(Chanakya of Arthashastra And Aristotle of The Politics, 4th century B.C.E)
Japan lowered interest rates. The yen is too strong to compete in the face of a dollar deluge for the export-dependent economy which is at risk of dropping below China and India among the top 5 global economies in terms of purchasing power parity (PPP). Brazil’s Dilma Rousseff has complained to Obama about US monetary policy.
James Rickards, on Twitter: @JamesGRickards, a hedge fund manager in New York City and the author of Currency Wars: The Making of the Next Global Crisis seeks a solution which may not be to the liking of his portfolio in the end game.
I spent some time with senior officials of the International Monetary Fund (IMF) and World Bank at the recent Spring Meetings in Washington, D.C., the week before Earth Day 42, in my capacity as a Non-Governmental Civil Society Organization (NG-CSO). Contrary to Mr. Rickards arguments in the Economic Intelligence column of US News, United States is correct not to bail out Europe.
EMU countries and non-EMU EU countries are adept at using their own money to structurally reform their countries. They have been there and done that on many occasions before, in the past 1250 years or so, and can do it again. American veto or vote at the IMF is not material for the political and economic cohesion of Europe.
European unemployment is within its long-term range of fluctuations and the few errant members of the union such as Portugal, Italy, Ireland, Greece, and Spain (Iceland is not in the Union yet) should be able to be managed by Brussels to keep the continent on track to its vision of Europa 2050.
The same argument, in fact, applies to Brazil, Russia, India and China (BRIC), which will be better off de-militarizing and diverting those funds to an agenda similar to Europe’s as I and my firm Transformations have been advising the IMF’s Managing Director and the Government of India.
In an emerging world of monetary and exchange rate self-reliance led by BRIC, in line with the IMF’s vision for global macroeconomic stability, using gold in lieu of any economy’s productive capacity is anachronous at a time when the IMF, upon the recommendations of a committee of central bankers that included the United States of America and the People’s Republic of China (PRC), has sold its gold from the days of Bretton Woods in the march of its 186 members – Kosovo being the most recent addition.
Transformations disagrees with Andrew Crockett’s Committee to Study Sustainable Long-Term Financing of the International Monetary Fund (IMF) that IMF’s expenditures can be financed using revenues from its gold sales in the absence of financial crises. We also see financial crises as being a moral hazard for financing the IMF’s and World Bank’s budgets.