Category Archives: IMF

UK Election Results Capture Political Schism

In under two years since the country stunningly voted to leave the EU, the same electorate shifted yet again and leant away from the idea of a clean break with Europe and threw the whole thing now into chaos. The youngest of voters sided with Labour, who were selling polices in a throw-back to those last seen in the 70s that, if followed, would lead the country to financial ruin. Corbyn’s plan is not even realistic; yet the youngest among us just have no memory of such irresponsibility. Only the old do, and so they voted Conservative.  

Now hostage to a 10-seat minority of the DUP, Theresa May will be saddled with a back-seat driver at negotiations with the EU. Decision making responsibility will not fall to May; she will have to keep ‘calling home’ to get approval.

Worse of all, the result of this election shows how the entire political system is corrupted. We have the worst of both worlds: a disenfranchised and ignorant electorate (e.g. Most of the young) that falls for platitudes and made-up promises. Of course, the left calls such things as false truths or fake news if the right puts such things out.

Britain will now have a much riskier time with Brexit. All we can hope for is a bank run that requires a bail-out or for the IMF to drop Greece ‘in it’ and a run on the Euro. It’s a matter of time. But now we need it sooner rather than 

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China’s currency to be added to IMF’s SDR basket as of October 1. About two years too early.

Transcript of an IMF Conference Call on the SDR Basket.

This is a big risk for the IMF and suggests a confidence challenge as they could not resist the pressure from China. The RMB is not yet freely or fully convertible. China has a close-hand on how the currency moves. The IMF is thus handcuffing its own possible monetary policy instrument (it keeps talking about the SDR playing a legitimate role in currency trade settlements). Worse, when firms claim against their own SDR, their fees will be partly held hostage to China’s own rate setting for its currency.

This move by the IMF is too early and mostly as a result of pandering to the growth of China and its [IMF] effort to try to help work with/control how China evolves in the wider world. The RMB should be planned for and accommodated in the SDR, but not until full and free convertibility.