Why am I holding Euros???

The most obvious question to oneself these days, especially if one's a fund or an institutional, is Why aren't we bailing out of Europe...If you're the client, the question to your advisor: Why are you holding on to Euros?  The obvious explanation is: cognitive dissonance. The hypothesis was advanced by  psychologist Leon Festinger (1957).It became popular among political pundits and business types quite rapidly when, years later,  Newell and Simon* integrated Festinger's insights into their own hypothesis concerning human problem-solving.

The Newell-Simon model as it is now labelled, named after Allen Newell and Herbert Simon,  describes how human beings make decisions, ie. solve problems. It becomes especially enlightening when it describes how people react during the intellectual logistics of problem-solving: the intelligence phase, design phase and choice phase.

How do investors react to conflicting attitudes: you hold Euros but everyone calls a crash.

Decision-makers, when in doubt,  will "listen" 'more' to information that supports their belief system than to information that disrupts or questions their belief system.  The underlying hypothesis is that the individual seeks to reduce dissonance or accompanying discomfort created by conflicting information that undermines his position. He will settle for 'satisficing' information without claim to making the optimal decision.

But in many cases, he will side with inputs that justify his original position. Of course, the more individuals are rationally bound (you don't have all the info) the more they will attempt to adjust in a timely satisficing way to the facts. If the former, You could be a die-hard and lose your pants and that of your clients, notwithstanding the information;  if the latter, you could be pragmatic, give yourself and others the benefit of the doubt, and bail-out. After all, the well-known economist and investor John Maynard Keynes evoked the perfect reaction to relieve the dissonance: "When the facts change, I change my mind. What do you do, sir?"

So why are some investors still holding on to the Euro securities...for the same reasons that some European leaders keep promoting austerity measures for public policy notwithstanding the adverse results being generated in  Greece, Spain and Italy.

The dissonance:
Firstly, even though things are difficult in Europe, they're difficult all-around the world. Some will argue that they're already overexposed in equities, in BRICs, in US and other sovereign currency-issuer securities, and even gold-it can collapse on a wind-shift....after which deliberation they move on and argue the next....

...Eurozone economies are not in as bad a condition as selected data suggest. It's quite reasonable to experience hiccups during 'policy transitions' after traveling over rocky roads. And Southern European roads are very rocky according to northern Europeans. Things will smooth themselves out over time. The worst case is if Greece defaults. Let it exit. Nudge Greece out gracefully. The Zone is saved.  This is the message that is being conveyed by European leadership as social tensions in certain countries become more forceful. If that doesn't work out as planned....they move on and argue the next....

...Europe is 'too big to fail'. (Remember Lehmann et al). The US and China won't let it happen- this is Europe, not some mismanaged bank. Some refer to this position as highly speculative; other would consider it quite realistic. Either way, their rationalization recalls Lord Byron's popular but mistranslated line found in his Childe Harolde's Pilgrimage :

   When falls the Coliseum, Rome shall fall;
   And when Rome falls--the World.'

The Eurozone rendition is "When falls the Euro, Europe shall fall; And when Europe falls---the World."

It would carry more credence if it was the US, however.

Here's my take:  If China's growth is projected downwards, if Germany's order book starts doesn't refill to 2010 levels (I don't think it will refill for a long while) and  growth in the US is revised downwards, then you should have bailed to liquid USD, until the facts change!!! If you didn't, think about it.

*I credit Fictional Reserve Barking, Oct 2, 2011, author (Circuit, ) and reader  (JHCraw) for the reference to Herbert Simon's work.

Europe! It's not too late to reverse austerity

Europe! It's not too late to reverse austerity 

The article is cross-posted on Fictional Reserve Barking.  We wish to thank the editor. Readers are invited to post comments on either blogs.

Months ago we outlined the challenges that presented themselves to Italy and Greece, and to Germany, France and the United Kingdom.  We opted against austerity, trusting that the technocratic appointments of Messrs Monti and Papademos could transform governments in Italy and Greece, and enable their respective legislatures to both recommend alternative and optimal public expenditure policies and to restrain policymakers from endorsing imposed fiscal restrictions while constraining budgets any further.

Unfortunately for the global economy and markets, Messrs Monti and Papademos initiatives did the contrary.  They aspired towards the heroic in adhering to a sub-optimal detriment and have now emerged as the scapegoats for political and investment désenchantées.

