tag:blogger.com,1999:blog-2546602206734889307.post1563758128128667280..comments2024-03-19T09:54:37.187+00:00Comments on mainly macro: Greece and the political capture of the IMFMainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger44125tag:blogger.com,1999:blog-2546602206734889307.post-33312649528965398982015-07-16T11:57:45.916+00:002015-07-16T11:57:45.916+00:00The IMF itself has recognised that the SAPS were a...The IMF itself has recognised that the SAPS were a mistake. And as I said, it now endorses capital controls - something unthinkable even say five years ago. No, I did not say there is a conspiracy between the US/UK and the IMF. But the IMF is an institution in which the US has enormous influence. It's thinking often reflects the thinking dominant in the country at the time. Come on, most of its economists are educated at MIT. The IMF under Stanley Fischer's stewardship used moral hazard arguments to argue against bail outs and the implementation of austerity. They used incentive arguments and what can be called "sound money" arguments. (My guess is that this reflects Sargent et al influence which was very powerful at the time - even on MIT economists.) I have posted actual quotes from the IMF when it said this in the 1990s, and when it said they were a mistake (last year) on past SWL's actual blog comments - I will dig them up again if I have time. Very clear on their wrongdoings.<br /><br />What is very interesting is why the IMF last year admitted its mistakes, yet insisted on that Greece pay its debts. I suspect a big internal battle is going on in the institution.<br /><br />The reference to Bali bombings is not diatribe. The political problems in dysfunctional states is related to the economic problem and a society with extreme differences between winners and losers. Sort out the economic problems in the Middle East and Indonesia and basically you have neutralised the problem of Islamic State. (Once again though we have mainstream economists arguing that income inequality is good for third world growth - they have not studied history or development economics- which thankfully still has a large historical and sociological component.) Yes, Thailand went through a boom (and bust), but likes it political situation, it is on a flimsy economic one.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-2003415176885100322015-07-10T18:34:04.639+00:002015-07-10T18:34:04.639+00:00Alexander:
That shows that Schäuble, though a law...Alexander:<br /><br />That shows that Schäuble, though a lawyer, knows something about economists.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-62391920236835326292015-07-07T01:46:17.994+00:002015-07-07T01:46:17.994+00:00Using the Islamist-inspired Bali bombings as some ...Using the Islamist-inspired Bali bombings as some sort of diatribe against capitalism is utterly ludicrous. Anyway, let's not go further down that road.<br />At first sight the 1997 crisis seems not dissimilar to 2008 insofar as it was caused by a credit bubble that resulted in an unsustainable property boom throughout SE Asia. Malaysia's recovery (slower than those who took IMF funds) was due to stronger commodity prices. Their economy was fundamentally healthy with the exception of a few over-extended businessmen with links to the ruling party. Their refusal to take IMF funds was not due to some noble decision to go it alone. They knew their racist policies favouring Malays at the expense of minority races would have to be repealed. By 1999 Thailand's economy was growing by 4%-pretty decent compared with the post 2008 recovery in the west. Some perspective is required-in the 10 years prior to the crisis the Thai economy would have topped world growth tables. <br />You do realise these SE Asian nations have some of the most hostile laws regarding foreign investment on earth? Portraying the IMF involvement as some sort of US/British conspiracy is unsupported by any evidence. If it were true, surely they would have ensured foreigners were free to invest in land/businesses in Thailand/indonesia/Philippines? Hint: you can't without going through endless bureaucracy. Anyway by far the biggest foreign players in these economies are Japan/Taiwan and china.Anonymoushttps://www.blogger.com/profile/01564096730987905967noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-24275250894751235602015-07-06T15:20:43.008+00:002015-07-06T15:20:43.008+00:00"Anon: the IMF would surely feel wholly vindi..."Anon: the IMF would surely feel wholly vindicated by the strong recovery in countries affected by the 1997/8 Asian Debt crisis. Portraying them as victims is grossly inaccurate."<br /><br />It was a tragic episode, especially for Indonesia, Thailand and SE Asian countries. Korea got out of it thanks to an already very strong export sector. Malaysia got out of it probably the strongest - by defying IMF advice and implementing capital controls (to the ridicule of just about everyone at the time save Jeff Sachs). Thailand eventually recovered, but after enormous losses to output. Both Thailand, and especially Indonesia have been left with fragile political environments, the latter only saved by a resources boom - and if you want some idea of the human rights and ecological cost google Freeport Moran mine Grasberg. The latter is a particularly explosive situation given high income and other inequalities and widespread distrust of western capitalism, evidenced in its most extreme form with the Bali bombings.