Showing posts with label IMF. Show all posts
Showing posts with label IMF. Show all posts

Sunday, October 29, 2017

IMF and World Bank Pivot Toward the Blockchain. Brendan Cody, Impact Investing Intern, George Washington University

The emergence of blockchain technology and cryptocurrency creates potential threats, but also opportunities for the world’s central banks. We noticed a pivot toward greater discussion of blockchain at the IMF and World Bank meetings we attended in early October as central bankers, financial institutions and policymakers took note of these developments.

Cryptocurrencies do not require an intermediary to verify and oversee transactions, allowing transactions to bypass the current monetary system overseen by central banks using fiat currencies.

In their official capacities as international organizations seeking coordinated and stable monetary policy, the International Monetary Fund and the World Bank recognize the potential of blockchain technology and both have taken significant steps in this fintech space.

Christine Lagarde, managing director of the IMF, suggested the creation of a digital currency based on the special drawing rights, a basket of international reserve currencies. There are details and pragmatic questions to be answered about how the currency would function, but this is certainly a positive start. Special drawing rights are seldom used, but blockchain technology could increase their utility by lowering transaction costs and decreasing settlement time. In April, The World Bank created a lab to evaluate blockchain-based currency and data storage applications.

In interviews with CNBC, both Christine Lagarde and World Bank President Jim Yong Kim were cautiously optimistic about developments in blockchain technology, acknowledging the potential but mindful of the risks embedded in this relatively unproven technology. These risks include new, unanticipated security threats and the potential for manipulation by large actors with nefarious purposes.

It will be interesting to see what the future holds for these technologies from an regulatory and institutional perspective, but blockchain's potential for disintermediation of the IMF and World Bank has put these large financial institutions on notice.

Wednesday, April 26, 2017

IMF 2017 Spring Meetings: where we are now

We attended the IMF/World Bank Spring Meetings and heard nothing that would make us revise our 2017 Economic Forecast for Businesses under Trump as noted in my talk to the Greater Houston Black Chamber of Commerce on February 14, 2017.
As I noted then, we expect economic growth to continue for most of 2017. The IMF confirmed our forecast: global economic growth is projected to rise from 3.1% in 2016 to 3.5% by the end of 2017. The IMF expects global economic growth to reach 3.6% by 2018. Total global investments are expected to continue to grow from today's $212 trillion. These are stunningly good figures, and mark a complete reversal from the Fund's earlier, pre-Brexit 2016 economic forecast. Recall that the IMF predicted economic doom and gloom were Britain to exit the EU. They have softened their view, to say the least.
This is not to suggest that the Fund has suddenly become a champion of the rosy scenario. (We think their growth forecast is too optimistic, by the way.) The global economy still faces significant problems and risks:
  • African Famine. At one session the IMF blamed the escalating risk of famine on the Horn and the Sahel regions of Africa on the African nations themselves, a global version of the "blame the victim" strategy used by bank management so effectively to dodge responsibility for the financial crisis, thereby avoiding jail time. The IMF noted that "security shocks" and unmet IMF financial obligations incurred by the subject countries (past due IMF and World Bank loans) prevent the IMF from taking a more active role. They concluded that there is not much they can do to prevent a full blown crisis from occurring sometime later in the year. We suspect they would have a different attitude, no matter how much money they were owed, concerning a potential famine in, say, Europe.
  • Inequality and Taxation. One session noted that economic inequality is not inevitable and that while fiscal (taxation) systems always reduce inequality, they do not always reduce poverty. We agree.
  • The Unbanked. The IMF and the World Bank continue to claim to be concerned about the two billion persons globally who are unbanked, we remind both that banks have not been shown to be the cure for poverty or for inequality. Further, there are at least one hundred thousand unbanked in the DC area alone. One does not have to travel to Kenya to serve the unbanked.
  • Kenya. Speaking of Kenya, one of the most encouraging things I heard was that the Government of Kenya has started selling small amounts of Kenyan Government bonds to the public via cell phone. This is truly brilliant and shows how central banks can actually be inclusive.
As we noted in October, we continue to forecast that we will see a major financial crisis emanating from the World Bank. (For information on timing, scale and scope, and for our full review of the Spring Meeting, email info@creativeinvest.com). We also continue to believe that the IMF, led by the humbler and more competent Christine Lagarde, as marginally safer, but, still, not without issues.

Wednesday, April 19, 2017

World Bank/IMF Spring Meetings, 2017, Brendan Cody, GWU student and Impact Investing Intern

In April, 2000, 10,000 protesters gathered outside the World Bank/IMF Spring Meetings to express passionate disapproval of globalization and to express concern about growing income inequality.

Chaos erupted and upwards of 1,000 people were arrested. Seventeen years later, at this year’s World Bank meetings, there are no protesters to be found in Foggy Bottom. The World Bank has attempted to incorporate some of the protesters’ concerns into their Spring Meeting event schedule: they have increasingly emphasized income inequality and other issues. This progress was displayed at the Civil Society Organization (CSO) Roundtable on April 18: CSOs posed their questions directly to World Bank executive directors.

The questions were direct, opening with “How can the bank do more to provide relief in wars and other crises?” Executive director Merza Hasan brought attention to the relief efforts of the past, but suggested there was room for improvement. The comments were in line with World Bank President Jim Yong Kim’s comments at the London a School of Economics last week.

