In the past the International Monetary Fund was consistently criticised by some for always imposing impoverishing austerity on the economies it supported for the sake of preserving the interests of foreign (mostly developed world) investors. More recently, under Christine Lagarde, it has sometimes called for a moderation of austerity to avoid driving 'rescued' or recovering economies deeper into recession. There was a famous little muted spat between the IMF and the UK Chancellor George Osborne on this subject. However, with the improving economic data from the UK, Osborne has been able to announce that his government has 'fixed the economy' - his phrase.Well, it's obvious, isn't it? The Labour government 'wrecked' the economies; the Conservative/Liberal Democrat coalition (but you can forget the secondary partners now) 'fixed' it. These things don't happen unless the people in control will them.
But now, as the federal reserve in the US, flirts nervously with the famous and long looming 'tapering' to withdraw the massive financial stimulus to the economy, rippling signs of dependency and withdrawal symptoms begin to appear. Christine Lagarde is on the case and has warned the World Economic Forum at Davos.
'This is clearly a new risk on the horizon and it needs to be closely watched ... How tapering takes place, at what speed, how it is communicated and what spillover effects it has, particularly in emerging markets.'
Larry Fink, chairman of fund manager BlackRock, saw it rather differently. He told the WEF that one of his concerns was the large positions held by investors in various emerging markets. However, he claimed that tapering was not the main problem. 'It's going to require much better domestic policy in these emerging markets.'
In other words the IMF needs to get a grip = like it used to have.
