Is the IMF growing a pair….?
This past week, the Fund’s new Managing Director, Christine Lagarde, delivered a rabble-rousing speech in Jackonson Hole, Wyoming in which she called for a mandatory capital increase for European banks, using public funds if needed. I’m not convinced that’s going to fly, but I have to say that I admire Lagarde’s moxy.
Today, Kenneth Rogoff, the Fund’s former Chief Economist, published an op-ed in which he suggested that the Fund may finally be pulling away from the party line and demonstrating some willingness to contradict its European masters. Maybe.
I had to chuckle at this passage in Rogoff’s essay:
“The late Chicago-school economist George Stigler would have described the IMF’s role in Europe as reflecting acute “regulatory capture.” Simply put, Europe and the US control too much power in the IMF, and their thinking is too dominant. What European leaders may want most from the Fund are easy loans and strong rhetorical support. But what Europe really needs is the kind of honest assessment and tough love that the Fund has traditionally offered to its other, less politically influential, clients.”
It’s the last line that got me. My immediate thought was “honest assessment and tough love? What would Lula say?”