Another CSO delegate discussed the internet shutdown in southern Cameron and the role the World Bank should play in pressuring the Cameroonian government. Mr. Hasan contended that access to information must be a right for all people. The economic record has shown the importance of access to information and to the internet's role in creating healthy democracies, institutions and growth. It is thus imperative that the World Bank and other multilateral institutions continue to support an open internet.

The second session focused on funding of CSOs and aid to developing countries. The last ten years have seen a decline in foreign aid and a frantic search for alternative funding. The World Bank has a role to play here in helping organize a focused development finance strategy and in ensuring investment quality over quantity.

Illicit transfers out of developing countries further exacerbate the funding issue. It is estimated that for every dollar in aid going to Africa, one dollar flows outwards in illicit transfers. The delegates suggested the need to pressure both developing and developed countries to limit these transfers.

Finally, CSO delegates insisted that the World Bank only finance environmentally sustainable projects. The Bank has made this a stated goal, but revelations last year showed that private banks in Bangladesh and Indonesia who received funding from the International Finance Corporation (the World Bank’s private sector arm) funded coal projects. This was rather indirect funding, however, and it appears that there have not been regular occurrences of this kind in recent years. Still, the World Bank can help discourage coal plant investments whose short term costs are cheaper than solar, but whose intergenerational costs are more expensive in the long run.

Additional events throughout the week will hopefully provide further discussion of these and other issues. 

Friday, April 22, 2016

Takeaways from the IMF/World Bank Spring Meetings

Each spring "the International Monetary Fund (IMF) and the World Bank Group..bring together central bankers, ministers of finance and development, private sector executives, and academics to discuss issues of global concern, including the world economic outlook, poverty eradication, economic development, and aid effectiveness." We have attended this event for the past six years.
Prior to the event, the IMF issues a Global Spring Meeting Economic Forecast, this year predicting the world's economy will grow by 3.2% in 2016, down from the 3.8% forecast issued last year. This decline was due mainly to an increase in political ( as opposed to purely economic) risks. Keep in mind that these are the same factors (austerity as an inappropriate focus on reducing deficits in a time of recession, inability to rationally address the causes and solution to the crisis) that led to the shallow global recovery in the first place.
Our analysis indicates that the key risks to the global economic forecast are all potentially self inflicted political injuries: TrumpBrexit, and the Premature Celebration of the end of the financial crisis. These are described below. 
Premature Celebration 1: We questioned Clinton Treasury Secretary Larry Summers about the relevance and ability of economic policy to meet the needs of all of the world's people, especially people of African descent. We noted the inability of economic policy makers to forecast the financial crisis, cited damage done to the environment, and pointed out that key monetary policy tools are now ineffective, at least without extraordinary effort (QE1, QE2, QE Etc.). A video of the question is provided below.
His response (really a non response) cited Churchill, a man who, prior to his achievements in WWII, fought to preserve the continued exploitation of Black Africans by the British. 
I think that says it all.
We believe Mr. Summers is angling for rehabilitation as Fed Chair in the Hillary Clinton Administration. Given his track record, this would be another self inflicted political injury. 
Trump. During the taping of an episode of the BBC news show Hard Talk, IMF Managing Director Christine Lagarde forcefully addressed the Trump issue, saying that she thought Mr. Trump a risk to global economic stability.  
Brexit. On June 23rd, Britain will decide whether or not to exit the European Union. The IMF made their opinion clear: a vote to exit will add significant volatility and risk to global markets. We think a vote to exit the EU would be suicidal for both Britain and the EU, and therefore forecast that they will not leave.
Premature celebration 2: In a session on cyber risks to financial institutions, SARAH BLOOM RASKIN, Deputy Secretary of the U.S. Department of the Treasury, (pictured in white) the Treasury point person on cyberthreats and financial institutions, seemed woefully ill informed concerning upcoming changes to the administration of the internet's root servers. She indicated this was a "new issue" for her. The ROOT SERVERS. A NEW ISSUE. This is truly problematic. Below is the video of the question posed.

Other Observations
Five years ago, most of the catering support staff were white working class people and white middle class people damaged by the recession and desperate for any employment opportunity. This year, most of the catering support staff were Black working class people, mainly from the Washington, DC area. (Thank you, Madam Director...) This tells us that the economic recovery is finally reaching the difficult to reach populations, those hardest hit by the crisis to begin with.
This means that economic growth, and the employment it generates, will continue to be strong domestically until the end of the Obama Administration.
Given his performance, Mr. Obama would be forgiven for "dropping the mike" before leaving.

Monday, April 20, 2015

What Poor People Want

Fiscal Forum: “The Political Economy of High Debt” IMF, April
19, 2015. L to R: David Wessel, Maria Luís Albuquerque,
Christine Lagarde, Helen Clark, Joaquim Levy.
I was at the IMF yesterday with a bunch of rich white people (@Lagarde @HelenClarkUNDP  ) when the subject of poor people came up.

Of course, as they do with Black people, rich white people claim to know everything there is to know about the poor. I think their main fear is that poor people will want the same deal that Goldman Sachs got, or the deal JP Morgan got, or the deal the "London Whale" or the LIBOR manipulators got. This fear is borne of a certain selfishness and greed.

It is, also, completely wrong, so I took the time to tell them what I think.

Here is what we want:

1. Water. Not privatized water systems. Access to clean water.
2. Food. Not GMO degraded, just clean food.
3. Shelter. Not subprime loans, but shelter.
4. Peace. Not the opportunity to be shot in the back by a racist cop, or a racist Israeli soldier or a Muslim extremist.

If you think about it, these are the same things that rich white people want.