More ironic is that both men had very little to do with the original debacle.  They were recommended to their nation’s legislatures to clean up a mess.  Instead, as a result of attempting to implement austerity measures, they have generated more anxiety in world markets than expected.

Unfortunately, the recent economic deterioration and rising social tensions within their respective economies has become their responsibility, and the political disenchantment surfacing within the electorate is also their responsibility.  Worse still, the time for apologetics is long past and is now irrelevant.  At jeopardy is their leadership, the credibility they endorse for their visions of the future and the overall well-being of their citizenry.

Mr. Draghi and Mrs. Lagarde have voiced a redemptive message.  Both had professed that the worst was over.  For instance, in a speech on March 26 of this year, Mr. Draghi said the following:

“I would like to take this opportunity to provide you with my assessment of the current situation in the euro area and shed light on recent signs of improvements in the overall outlook.  I would particularly like to draw your attention to the effectiveness of the policy measures implemented by the Eurosystem, the EU institutions and national authorities.  And to remind you of the measures that we all must continue to pursue over the coming months and years with great diligence in order to continue on this path of stabilisation.”

As for Mme Lagarde, on March 18 of this year, the Managing Director of the IMF sought to reassure the audience of the 2012 China Development Forum with the following statement:

“There are signs that strong policy actions—especially in Europe—are making a difference. Financial markets have become a little calmer…”

Yet, Spanish yields are rising, as are those of Italy and Greece, and there is more and more talk of a potential third bailout for Greece although the IMF and the ECB have reassured the investment communities that changes in Greece are being introduced as promptly as possible and will be enacted effectively.

Any remnant stress in markets, according to the institutional duo is a result of the misperception by the interested communities that the consolidations proposed by the ailing economies cannot be achieved.

The emerging doubt on behalf of investment communities and investors in general should not be surprising.  After all, it’s their money and it’s their perception that underscores investment decisions.

One daresay that the investment community saw the collapse of the system much earlier than either the IMF or the ECB, although the leadership of the latter two has been proactive in attempting to stabilize investor sentiment and mitigate between some form of restraint and investment in growth and employment.  Notwithstanding, the reassessment that further bailouts will be necessary is now the swan song of European austerity politics.

Unfortunately, European policymaker perceptions of the bond markets are completely skewed as a result of their own biases.  What is difficult for them to appreciate is that there is no basis left for growth.  Unemployment is up, with Spain leading at 23.6% followed by Greece at 21.0%.  And in those Eurozone countries where unemployment rates are low, many of the employed are part-time workers and, as such, susceptible to labour volatility during these turbulent times.

Moreover, capacity utilization in the manufacturing sector over the last four quarters is dropping across the Eurozone at alarming rates.  Order books are not being filled as quickly as desirable, and their durations and size are shorter than required to support additional investments.  As a result, business investment is stalling as management constrains expenditures and saves its liquidity for dividends in lieu of growth to stabilize share values, foreboding that equity markets react adversely to this dilemma and possibly falter.

What most pundits expected from the emerging markets may not be realized: trusting that BRIC plug the slowdown in Europe, with China leading the way.  Unfortunately, there is no plug.  Most informed observers now mitigate between a slowdown and an ease in aggregate demand, with China’s future growth rates in question.  Projections for the region suggest that China’s growth potential could be in the midst of a major contraction with rates dropping to 7.5% from anticipated 8% and over.

Given the above, the most difficult challenge in domestic politics is for any Government to admit that it followed the wrong track.  There is no shame in being part of a bigger bloc of nations that propound fiscal consolidations even if austerity is showing itself as being the ineffective solution to the Eurozone’s financial crisis, a crisis which is now becoming an economic and political crisis.

It actually takes great courage in admitting that the austerity programs recommended may not work out.  The experiences of other nations in the matter, elicit danger signals that can’t be overlooked.  In such a case, the consolation is that if one’s admission is timely, the Government may come out of an unfortunate situation looking respectful and remarkably diligent.  There is still time for Europe to turn back its political agendas before turning the wrong corner.

Thanks, but Sorry, your way won't work, so let's...

