July 12, 2006

About priorities and painting firehouses

Sir, Edwin Truman in “Time is running out to rebuild the Fund, Mr Paulson”, July 12, screams out for putting the IMF fire-brigade in order so that it will be better prepared to confront whatever disasters might come out of the global “massive distortions” of which some of these, for instance the doubling of foreign exchange reserves over the last five years, he suggests has somewhat occurred as a response to a “weakened Fund” Wow! Yes, a good functioning Fund is an absolute must for the World, it needs new equipment, it needs new young forces and it probably needs a totally new mindset, and so let us make it really sure that we are not just rearranging the drawer or painting the firehouse, just to calm our nerves.

I for one have for a long time sustained that the way the Fund has given in to their bank regulator chums in Basel, forcing the substitution of some few credit rating agencies for the diversified views of a free market, has just been one of the most incredible build up of systemic risks the world has ever seen and so, to me, enhancing the Fund’s legitimacy, post Argentina, needs a lot more “than redistributing voting shares and executive board chairs” based on whatever concocted ratio someone might deem appropriate. The reshuffling of pure local interests will not lead us anywhere in a global world. Where I do agree completely with Mr. Truman is in his call against the “irresponsible fiscal position” of the US and that on remedying this is where the new Secretary “needs to exert leadership at home to achieve results abroad”, perhaps even to such an extent that he should instead ask Mr Paulson to forget about the Fund for now, do not even go to Singapore!, less it becomes an excuse for him painting his firehouse too.