India, China leave Christine Lagarde guessing....QE to infinity and beyond....
On Tuesday, Lagarde got an almost-identical response in Delhi. Most significantly, while reporting China’s stance today, Xinhua took note of the Indian stance. It does seem Delhi and Beijing are in active consultation on the issue.
Yang explained to western journalists in Beijing in English: "We had a good discussion. She explained to me the purpose of her candidacy. I listened very carefully. It's an open field now. There are quite a few people campaigning. China of course gives serious thought to this very important issue." Just before Yang spoke, MFA spokesman in Beijing repeated China’s stance that choice of a new IMF chief should be based on "openness, transparency and merit, and better represent emerging markets and better reflect changes in the world economic structure". He added, “China hopes relevant parties will make the final decision through democratic consultations.”
Of course, Lagarde pitched hard in Beijing, estimating that if she secures China’s support, it becomes a done deal. What does Lagarde herself make out of this unhappy journey to Delhi and Beijing? She put a brave face and admitted it is up to Beijing to decide whether it supports her bid to lead the IMF. Curiously, she agreed with the Chinese statements that said the selection should be “open, transparent and merit-based”. As for her overall prospects, Lagarde said, "I'm confident. I'm very positive about the meetings that I've had so far. My sense is that it's too early to count the chickens, if I may say."
Even as Lagarde arrived in Beijing, Lagarde tried a charm offensive. The AFP quoted her saying China's share in IMF should be boosted to 6.4 percent. China's voting share in the IMF was increased last year to 6.19 percent from the previous 3.65 percent. But Beijing kept a big picture in view.
Is it absolutely crucial Lagarde secures China’s backing? No, even without it, she can get the job. But the issue is of legitimacy. China’s backing legitimises her election. Lagarde’s chances of winning are even because even at this point, with just a day ahead of the key deadline on Friday, the emerging-market nations have failed to coalesce around a consensus candidate. The nomination process closes Friday. Two candidates are officially on the field at this point aside Lagarde: Mexican Central Bank Governor Agustin Carstens, and Kazakhstan National Bank Chairman Grigory Marchenko.
A consensus candidate of the emerging economies has to be Carstens. His candidacy will put the United States in a fix. Carsten arrives in Delhi Friday....and Billary might want the job too :)
It isn’t the end of the world; it’s only the end of us, in the long run, when we are all dead. But there are good reasons not to cash out risk assets for gold coins and shotgun shells. The economy will drag along with growth in the 2% range, unemployment will remain high, and everyone will feel miserable — but it won’t all go to pieces.
10) Europe’s problems are overblown. Germany and France are doing quite well, indeed, and Italy is salvageable. Greece is a one-off anomaly, a tourism monoculture in which most transactions take place offshore, away from the eyes of the taxman. Greece requires not so much a divorce from the EC but an annulment (on the grounds that it lied massively about its GDP and debt before joining European Monetary Union). Ireland has a real economy with a strong manufacturing and financial sector; it requires some restructuring of its mortgage sector, some budget austerity, and some help.
9) China will come to Europe’s rescue, buying European PIIGS debt in return for more access to European markets. As WSJ reports this morning, Chinese companies are in an M&A spree in Europe. I expect China to own some big European banks within a year or two.
The banks are in no danger. They have a trillion dollars of excess capital at the moment. The regulators will place a 4% capital surcharge on the FISI’s (financial institutions of strategic importance) and make them raise more common equity, which means bank common will remain a lousy investment (unless you luck out and buy the lousy Spanish or Portuguese bank that takes taken out by the Chinese). Bank preferred should benefit.
7) China is doing just fine, as I’ve been saying all along, and HSBC said overnight.
6) Corporate profits have had their big growth spurt, but are not likely to sputter out. Well-managed big cap stocks with strong cash flow and exposure to global growth are likely earn a lot more than Treasuries at 3% or high-grade corporates at 4%.
5) Volatility is curiously low (my VIX hedge against deflation was a lousy idea, by the way — I closed out my position with a modest loss).