The past two weeks have witnessed major changes in the political and financial landscape of the European Union and the Euro area.  Two of the European region's most economically and politically unstable members have endorsed visions for new governments. An Italian  lawmakers' consensus has accorded Mr. Mario Monti the opportunity to form a transitional government that will empower Mr. Monti to negotiate and manage Italy's financial portfolio through turbulent waters; a Greek lawmakers' consensus has accorded Mr. Lucas Papademos the opportunity to form a transitional government that will empower Mr. Papademos to negotiate and manage Greece's financial portfolio through even more turbulent waters.

In the same European theatre during this year's summer and fall,  a new optic is also focusing the people and market's perspective on the political savoir-faire and competence of the region's traditional leadership.  According to many, Mrs. Merkel and Messrs Sarkozy and Cameron are demonstrating a lack of courage to make things happen. The situation is simply too overwhelming for that threesome.  To the boisterous three is the stage, but not History! History confirms that some leaders are made for good times and others, in the mold of Roosevelt and Churchill are made of a 'stuff' that captains the worst of storms.

Although premature and echoing the sound of fluttering feathers, we are nevertheless inspired by both Monti and Papademos, firstly because the respective country's lawmakers agreed to the appointment and secondly, because the national sentiment appears to be overall favorable. The fundamental criteria for success in bleak times is the support of the people-which, while it lasts tacitly transforms the leadership of a technocrat to leadership by charisma. The 'je ne sais quoi' that makes Monti and Papademos viable is exactly the opposite of 'je sais tres bien que' Mrs. Merkel and M. Sarkozy  are no longer comfortable to lead the EU nor the Eurozone out of this maelstrom. Mrs. Merkel whose economy is cruising through the turbulence seems confused about her directions and reads signals with great difficulty, she should possibly review her entourage for more capable resources. Mr Sarkozy should leave aside his political ambitions and rise to the European Region's challenge-it would probably guarantee him the undecided electorate. Finally, Mr. Cameron should abandon his economic platform and slowly steer towards fiscal accommodation before the country reaches the crevice.The economic indicators for the UK are in a sharp decline, and although inflation is for all intents and purposes non-problematic, unemployment is on the rise and capacity is in decline. The latter do not project good times.

In this maze of political ambiguity, Monti and Papademos, seconded by a  known entity Mr. Mario Draghi stand out quite remarkably. In fact, the rise of Monti may have been spurred by Mr. Draghi's reluctance to fully engage the ECB in support of the Italian auction sponsored under the last Berlusconi government. The politicization of the European Central Bank in this context is not acceptable-it mirrors the rise of a political elite beyond the legitimacy of elected representation. If the analysis of the ECB's undemocratic behavior is correct, then Mr. Draghi must explain the actions of his office towards the Italian electorate.

On the other hand, regardless of the origins of their rise, Messrs Monti and Papademos were well-trained to deal with the one concrete challenge of any political economy - to spur employment and extend economic growth. Mr. Monti, as a student of the keynesian Mr. James Tobin has the baggage and opportunity to challenge the austerity measures that are being imposed on the Italian economy. The discourse is not to settle on the terms for a refinancing but to convince markets that the conventional wisdom is not operative and will fail dramatically in the longer run. If markets do not want to be disrupted, then they must entertain the possibility that social unrest will certainly ensue a market's intransigence towards the plight of the unemployed. The matter does not involve a change in narratives, it requires a change in the essence of the discourse.

For Mr. Papademos, the measure of success lies in convincing the Greek electorate that unless there is some accommodation by the people, then there will be no accommodation by the markets. But this tradeoff is quite out-of-line with Mr. Papademos own dispositions. As a young economist, Mr. Papademos studied the accommodation of anti-inflation policy  in promoting employment.  If one considers that the whole segment of the public service is discontented about the market behavior towards Greece's dilemma, then Mr. Papademos must re-engage the early flirtations of his intellectual odyssey and abandon the ECB temple's aphorism of 'Price Stability'. One also hopes that he will challenge the skew towards privatization of public assets that seems to be permeating the ideological baggage of most European leaders in structuring refinancing.