<br /><br />Even the IMF admitted the SAPs in the aftermath of the Asian Financial Crisis were a mistake (and has specifically said so) and now also endorses capital controls.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-69303285665403610142015-07-06T15:12:41.885+00:002015-07-06T15:12:41.885+00:00So you keep saying. Would you like to mention some...So you keep saying. Would you like to mention some of these proven facts?Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-82189186872586800762015-07-06T15:02:42.473+00:002015-07-06T15:02:42.473+00:00I think you really need better sources. Here is Cl...I think you really need better sources. Here is Clive Crook, hardly someone of the left:<br /><br />http://www.bloombergview.com/articles/2015-07-01/europe-wants-to-punish-greece-with-exit<br /><br />The data shows that Greece, at the Troika's insistence, has enacted more austerity than any other country. That inevitably leads to a collapse in GDP: multipliers have nothing to do with 'structural reforms'. It has also enacted a good deal of the 'structural reform' asked of it. The idea that the Greek economy has collapsed because it has not enacted every reform is pure nonsense - it has collapsed because of the measures imposed by the Troika.<br /><br />I think if anyone is suffering from following propaganda .... Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-55984480646440054032015-07-06T15:02:38.847+00:002015-07-06T15:02:38.847+00:00What a load of baseless rubbish. Your anti-austeri...What a load of baseless rubbish. Your anti-austerity agenda is harming the development of macro-economics as a field because you ignore proven facts when concocting your arguments.<br /><br />You are a disgrace to the profession.Rohannoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-1809334024133171792015-07-06T15:02:32.703+00:002015-07-06T15:02:32.703+00:00"The IMF took a very "austerian" vi..."The IMF took a very "austerian" view during the Asian crisis, to the great profit of American financial firms."<br /><br />Indeed, and Goldman Sachs did very well out of the slash and burn fire-sales which it later sold on the left over pieces to jaw-dropping dividends shared among their partners. Grotesque vultures.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-18539474240260621622015-07-06T14:51:32.972+00:002015-07-06T14:51:32.972+00:00The Troika always set this up as a repeated game: ...The Troika always set this up as a repeated game: loans always had to be renewed, so giving the Troika a chance to enforce compliance. In a repeated game, if you keep dangling a carrot but fail to give it, you get rumbled. That was the No vote.Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-64510322933798747312015-07-06T12:12:26.673+00:002015-07-06T12:12:26.673+00:00The author is following Greek propaganda that nego...The author is following Greek propaganda that negotiations actually failed because no debt relief has been granted. I think this is wrong.<br /><br />Negotiations failed due to Syrizas unwillingsness to make the pension system sustainable, the unwillingness to improve public finances by cutting public expenditures instead of tax hikes and the reluctance to enter into further structural improvements that improve competitiveness.<br />Syriza is the ruling party of the radical left that has little understanding of modernizing the economy by fostering entrepreneurship and liberalize markets. There is simply no willingsness to invest into Greeks future because this is not w´hat Syrizas electoral base represents.<br />The IMF might have not predicted multipliers in Greece correctly. But aren't these multipliers a direct result of a governments ability to implement structural reform. Creditors rightly complained about the previous governments undermining of structural reforms by subsequently introducing legislation that countered these reform efforts.<br />Greeks debt looks high but is no burden on the economy since most payments have been moved into the distant future. The Eurozone gave itself a mechanism to deleverage which is financial repression effected by loose monetary policy and QE. Greece could have it in the same way but refuses to accept this. <br />Some limited debt relief was even considered by the eurozone but Greece made it clear it would not deliver on any structural reforms whatsoever. <br />Greece can't have it all and both ways.<br />No structural reforms, debt relief and still staying in the euro.<br />I wonder what a European referendum on a Greek package would have looked like. Outcome would likely be similar. A majority would rejects such package after this farce of the last 5 months.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-65921275375746503972015-07-06T10:26:22.900+00:002015-07-06T10:26:22.900+00:00Thanks for the link - essential reading on the DSA...Thanks for the link - essential reading on the DSAs. It was also good to see Max Corden referred to.