Global Challenges, Global Solutions

By iMFdirect

The IMF-World Bank Spring Meetings are upon us here in Washington DC.

With global challenges that require global solutions—the theme of the meetings—IMF Managing Director Dominique Strauss-Kahn reminds us that this is “not the time for complacency.”

Government ministers and officials, members of civil society organizations, journalists, and others are flocking to Washington DC this week to discuss and decide on key issues facing the global economy.

We’ve kicked off the week, releasing our latest assessments of the world economic outlook and global financial stability, as well as an updated look at the outlook for government debts and deficits.

Setting the scene for the meetings, the Managing Director laid out the priority issues in two recent speeches.

Speaking to students at George Washington University last week, he pointed to the task before us….

…to rebuild the foundations of stability, to make them stand the test of time, and to make the next phase of globalization work for all. This rebuilding has three core areas—a new approach to economic policies, a new approach to social cohesion, and a new approach to cooperation and multilateralism.

And, he spoke yesterday about the global jobs crisis, and the need to sustain recovery through employment and equitable growth…

…what we have learnt over time is that unemployment and inequality can undermine the very achievements of the market economy, by sowing the seeds of instability.

In a recent interview, Reza Moghadam—head of the IMF’s Strategy, Policy, and Review Department—talked about how recent global events will feed into the meetings. Watch this video to hear more about what he has to say on global imbalances, capital controls, and reform of the international monetary system, and whether we should we expect any big decisions coming out of the meetings.

3 Responses

  1. Mario Draghi, the Chairman of the Financial Stability Board, in his statement to the International Monetary and Financial Committee on April 16, 2011 wrote:

    “There are signs that the low interest rate environment, which has been necessary to support growth and financial sector recovery, may be leading investors to search for yield in more complex non-standard market segments that increase exposure to liquidity risks. Developments in exchange-traded funds, commodities and high-yield markets are examples that warrant closer surveillance by regulatory authorities.”

    And I just have to ask … why does not Mr. Draghi just suggest lowering the capital requirements for banks when lending to small businesses and entrepreneurs, and who are currently not being lent to since the triple-A rated and some Sovereigns ate up all bank capital there was? That would allow some very simple and much needed vanilla bank lending to happen.

  2. The mother of all capital controls is the one produced by the Basel Committee for Banking Supervision and which steers away all bank lending from those officially perceived as “risky”, like the small businesses and entrepreneurs, towards lending to those officially perceived as not risky, like the sovereigns and whoever can hustle up a triple-A rating.

    If the IMF has not opposed that global capital control, by what right could it then oppose other local capital controls of a much less intrusive nature?

  3. If you are really serious about employment, then why do you not ask yourself the question whether it is logical to have the capital requirements for the banks, one of the most fundamental players in economic development, to be based on such a nonsense as the credit ratings… nonsense because the credit ratings have anyhow already been considered by the markets and the banks when setting the risk premiums and their interest rates.

    Why should a triple-A rated bank client be helped by the regulators more than what he is already helped in the market by the sheer fact he has been allocated a triple-A rating?

    “Potential for Job-Creation Rating Agencies”. Now does that not carry a sweeter message for our unemployed youth?

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