Certainly, one of the critical errors of the ECB financial managers has been the concession to promote 'price stability' at the expense of employment. During two consecutive sessions in April and July, Mr. Trichet decided to boost interest rates when every economic indicator in Europe signaled that there was no inflationary threat imminent on the horizon. If anything, the rate increases intensified an already fragile economic landscape, tempering business investment, and disappointing any consumer initiative to spend. The initiatives certainly cast doubt on the sound judgement of European financial leadership.  One can forgive Mr. Papademos for the latter case in point,because obviously, Mr Papademos although a former member of ECB's executive directorship, and Vice-President to Mr. Trichet, had  left the ECB in 2010. What does that imply for Mr. Draghi who inherits the sequitor of that deepening crisis. On the one hand, Mr. Draghi has signaled his intentions to support any reasonable auctions in the market. If there is anything for Mr. Draghi to recall it is one of  his former teacher's Robert Solow's insight that persistent levels of unemployment adversely affect long term growth in productivity and a second caution that accelerating unemployment can have a disinflationary effect which, in our opinion, given the European context of the day translates into a tendency to affect adversely real wages more than prices, hence disposable income and consumer spending rather than corporate revenues.

Although both Messrs Monti and Papademos are highly capable and well-intentioned, the leap from technocracy to polity is not a matter of degrees. It involves a qualitative leap that resembles more a Kierkegaardian leap of faith that marks the end of innocence.  Although the scenario both men confront at the moment in their respective nations is reminiscent of  the High-Noon sheriff's duel with destiny, both men are certainly more equipped and better supported than the solitary Gary Cooper with his lone gun.

Nevertheless, we have faith that both men will succeed by cautiously pulling back from endorsing further austerity and inviting the markets to the table in order to embed the common sense of loosening up their exigencies. We also trust that Mr. Draghi will endorse a more accommodating stance towards national governments that confront onerous economic and financial challenges. There is no easy formula for success, but there are options that are more beneficial than tightening the coffers of an economy- put people back to work.

Mme. Lagarde’s IMF: Courage more than Heuristics


Our last posting suggested that the IMF exhibit courage in their next selection of a Managing Director. Although we had shown reservations towards a European selection, we confess that the appointment of Mme. Christine Madelaine Odette Lagarde to a five-year term by the IMF Executive Board must have involved great discernment and caution.  The IMF certainly demonstrated great courage by dismissing gender issues; and provoked some irony in selecting a neo-liberal/conservative successor to a socialist Mr. Strauss-Kahn. Moreover, no one can now doubt that the IMF did not seriously consider the possibilities and respective consequences that adverse disclosures from the investigation in the Tapie Affair could have on the new Managing Director, the Directorships and overall image of the institution.  That Rubicon is no longer a blindside-whatever the outcome.  

Mme. Lagarde has enjoyed firsts for most of her life. Her trek from the law firm Baker Mackenzie to France’s Minister of Economic Affairs is convincing. Commanding excellent English, she had an early stint in Washington DC as a congressional assistant to William Cohen, practiced law in Chicago to return to France and oversee three key French Ministries. Although her stay at Finance was largely polemical because she was considered by most as an executor of Sarkozy’s monetarism, it finally became controversial with the Tapie-Credit Lyonnais settlement. Notwithstanding, Mme. Lagarde is still considered by most critics as a very credible administrator. Some critics wonder whether her alleged monetarism and recent support of the ECB position on debt restructuring presents an intellectual hurdle in her new role. That’s somewhat doubtful. It may have been problematic for a despondent pundit, but it is actually a non-sequitur for a seasoned professional like Mme. Lagarde.  Although her recent record relating to the European debt-strapped sovereigns may be an affront presented by her critics, her more recent announcement since taking over the helm of the IMF indicate that Mme. Chairman may actually be suiting up for a transformative leadership of the institution:

… the IMF must be relevant, responsive, effective, and legitimate, to achieve stronger and sustainable growth, macroeconomic stability, and a better future for all.

The governance issues, and not necessarily internal, apparently take some precedence on Mme. Lagarde’ s agenda, There are facets pertaining to the IMF’s cohesiveness and overall effectiveness towards their membership that must be addressed immediately and there are incongruities that must be rectified in order to level the playing field. These ‘…issues cannot wait for yet another summer holiday.’ Structurally, the IMF is confronted by an unbalanced membership that is witnessing a proactive effort to realign expectations on the part of emerging economies and a responsive tacit gradualism on the part of the advanced economies. Organizationally, the IMF is experiencing institutional fatigue, and there are very few qualified professionals around since the inception of the Great  Recession in 2007 that have any stamina remaining and vision to assume the requisite leadership and ensure the appropriate continuity to an institution that is crucial to the ongoing stability of the global economic system.  Mme. Lagarde admits that

We are facing a landscape… with an uneven process of recovery and specific issues of a divided nature,…,between the advanced economies on the one hand, the emerging markets on the other, and the least developed countries, or low-income countries… with specific issues and yet a path to recovery that is obviously pronounced.