VIX, Past 12 Months
Despite the big drop in stock prices, volatility barely budged compared to previous spikes. Why should there be volatility? This is the United Socialist States of America. Nothing ever happens in socialism. It’s like forecasting the Czech economy in 1959. Read the five-year plan, comrade.
4) The bad news is the good news: the same sclerotic, government-dominated quasi-socialist morass that prevents the economy from growing restricts the downside.
3) It’s hard to get a double-dip recession when there’s no risk to liquidate. As a matter of fact, there’s nothing to liquidate.
No-one has inventories. No-one has exposure to the dicey housing market. No-one has exposure to leverage. We are still de-levering, as I keep emphasizing (looking at the adjusted total loans and leases, not the M&A driven C&I loan series.
2) US labor remains cheap, which is to say that with high unemployment, American workers can’t keep up with inflation. There may not be any startups creating jobs, but there’s not a lot of reason to fire people, either.
Number One reason not to panic is — Barack Obomba, CIA's bogeyman!
1) Obama’s mismanagement of the economy (health care with a punitive threshold for startup businesses, useless Keynesian fiscal stimulus) is responsible for this mess, and prospective voters are holding him accountable. Obama CAN be beaten in 2012. And a Republican administration with supply-side fiscal incentives for growth could turn the US economy around (not as dramatically as Reagan did, to be sure). Things very well might get better, someday....
What lies in store for Greece, Portugal, Spain, Ireland, Italy, and, in short order, the United States, is the wholesale sell-off of public property to private corporations at bargain basement prices. What the schrekers who gather in their secretive lairs at Davos, Cernobbio, Bilderberg, and G8/G20 are bringing about is a world where no property is owned by the state, which by default means the people. Total corporate control over every facet of life equals extreme fascism.
What is occurring is Greece is a bellwether for what will befall other nations in Europe, as well as the United States, if the bankers get their way. And in Greece, the people know how generations of investments by the taxpayers are being turned over to vampire capitalists who have the full backing of the International Monetary Fund, European Commission, and the European Central Bank.
The European and global bankers have demanded that the Greek government sell off entirely or assume a minority stake in a number of state enterprises and utilities.
For example, this year global capitalists are slated to acquire 84 percent of OTE, the Greek telecommunications provider. In addition, private bankers will assume 66 percent ownership of the Greek Postal Savings Bank; 51 percent of the National Lottery; 60 percent of the Salonika Water Authority; 68 percent of DEPA, the natural gas utility; and 25 percent ownership of the ports of Piraeus and Salonika.
Next year, the capitalist grab for public property increases in intensity with Athens International Airport coming under 79 percent private ownership. The global capitalists will also obtain 100 percent ownership of the Egniata toll motorway; 60 percent of Hellenic Post; 66 percent of OPAP, the state-run video-lotto and online sports betting firm; 73 percent of the Athens Water Authority; 83 percent of DEI, the Greek Electric Authority; and 51 percent of the Greek Regional Airports Authority.
The Greek Communist Party has vowed to fight against the acquisition of public property by the private sector. In fact, it is the Communist parties of Europe that have been the most vocal against the power grab by the bankers but their opposition to the privatization moves receives very little attention by the corporate-controlled media.
Massive sell-off lists of public property are now being drawn up by the governments of Portugal, Spain, Italy, and Ireland. In the United States, there are calls for the privatization of the US Postal Service, Social Security, and Medicare.
One Libyan government official this reporter spoke to in Tripoli during an intensive NATO bombing assault, opined that the same fate is in store for the Libyan Socialist Jamahiriya of the old CIA-Puppet Gaddafi. With the highest standard of living in Africa, Libyans could witness the U.S.- and NATO-backed rebel government begin to sell off Libyan government assets to global capitalists. The Libyan official said, "these people [global banksters/Gangsters] would sell the air if they could get away with it."
By Pam Johnson
WASHINGTON - Two days ahead of a formal vote scheduled for June 30, former French finance minister Christine Lagarde became the first woman to be appointed managing director of the International Monetary Fund (IMF) on Tuesday.
Replacing former IMF chief Dominique Strauss-Kahn, who vacated the post in disgrace last month following sexual assault charges, Lagarde surpassed her lone competitor - Mexico's central bank governor Agustin Carstens - to take control of the Washington-based fund's executive board, which oversees operation of the 187-member institution.