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-81445741142922194202015-07-06T09:57:38.038+00:002015-07-06T09:57:38.038+00:00Anon: the IMF would surely feel wholly vindicated ...Anon: the IMF would surely feel wholly vindicated by the strong recovery in countries affected by the 1997/8 Asian Debt crisis. Portraying them as victims is grossly inaccurate.Anonymoushttps://www.blogger.com/profile/01564096730987905967noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-10220578500652805432015-07-06T09:46:48.541+00:002015-07-06T09:46:48.541+00:00Okay, thanks for sharing your view... Which thus m...Okay, thanks for sharing your view... Which thus means that the Fund's Managing Director (Lagarde) and its Executive Board have aligned with the EU institutions in rejecting the IMF Research Department work that is critical of Greek austerity. Could it be that it is the Lat Am and Asian countries that side with the "German view" because they do not want "Old Europe" countries to receive "better" treatment than they got from the Fund in the 1990s during their own crises, thinking that they were forced to go through very tough austerity and survived and so should Greece now? Of course, if this is the reasoning behind the Fund's hard line position on Greece, these countries forget that contrary to them, Greece has no independent central bank and no own currency...Patrick VBnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-11379172638335388892015-07-06T08:44:38.578+00:002015-07-06T08:44:38.578+00:00While I applaud this post as being more balanced, ...While I applaud this post as being more balanced, I think it seriously misconstrues the IMF. The IMF took a very "austerian" view during the Asian crisis, to the great profit of American financial firms. I'm trying to search my memory, and I can't remember a case where it was hard on creditors. Could someone give an example?<br /><br />I'd also just repeat what other commentators have said. The whole point of the current approach to Greece is to get structural reforms into an economy which is supposedly corrupt. It used the carrot approach: dangle it in front but never so close it might be eaten. I'm not saying I approve of the approach, but that was the idea.<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-87815613677525253012015-07-06T08:37:24.335+00:002015-07-06T08:37:24.335+00:00You should read page 6 onwards of this from Peter ...You should read page 6 onwards of this from Peter Doyle:<br /><br />https://ptdyblog.files.wordpress.com/2015/07/dsa.pdf<br /><br />I agree that once this would have just been standard fare from the IMF, but I thought they knew better now. I think many of their staff do, but politics gets in the way. Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-49242640187590484402015-07-06T08:03:46.104+00:002015-07-06T08:03:46.104+00:00The fact that ethical principles are violated left...The fact that ethical principles are violated left and right, and even the fact that entrenched laws and institutions allow and encourage the continued violation of those principles has absolutely no effect on the validity of those principles. "No good deed goes unpunished" and "strictly Machiavellian manner" as attempts to express the principle actually being followed in the world economic system as currently set up are way too crude. You need a much more specific formulation, and it would be helpful if you could come up with a good formulation, because then "the people" would become aware of the gap and see clearly how unacceptable it is. Ethical principles work for "the people" and against the power principle. Your objections concern praxis; if "the people" were able to get a clear understanding of the current ethical situation, the power of public pressure might have a positive effect on the level of praxis. I admit it would be no easy task to bring about such an understanding. I think you are misunderstanding the role the the common awareness of ethical principles has in governing human activities, including economic interactions. (I distinguish between ethical principles, properly speaking, and "morality", which is what I adverted to in the case of creditor behaviour above. Actually, a conventional idea of "morality" in this sense on the part of the creditors (as opposed to a decentred ethical understanding) is one of the things getting in the way of arriving at a practically effective solution to the problem in this case.)JPLnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-52038512760109711122015-07-06T00:53:25.704+00:002015-07-06T00:53:25.704+00:00I might just add that Paul Krugman and others have...I might just add that Paul Krugman and others have justified IMF practice in previous episodes on the basis that states were "corrupt" and therefore needed the IMF's reforms (yes meaning austerity). Watch this - and be sceptical. Some are also saying this about Greece. The fact is that institutional structures in smaller states and emerging markets are of course in no position to deal in equal terms with the financial institutions and power structures of major countries like the US or Germany. Imagine them up against the legal and other resources of major corporations, banks and governments in the US or such countries. This is more the problem and the fact they were in no position to defend their positions than the states being "corrupt", which was a generalisation in any case.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-15103867244412495302015-07-06T00:43:30.736+00:002015-07-06T00:43:30.736+00:00A very interesting post indeed. In my view the Gre...A very interesting post indeed. In my view the Greek episode has led to more soul-searching by the IMF than previous episodes. During the Asian Debt Crisis and Latin American Debt Crisis the IMF's policy prescription was austerity as a condition for debt relief - and included wholesale privatisations and drastic macro-contraction measures to stabilise currencies. The likes of Stanley Fischer (yes Paul Krugman's mentor) were behind this, not the Germans. So really these policies are very deeply rooted in the IMF, and so we should be careful in tracing them back to German influence. (Some economists, notably Jeff Sachs, were critical of the IMF during these episodes, but frankly, not enough were.)