For Mme. Lagarde, who is a keen observer of Realpolitik, a refined diplomat of European mores and an ardent tenant of neo-liberal values, the signals voiced by the Many and les Autres are a clear indication that the institution must shed some of its theoretical armour- and modify its modus vivendi and operandi in favour of more proactive determinants of social responsibility.

…we cannot only analyze the economy by looking at some of the traditional standard criteria…by the hope to reduce fiscal deficits and organize fiscal consolidation in a big way, reduce debt and make it sustainable…

Knowing how to read the writing on the wall involves knowing when to replenish the artist’s easel with different brushes and colors, when to revamp the orchestra’s partition  with different instruments,  and sometimes knowing when to abandon a well-versed repertoire for newer measures and sensibilities. Contrary to the unsophisticated critic who challenges Mme. Lagarde’s ability to exercise sound judgement and exert good decisions because of her so-called non-economic background, this post suggests Good Riddance for the non-economist! This cynic’s rebuff is understandable: Who put the world economy in this mess in the first place, and who has not been able to restore any credence towards a reasonable path of recovery…certain specialized economists and certain other specialized bankers.

We contend that Lagarde, if one is permitted to embellish her podium with the generic pun! will be quite the man to do the job.

Her explicit resolve to ‘include such matters as employment, social affairs, peripheral components of the traditional economic look at the situation of a country’ is not only a commendation of Mr. Strauss-Kahn’s initiative but a recognition of the underlying critical factors that ensure sustainable economic growth. This flexibility towards diverse economic ideas and options is the mark of a good pragmatist. A non-zealot is what the IMF needs at the moment-an intelligent visionary:

                       

The International Monetary Fund is here… to help restore stability where there is instability, and there is plenty of that around; to help make sure the economies of the world work better to provide a better welfare for people. And to that, clearly, employment is a key issue. Whether you look at advanced economies, or whether you look at emerging markets, or low-income countries, the issue of employment is a critical one, and one that actually determines a stable social chemistry for society. So we should not lose sight of the overall main goal of the Fund.

The challenge nuances the Fund’s traditional mission. No one is suggesting that the Fund replace the sovereign’s  responsibility over national labour and its social and human development. Mme. Lagarde is clear on the focus as well as the demarcation of independent efforts. She has no ulterior pretensions to create a surrogate for sovereigns.

I'm not suggesting that the Fund should be turned into a specialized boutique on employment and best way to reduce unemployment.

However, she is certainly aware that IMF's traditional fiscal management may not be the only suitable solution, and may not deserve the prominent role it unfortunately once held. She is insightful with regards to spillovers and contagions recognizing their structural presence at the global systemic level,  and has committed the IMF to ‘actually addressing, describing, analyzing them’, and hopefully avoid and help resolve them.

It is not pretentious or gratuitous for Mme. Lagarde to suggest that

…Greek political parties altogether either in government or in a position, can be rightly inspired by the decisions, the courageous decisions made by political parties in Ireland, the courageous decisions made by political parties in Portugal.

The allusion to courage in the context of Greece and similar sovereigns is timely and natural. Courage is not only the trademark of Greek history and Greek culture, but picking up from Aristotle in the Nicomachean Ethics and the Rhetoric, both Samuel Johnson and Winston Churchill qualify Courage as the first of all human qualities. Courage is that necessary disposition that ensures first overcoming and then moving  beyond fear to achieving confidence in one’s capacities.  Mme. Lagarde understands full well that in order for weakening economies to succeed, it is essential to subvert fear in an unknown future and prep up the confidence factor. In the case of Greece, this modern economic crossroad is reminiscent of  Thermopylae and  Salamis. The Greek polis must rise to courage.  Following Aristotle’s lesson (Book III, chap 9), Mme. Lagarde reiterates in her own qualified manner that courage involves some ‘endurance of pain’ ;  and Mme. Lagarde is certainly no newcomer to courage. Her personal achievements and professional steadfastness are reflections more of that classical virtue than exhibitions of stubbornness and misplaced pride. Her decision to assume the helm of a great but battered organization is an appropriate reflection of courage and resolve: ‘So, here I am. And, for good…’

We hope so,  lest  Tapie's  fortuna unravels another IMF debacle.