Though Lagarde's appointment has been a fiercely contested foregone conclusion for several weeks, Tuesday's 24-member board meeting opened with ostensible uncertainty about the allegiances of key players like the United States, which is responsible for 17% of the fund's US$320 billion resource pool and has thus far remained silent for fear of backlash in a thorny debate of European dominance versus emerging market economies.
The curtain of largely symbolic suspense was lifted earlier on Tuesday when US Treasury Secretary Timothy Geithner threw his weight behind Lagarde, who had also secured assurances from the governor of the People's Bank of China on Monday.
Even before the meeting convened, Lagarde had clinched support from states representing a full 40% of the IMF's voting power.
"I am sure that Lagarde will be a very capable leader of the institution," Carstens said in a statement to the IMF on Tuesday.
"At the same time, I hope that under Lagarde's direction, the IMF will make meaningful progress in strengthening the governance of the institution, so as to assure its legitimacy, cohesiveness, and ultimately, its effectiveness," he said.
Carstens' mild statement of support belied the storm of debate, critique and, at times, open hostility that has surrounded the selection process over the last few weeks, during which economists and organizations from across the ideological spectrum united in their objection to continued European leadership.
"The Obama administration could have stepped up and welcomed emerging powers taking a leadership role in the IMF [but] it chose instead to be quiet about the disenfranchisement of emerging markets and developing countries in this process and jump on the European bandwagon at the very last minute," Raymond Offenheiser, president of Oxfam America, said in a statement following Lagarde's appointment.
Caroline Hooper-Box, acting head of Office and Essential Services Media Lead at Oxfam International, added in a press release on Tuesday, "This farcical appointment process has damaged the IMF's credibility."
"The IMF is badly in need of reform. To protect the institution's credibility, Lagarde will have to act to loosen Europe's stranglehold of the IMF Board, and give others more of a voice.
"She'll also have to decide what to do with the $3 billion the IMF got from selling its gold reserves last year," Hooper-Box said. "This money must be directed to poor and vulnerable citizens in developing countries - the same people who are excluded from IMF decision-making."
Lagarde's appointment coincided with a 48-hour general strike in Greece that has led to riots and clashes with the police as protestors rage against the government's proposed austerity measures', which are to be voted on in parliament on Wednesday.
In order for Greece to secure a $17 billion loan from the IMF - which it desperately needs to pay off a chunk of last year's $142 billion bailout debt - the government is under pressure to increase taxes and cut state spending, moves that will hit hardest on minimum-wage and low-income families' pocketbooks.
However, the fighting on the streets of Athens encapsulates some critics' claims that a European in the driver's seat of the world's most powerful financial institution is the last thing a shattered global economy needs.
Kenneth Rogoff, an economist at Harvard University, last week referred to the IMF as the "commander on the frontlines of the crisis" in Greece, adding to the growing public outcry against Lagarde stepping in as saviour of a crisis that he said her own country helped to orchestrate.
According to Howard Schneider, an economics correspondent for the Washington Post, the Greek rescue has "unraveled" in the past months, leading to a deeper-than-expected recession and possibly necessitating billions more than the $150 billion already provided under the three-year emergency plan last year.
Martin Wolf, the chief economics commentator at the Financial Times, wrote last week: "Did anyone think to themselves that the head of the IMF should be an Asian during the Asian financial crisis of 1991-1998, or a Latin American during the crisis in the 1980s and 1990s?"
"The eurozone is a very special and, in my view, very dangerous construction," he said, adding that according to the IMF's most recent data, the EU's share of global output at purchasing power parity will shrink from 25% in 2000 to 18% in 2015, an "astonishingly rapid" rate of decline.
Meanwhile, World Bank estimates for China's growth in 2011 have shot up from 8.5% to 9% - leading experts to speculate that Europe can no longer afford its patronizing dismissal of the rest of the world.
Offenheiser said: "If the US and EU continue to hold on to power through structures that reflect an obsolete economic and political world order of years past, the rising powers will inevitably turn away from the organization and toward institutions where they do have a voice."