<br /><br />Having said that, I do feel that the victim of the IMF's policies have been poorer, weaker states, and I suspect the real motivations behind them are the powerful countries and powerful, especially powerful financial, interests and their links to respective governments in powerful countries. But Germany is only one of these, and not the most important. For sure the US centred Anglo-Saxon dynamic is far more influential, and not just during the age of the Washington Consensus.<br /><br />In short, we are seeing a little bit of soul searching and reticence by the IMF re Greece, but austerity is very much consistent with its practice since the 1980s. Over and over again the result has been small emerging markets paying the price for the excesses of powerful financial interests that have promoted financial deregulation and globalisation, a lot of them US and UK centred.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-4600746545290597962015-07-06T00:40:34.275+00:002015-07-06T00:40:34.275+00:00Germany must invade Greece to get back there money...Germany must invade Greece to get back there money. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-57132293788805852612015-07-05T23:17:39.546+00:002015-07-05T23:17:39.546+00:00"When governments borrow too much, and cannot..."When governments borrow too much, and cannot repay, it generally falls to the IMF to sort things out. "<br />When governments borrow IN A FOREIGN CURRENCY too much, should say.Randomhttps://www.blogger.com/profile/04445772572707818311noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-15494738019098141812015-07-05T19:07:23.128+00:002015-07-05T19:07:23.128+00:00Germany will never accept a realistic deal. There...Germany will never accept a realistic deal. There are only two ways, in real terms, Germany can be paid: By confiscating a large quantity of real Greek assets, or by accepting a long running trade deficit with Greece. That is Germany would elect to become a net importer of Greek production. This is unlikely in any case because Greek industry is in shambles after years of itself running a trade deficit and austerity. <br /><br />The talk about money is just smoke and mirrors. German industry made out from the trade surplus with Greece. They don't want the unavoidable costs, the necessary depressed demand for domestic production, that come from running a deficit.<br /><br />The Greeks do have to put their house in order. The Germans can demand that. But to demand money from Greece now will prevent that from ever happening.greghttps://www.blogger.com/profile/08201906679062960215noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-66343180569540320172015-07-05T16:35:21.859+00:002015-07-05T16:35:21.859+00:00But why were the private sector creditors only giv...But why were the private sector creditors only given a partial haircut (and so late in the day)?<br /><br />If fear of bailing out bigger governments was the key, a better strategy would have been to offer Greece nothing, and let the IMF do all the work.<br /><br />The actual strategy was almost certain to lead to the undesired outcome - by taking over unsustainable private sector debts, the EZ governments were almost certain to end up giving debt relief to Greece (or losing it when Greece defaults). I agree that the fears you mention are very real, and I have some sympathy with them, but the Troika is at fault for ignoring these fears at the crucial point when they bailed out private sector creditors. Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-73102443173232293532015-07-05T16:25:19.601+00:002015-07-05T16:25:19.601+00:00I think the IMF had, and still has, much more powe...I think the IMF had, and still has, much more power than you suggest. Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-380462559853942242015-07-05T14:54:13.218+00:002015-07-05T14:54:13.218+00:00I don't think morality has much to do with it ...I don't think morality has much to do with it other than a propaganda used by the Euro elites. The real issue is that this crisis reflects the general trend towards fragmentation of power. The West is in disarray because various factions all have different agendas and lack common ground, ironically, because morality indeed is not recognized as a way to achieve common ground. Doing the "right thing" rarely enters into any political-economic issue other than as propaganda or a tool to manipulate others. The system, using a game-theory concepts, has already eliminated those who are swayed by morality using the Washington maxim "no good deed goes unpunished" because the game is set up to penalize those that do not act in a strictly Machiavellian manner.Christopherhttps://www.blogger.com/profile/13952349762495248900noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-5327707220219656902015-07-05T14:46:58.440+00:002015-07-05T14:46:58.440+00:00Ok but almost the entire political economy of the ...Ok but almost the entire political economy of the planet is centered on fractional reserve banking and any change would dislodge the ruling elites that run the system. Whatever happens has to happen within that structure and there are other avenues open for reform. I do agree that fractional reserve banking is toxic at this moment in history, btw?Christopherhttps://www.blogger.com/profile/13952349762495248900noreply@blogger.com