Extrapolating power rankings from FORBES, Mme. Lagarde as Chair of the IMF would now move to 5^th  most powerful woman in the world,  from the 17^th ranking woman as Finance Minister of France. She also becomes the 37th most powerful person in the world.

The Blogger’s Return

If Parliament can recess, then Bloggers can Break.

The Bloggers’s Return, on the other hand is more fruitful than Parliament’s re-entry session.

The advantage of our break is twofold. First of all, one comments with confidence on what happened during the recess and as a result looks pretty good, if not great. Secondly,  one finds out how popular one is with family and one’s audience- respectively, they get a well-deserved front look at the poster-person and the rush to the stats hoping for the hopeless is hopeless. That is the true blogger’s fate! faith?!.

Reality is that only a few things are unchanged. In part, the collected efforts and works of the better part of our defunct humanity slyly called the Greatful Dead! And, in passing that’s not many!

What has changed? Nothing much, sparsely speaking.  Greece, Portugal, Ireland, Spain and Italy have been downgraded by  rating agencies: the US is on the next short-list. The IMF has selected a new Managing Director and US Congress is laming a decision on the debt limit-but it won’t affect their salaries. A new nation in Africa-South Sudan, has replaced Haiti as the poorest nation in the world. Haiti still awaits for its announced relief contributions from some Western democracies. Stock markets are so jittery that it looks like they’re dancing to the tune of a tarantella. Finally, no one knows what to do about the global economy other than China-although it’s also starting to worry about inflation. Yet, China will not cash in on its US Treasuries.

So where do we go from here. Best is to start with the IMF because its continuity is so critical to the low-income regions of world.

Washington Post, Mr. Strauss-Kahn, IMF and the EuroDebt Crises

The Washington Post highlighted an article dated June 6, 2011 covering the Strauss-Kahn vs Sofitel Hotel Maid. One should restrain from commenting the case. The courts will decide on whether there are legal consequences to Mr. Strauss-Kahn's actions, and the French people will decide the political future of Mr. Strauss-Kahn.  

The human interest perspective of the article was intelligent and very refreshing. In general, the article would have been excellent had it not been for one unfortunate mishap. Early on, one reads incredulously the comment by the Post's journalist- Mr. Brad Dennis, who is following the case:

"Monday’s hearing was the latest development in a scandal that has sparked an  international media frenzy, tossed the IMF into chaos and endangered the agency’s efforts to stabilize the European debt crisis."

I have a problem appreciating that the IMF is in state of chaos and a greater problem understanding why  Mr. Strauss-Kahn's absence from the IMF should endanger the efforts to stabilize the European Crisis.

The man has been with the IMF for four years since 2007. His  presence certainly did not prevent the global financial collapse of recent years that surfaced in 2007, nor did it appease the intensity of subsequent recessions, nor contain the quasi meltdowns of Iceland and Ireland and the debt crises of Greece and Portugal. This type of hyperbole or if it's the rendition of a third-party remark should be cautioned.

One can appreciate the figurative scope of the comment had it been a Keynes or a Mr. Paul Volcker. Even then! I am certain that Mr. Strauss-Kahn does not perceive himself in the same league as the former two, nor with Messrs. Bernanke or Greenspan. Nor did he aspire to be in that league. Mr. Strauss-Kahn's ambitions were, metaphorically speaking, groomed for greener fields.

The IMF as an institution is not charismatic, and its governors do not intend that it be predicated as such.  One hesitates to think of the embarassment felt by IMF personnel when one suggests that their reputations are tied to one person. One hesitates to think of the embarassment felt by its governors when a reputable newspaper suggests that the organization they oversee is only one layer deep and just that good!

If either is the case, spare the needy the expense of a sham and close it down.

That the future of Greece, of Portugal, indeed of the Eurozone Debt-Crisis, or any other sovereign in the world should be yoked in this manner to Mr. Strauss-Kahn, is inconceivable and moreso unacceptable. Mr. Strauss-Kahn is a competent economist, and was a fine Minister of Finance; but to reduce an Institution whose global stature and mandate is so critical to the development and stability of one hundred eighty-seven countries, to one person is scandalous! Mr. Strauss-Kahn himself would disapprove the comment.

