A Vital Task for The IMF
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Here’s a big idea for the next U.S. Treasury secretary: Reform the International Monetary Fund so that it can help the world balance its checkbook — reducing America’s deficits and Asia’s surpluses — before there’s a financial crisis that hits everyone from Beijing to Boston. The leaks and rumors are flying that Treasury Secretary John Snow is on his way out. But replacing the incumbent won’t accomplish much if his successor doesn’t have a strategy for reducing America’s nearly trillion-dollar trade deficit and its counterpart, the huge trade surpluses in Asia. Economists have been arguing about which is the chicken and which the egg — a “savings glut” abroad or a spending binge in the United States — but the real point is that these imbalances are inherently unstable. America is buying the rest of the world’s products only by writing IOUs on our future. At some point the rest of the world will stop taking our cheap paper. A starting point for thinking about these global financial issues is a speech given Feb. 20 by Mervyn King, the governor of the Bank of England and, with the departure of Alan Greenspan at the Fed, probably the world’s most respected central banker. King argued that the IMF today is an institution without a clear mission. “If not in a deep slumber, then the Fund has appeared drowsy. It is an institution, it is said, which has lost its way.” More : washingtonpost.com |