“The IMF and the World Bank urgently need to address their legitimacy deficits,” reads the official BRIC communiqué. The rest of it is equally punchy. Two striking points: (1) the call for reform, and (2) the move from the dollar.
Understandably, BRIC countries want a greater – or just more proportionate – voice in global institutions. Reforms of unfair voting systems were high on the agenda, complete with deadlines: “We call for the voting power reform of the World Bank to be fulfilled in the upcoming Spring Meetings, and expect the quota reform of the IMF to be concluded by the G-20 Summit in November this year.” Their message is clear: deliver the reforms, or risk obsolescence.
On currencies, the statement talks of
Buoyant US economic data has revived a debate over the shape of the US recovery.
In congressional testimony this week, Ben Bernanke made clear he thought the risks of a “double-dip” recession, while “not negligible”, had fallen in recent months.
The exit is upon us.
Kevin Warsh, Federal Reserve governor, broke the economic cycle up in to four stages: the boom, the panic, the exit and the epilogue. And he said that – now the central bank has exited its emergency liquidity facilities – we have now entered the third stage.
“I don’t think exit is an inappropriate four letter word,” Mr Warsh said in a speech at the Levy Economics Institute. “People are comfortable now with the central bank talking about exit. So long as we can exit and explain what we’re doing.”
A 15 per cent appreciation of the renminbi would reduce the American trade deficit by just 5 per cent by the end of next year, and the effects would not significantly increase GDP.
The governor of the Czech National Bank, Zdeněk Tůma, announced today that he is resigning with effect from June 30, 2010. Mr Tůma, 49, delivered his resignation letter to President Václav Klaus on Tuesday afternoon. Mr Tůma became governor in December 2000. This term, his second, had another seven months to run: it was due to end February 12, 2011.
His reasons seem complex. He cites minimising uncertainty as a factor. Two other central bank officials’ terms end on February 12, 2011, and he suggests it’s a bad idea for them all to go together:
Washington politics seems like it may be leaving Paul Volcker, White House economics advisor, a little less upbeat. A couple weeks ago, he was “more optimistic” than he had been that a financial reform bill would pass this year. Today, at a talk to the Levy Economics Institute he said only that he was hopeful that useful structural reform will pass.
Mr Volcker criticised those in the financial community who “bitterly fighting” credit default swap regulation. They were, he said, “pushing back against what seems to be reasonable protection against the next crisis and its effects,” saying there should have been some “better” and “more expeditious way” of dealing with the problem of AIG’s CDS-fueled collapse.
The unnecessarily acrimonious CDS fight isn’t Washington’s only problem. Mr Volcker also lashed out at the politics that – 15 months after inauguration and in the midst of an economic crisis – have left the Treasury without permanent replacements for the two top finance posts: under secretary for domestic finance and under secretary for international affairs. “There is something the matter in Washington,” said Mr Volcker.