If the above turmoil and discomfort is true, that is also a scandal.  Then some overseers and regulators should have the courage and decency to step down for having failed to ensure transparency and accountability, and be replaced with competent people.

If, on the other hand, the IMF is in chaos because the incident in New York can unravel other similar disclosures, that is a governance issue of a different type. The readership requires the precision to avoid such ambiguity. 

On the succession issue: one should caution the Eurocentrism that is pervading the IMF and the World Bank. There are very good people with very good ideas beyond Europe, quite deserving of the opportunity to change things and make a difference.

This is a reprint of a posting that appeared on June 8, 2011

41st Parliament: Budget Debate- Day 1

Aristotle's Rhetoric Bk 2.1 1378a: It necessarily follows that the speaker who is thought to have all these qualities [intelligence, character and good will] has the confidence of his hearers.

Laurels:
Mrs. Duki Ashton (NDP) Churchill, Manitoba
Mr. Philip Toone (NDP) Gaspésie-ile-de-la Madelaine, Québec
Mr. Geoff Regan (Liberal) Halifax West, Nova Scotia



Washington Post, Mr. Strauss-Kahn, IMF and the EuroDebt Crises


 This morning's Washington Post highlighted an article dated June 6, 2011 covering the Strauss-Kahn vs Sofitel Hotel Maid. One should restrain from commenting the case. The courts will decide on whether there are legal consequences to Mr. Strauss-Kahn's actions, and the French people will decide the political future of Mr. Strauss-Kahn.  

The human interest perspective of the article was intelligent and very refreshing. In general, the article would have been excellent had it not been for one unfortunate mishap. Early on, one reads incredulously the comment by the Post's journalist- Mr. Brad Dennis, who is following the case:

"Monday’s hearing was the latest development in a scandal that has sparked an  international media frenzy, tossed the IMF into chaos and endangered the agency’s efforts to stabilize the European debt crisis."

I have a problem appreciating that the IMF is in state of chaos and a greater problem understanding why  Mr. Strauss-Kahn's absence from the IMF should endanger the efforts to stabilize the European Crisis.

The man has been with the IMF for four years since 2007. His  presence certainly did not prevent the global financial collapse of recent years that surfaced in 2007, nor did it appease the intensity of subsequent recessions, nor contain the quasi meltdowns of Iceland and Ireland and the debt crises of Greece and Portugal. This type of hyperbole or if it's the rendition of a third-party remark should be cautioned.

One can appreciate the figurative scope of the comment had it been a Keynes or a Mr. Paul Volcker. Even then! I am certain that Mr. Strauss-Kahn does not perceive himself in the same league as the former two, nor with Messrs. Bernanke or Greenspan. Nor did he aspire to be in that league. Mr. Strauss-Kahn's ambitions were, metaphorically speaking, groomed for greener fields.

The IMF as an institution is not charismatic, and its governors do not intend that it be predicated as such.  One hesitates to think of the embarassment felt by IMF personnel when one suggests that their reputations are tied to one person. One hesitates to think of the embarassment felt by its governors when a reputable newspaper suggests that the organization they oversee is only one layer deep and just that good!

If either is the case, spare the needy the expense of a sham and close it down.

That the future of Greece, of Portugal, indeed of the Eurozone Debt-Crisis, or any other sovereign in the world should be yoked in this manner to Mr. Strauss-Kahn, is inconceivable and moreso unacceptable. Mr. Strauss-Kahn is a competent economist, and was a fine Minister of Finance; but to reduce an Institution whose global stature and mandate is so critical to the development and stability of one hundred eighty-seven countries, to one person is scandalous! Mr. Strauss-Kahn himself would disapprove the comment.

If the above turmoil and discomfort is true, that is also a scandal.  Then some overseers and regulators should have the courage and decency to step down for having failed to ensure transparency and accountability, and be replaced with competent people.

If, on the other hand, the IMF is in chaos because the incident in New York can unravel other similar disclosures, that is a governance issue of a different type. The readership requires the precision to avoid such ambiguity. 

On the succession issue: one should caution the Eurocentrism that is pervading the IMF and the World Bank. There are very good people with very good ideas beyond Europe, quite deserving of the opportunity to change things and make a difference.