Can the IMF prevent another global crisis?
The International Monetary Fund (IMF) wants new authority to supervise the global financial system, Dominique Strauss-Kahn said.
The idea is for the IMF to "construct a global risk map" of nascent systemic risks.
“We must build on this positive momentum to transform the Fund into an institution even better equipped to meet the challenges of the post-crisis era,” Strauss-Kahn told a meeting of the Bretton Woods Committee.
He called for the Fund to improve its tools for financial surveillance and to “construct a global risk map” of nascent systemic risks. And while noting that the Federal Reserve and other central banks provided liquidity swaps during the worst of the crisis, Strauss-Kahn said that the IMF should explore options like short-term credit lines for extending emergency lending in future crises.
So do you think it would work to have the IMF as a global financial policeman? It makes sense from the point of view that they are the ones that need to bail out governments in trouble.
But can they actually prevent another global crisis? Or do you have other ideas of how we can best construct a global authority to prevent the kind of recessions we just had?
Can a global policeman actually prevent downturns from happening? Or just make a recession less severe? Do you believe a global authority is a good idea? Or should we just, as the financial industry wants, leave it to the markets?
(Photo Flickr – International Monetary Fund)
Tags: Bretton Woods Committee., Dominique Strauss-Kahn, financial surveillance, global risk map, IMF global financial supervisor
March 6th, 2010 at 13:04
I'm in two minds here – on the one hand, having a global watchdog for the global financial institutions does mean that this would (or, at least, should) be free from political expediency that comes with country-specific oversight.
On the other hand, I'm wary of such levels of interference as it can cause new levels of trouble.
If one can be 100% assured of (A) it's independence and (B) it's commitment to a free-market economy, then it would be positive.
March 6th, 2010 at 15:04
Agree with you Guy.
March 6th, 2010 at 19:54
Catarina, one again you have found a great topic to discuss. Guy, I am also in agreement with your thoughts.
However, in addition to having nation agnostic watchdogs, we must also have watchdogs that are not predisposed to lining their own pockets. I have watched with amazement as so many political and business leaders have been caught doing surprisingly selfish things.
This reminds me of the song from The Who “here’s to the new boss…wont get fooled again.”
We need watchdogs but we need people with Catarina’s business sense and ethics.
March 7th, 2010 at 11:52
Seems we all agree, David.
March 8th, 2010 at 16:37
Soveriegnty of member states and protections of national economies is an issue that would be an impediment.
Also the diverse economic driving mechanisms characteristic of individual nations , types of governments, social welfare systems, and tax structure dynamics, would be an issue as well as the financial regulations inherent with each sovereign state's governments.
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