting importance!
Worse, the Economist's category of "Food" lists the "%age change on one year" as 40%! I gasp in absolute horror! Prices for food, priced in dollars, are up by almost half, almost 50%, from 12 months ago!
Suddenly, I realize that this means that I'm literally paying for 1.5 items, but the snotty little cashier is waiting until my back is turned while I am unloading the shopping cart onto the little conveyor belt, and then she steals every third item that comes along! But when you turn around real fast to try and catch her and her thievery, she flashes that stupid little smile at you that she thinks will make me think that she is NOT stealing my food, but it just proves her guilt, as far as I am concerned.
And I have seen enough Star Trek episodes to know that videos can be altered in the computer, so it doesn't surprise me that the store's security cameras can't catch her stealing a third of everything I buy. Probably some kind of Klingon cloaking device or something. I dunno. Nothing that a photon torpedo couldn't handle, anyway.
Richard Daughty is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the editor of The Mogambo Guru economic newsletter - an avocational exercise to heap disrespect on those who desperately deserve it.
Republished with permission from The Daily Reckoning. Copyright 2007, The Daily Reckoning.
Junior Mogambo Ranger (JMR) Juan O writes to call my attention to the disquieting fact that "oil trades at a higher number than the USD index. How funny is that? Or maybe it's just tragic."
Naturally, I craftily respond, "Tragic? What in the hell are you talking about? Who the hell are you? Where am I? Why am I tied up like this?"
JMR Juan then says, seemingly by way of explanation, "USD 79.51. Crude Oil 79.91," which I naturally take to be a code of some kind, probably a message that he is sending help and that the odds are even.
I was relieved to hear this, and thus I was relaxed enough to idly notice that if the dollar index, which has been falling, was at rough parity to the price of oil, which has been rising, and now they are crossing, and that made sense, too! Oil exporters don't want dollars, see? They want units of buying power that they can use right now (like ordering some pizza and liquid refreshments for everybody), or to use in the future (to order some pizza and liquid refreshments as soon as The Mogambo goes home so he won't be hogging it all and we won't watch him eat, or, even worse, listening to him slobbering and gulping and belching while he gorges on it all).
And because these oil exporters, like everybody else, don't see the US dollar getting stronger in a real sense (because of economic vigor) or in a relative sense (because everybody else is debasing their own currencies even more tragically than we are), then the dollar going down would automatically make the price of oil rise, even though the true "value" exchanged would remain, theoretically, a constant!
So oil going higher as the dollar goes lower makes perfect sense, and I am glad that those stupid oil-exporting morons don't wake up and say, "Hey! We're getting screwed here by not raising the price of oil to compensate for the reduced value of buying power and reduced store of value of the damned dollar with which these deadbeats are paying for our oil, especially the part about the dollar being a 'store of value', so that by the time the damned Mogambo goes home and we can order some pizzas and beverages to get this party really started, the purchasing power of the dollar has dropped so much that we can't buy as much pizza and beverages as we can right now!"
They have a point! I mean, what Big Economic Moron (BEM) can't see the profound inequality of the value exchanging a barrel of oil today, which will be more valuable in the future, for 10 pizzas consumed today, versus the value of 9 pizzas consumed tomorrow? Or what is the relative value of 10 pizzas today worth, versus only 8 pizzas consumed next week? Or 6 pizzas next month? Or 1 pizza next year? What kind of idiot would hold dollars?
Likewise, what oil-selling nation would be so stupid as to constantly accumulate dollars, by exchanging a tiny bit of a finite amount of oil for them? Who would exchange their irreplaceable natural inheritance for a foreign currency when the value of that currency power was going down, down, down, down in buying power? Hahahaha!
Who would voluntarily accumulate dollars, and all your friends are laughing at you and chanting, "Hahahaha! Big oil-export moron selling oil for dol-lars! Devaluating dol-lars! Devaluating dol-lars! Mogambo him right! You are a big stupid oil-selling moron who doesn't get any pizza, and doesn't deserve any, because he was so stupid that somebody ought to come over there and slap your face until you stopped being so silly!"
I don't know if it is coincidence or what, but Kate "Short Fuse" Incontrera at DailyReckoning.com writes, "Also wearing on the greenback are rumors that the Saudi Arabian government are batting around the idea of de-pegging their currency, the riyal from the US dollar - a move that would be a disaster for the already down-and-out US currency."
And, even worse, it is not just oil and other imports that will cost more, but everything will cost more, too, even though it was made here, because our domestic production and exports will be so cheap to foreigners (thanks to their strong currencies) that prices will be bid up, tariffed-out, taxed, and boosted by demand.
For example, the CRB Index is a basket of 28 different tangible assets and other natural resources, and in the past seven months is up 14%! Hell, the Economist magazine's Dollar Index on the back page reports that "percentage change on one year" for "All items" is 21.5%!! Note the double exclamation points, which is a sure-fire way of detecting importance!
Worse, the Economist's category of "Food" lists the "%age change on one year" as 40%! I gasp in absolute horror! Prices for food, priced in dollars, are up by almost half, almost 50%, from 12 months ago!
Suddenly, I realize that this means that I'm literally paying for 1.5 items, but the snotty little cashier is waiting until my back is turned while I am unloading the shopping cart onto the little conveyor belt, and then she steals every third item that comes along! But when you turn around real fast to try and catch her and her thievery, she flashes that stupid little smile at you that she thinks will make me think that she is NOT stealing my food, but it just proves her guilt, as far as I am concerned.
And I have seen enough Star Trek episodes to know that videos can be altered in the computer, so it doesn't surprise me that the store's security cameras can't catch her stealing a third of everything I buy. Probably some kind of Klingon cloaking device or something. I dunno. Nothing that a photon torpedo couldn't handle, anyway.
Richard Daughty is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the editor of The Mogambo Guru economic newsletter - an avocational exercise to heap disrespect on those who desperately deserve it.
Republished with permission from The Daily Reckoning. Copyright 2007, The Daily Reckoning.
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