Behind the alphabet soup? Both the United States and the European Union agree that the International Monetary Fund, believed to be a relic just a few years ago, needs substantial beefing up. Getting something right, U.S. Treasury Secretary and former IMF employee Tim Geithner says about $500 billion in actual funding is needed. The U.S., Japan, and the E.U. have all ponied up fair amounts of money.
What about China? And, what preconditions will it attach?
If Beijing wants to say it will pay based on its GDP per person, rather than reserve funds, unless it gets more of a say, will the IMF then in turn demand more currency flexibility and openness? Since the EU isn’t indebted to China the way the US is, the possibilities are open.
Simon Johnson says this could be the last hurrah for the U.S. and Europe. Well, maybe more so for the U.S., based on some of the things I just said, or have blogged about before. The EU has a better debt structure, a currency that is on the rise in terms of interest, not just evaluation, and more.
And, although Russia is being quiet right now, remember, oil prices are starting to climb again.
At the same time, Johnson says that if the EU and G20 are going to push financial regulation ahead of more stimulus spending, they need to get serious.
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