International Monetary Fund Managing Director Christine Lagarde speaks at George Washington University in Washington, DC October 3, 2013. (IMF Staff Photograph/Stephen Jaffe).
Lagarde to the world: Keep feeding the banks with zero interest rate cost money, further trim down workers’ rights in the developed world and reduce subsidies on foodstuffs and utilities in developing countries. This was in short what the managing director of IMF had to say, ahead of the 2013 World Bank-IMF Annual Meetings, when she spoke at George Washington University last week. Christine Lagarde delivered a speech entitled “New Global Transitions Need New Global Agenda”, meant to advise the globe of how to be saved from a new crisis. Instead of offering a new real growth strategy which could pay better dividends to those who sweat in industry and services, she stuck with the good old recipes of forgiving the banks for their sins and cutting down take home pay for workers. Let’s take one thing at a time.
IMF boss said she had ready-made policies for growth, one for the real economy and a second for the financial sector. In reality what she had to propose on both accounts was a ‘save the banks at all costs’ policy in US and Eurozone, while her advice to the developing countries was more like a wish rather than a policy line. “The immediate priority for emerging markets is to ride out the turbulence as smoothly as possible”, was her policy proposal, but indirectly she asked for less take home pay even for East Asia’s breadwinners.
Starting from the banks
Starting from the financial sector, Lagarde was happy to see that policy makers in the western financial universe have come up with the systemic banks lists. What else could be the meaning of her comment, that “identifying systemically-important financial institutions” was an attainment? If this was not enough to single out the banks as the prophets in our modern world, she joined the New York banking community, or rather gangs, in demanding that “Any pending normalization of monetary policy in the United States needs to be managed carefully”. In short she told the US monetary authorities, to keep feeding the American banks with trillions of freshly printed dollars at zero interest rate cost, because the world needs it.
Confirming that she added “the U.S. has a special responsibility (to the rest of the world) to implement it (the normalization of monetary policy) in an orderly way”. As if the industrious populations of the world have gained anything out of this unseen before taxpayers’ generosity towards the banks. Anticipating the criticism that she is interested only for the lenders, Lagarede also noted “to implement it in an orderly way, linking it to the pace of recovery and employment”. But it’s the same story on both sides of the North Atlantic Ocean. The ‘systemic’ banks get the free trillions from central banks and instead of according loans to the labouring segment of the society, they invest it in Turkish bonds to mention the least risky bet, where the banks ‘invest’ other peoples’ money.
Outsized ruins?
However the head of IMF couldn’t ignore the reality everybody sees today, when the banks keep usurping large parts of world’s wealth, using even illegal methods. She said that the banks “took on outsized risk in pursuit of outsized rewards, causing outsized ruin.” Yet she conveniently conceded that building something new out of that outsized banking sector is not easy and blah…blah. She finally urged for a “faster progress on outstanding areas, including derivatives and shadow banking”.
As if she doesn’t know that nothing has changed nor is planned to change, in those markets that the banks have created to cheat and unduly exploit everybody else. EU competition Commissioner’s threat against the 13 largest banks of the world remains just a sheet of paper. Joaquín Almunia, accused those financial giants of having formed a trust in the huge derivative market. As for shadow banking, only God knows what is going on there. In short all Lagarde had to say about the western financial universe was to let the banks continue their unholy game.
Passing to the real economy, despite the title of her speech, promising “New Global Agenda” in reality all she had to propose was the good old recipe for workers to ‘labour more and gain less’. Her analysis for the developing countries goes like this, “The ultimate goal of their transition is clear—living standards that are closer to the advanced economies. They can get there, but they face new obstacles in their way… A lot of this reflects the turn of the economic cycle, but part of it reflects deep-rooted structural impediments too”.
Nothing more for producers
Knowing what the IMF means when it comes to structural impediments, it becomes clear that Lagarde proposes more relaxed administrative rules, smaller state business sector and lower subsidies on foodstuffs and energy in countries like India, Russia, Brazil and others. All these policy measures mean more unemployment and more expensive necessities, mainly foodstuffs, for hundreds of millions of people. At the exception of China, Lagarde proposes also devaluation of national moneys (Currencies should be allowed to depreciate), without explaining that such a measure will mean less real incomes for the most deprived parts of the population.
The same recipe is offered for the advanced economies as well, a little reshaped though. Lagarde stressed, “For the Euro Area, the IMF estimates that comprehensive and coordinated reforms of product and labour markets could boost GDP by 3¾ % after five years”. The medicine is the basically same: more relaxed legislation in everything, less consumer and labour protection. All that, for the banks to be able to usurp the additional incomes produced by poorer workers in less protected markets.
In conclusion what the IMF and Lagarde have to propose to the world is to safeguard the western banks, deprive workers of whatever protection is left in the developed world and reduce the subsidies of necessities in developing countries.
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