In These New Times

A new paradigm for a post-imperial world

The G20 wind egg

Posted by seumasach on April 10, 2009

Here is some cheering news: as suspected Brown’s much vaunted global stimulus amounts to practically nothing. William Buiter has done us the honour of putting his considerable expertise to debunking this particular piece of New Labour hype. As we have predicted for some time institutions like the IMF are now blocked from the point of view of the machinations of Brown’s New World Order brigade. It remains for Washington and London to desist from further, fruitless attempts to impose their hegemony and instead dismantle their empire, and for new global leadership to emerge based on the rising poles to the South and East, such as China, Iran and Bolivarist South America.


The green shoots are weeds growing through the rubble in the ruins of the global economy

William Buiter


8th April, 2009

The global stimulus associated with the increase in IMF resources agreed at the G20 meeting earlier this month will be negligible unless and until these resources actually materialise. The statements, declarations and communiqués of the G20, including the most recent ones highlight the gaps between dreams and deeds.

Even the promise of an immediate increase in bilateral financing from members of $250 bn is not funded yet. Only $200 have been promised firmly – $100 bn by Japan and $100 bn by the EU. Prime Minister Brown announced that the PRC had committed another $40 bn, but apparently he had forgotten to clear this with the Chinese. As regards the plan to incorporate in the near term, the immediate financing from members into an expanded and more flexible New Arrangements to Borrow would be increased by up to $500 billion (that is by another $250 bn). Unfortunately, nobody has volunteered any money yet. It therefore has no more substance than past commitments by the international community to fund the achievement of the Millenium Development Goals. Then there is the promise that the G20 will consider market borrowing by the IMF to be used if necessary in conjunction with other sources of financing, to raise resources to the level needed to meet demands. That is classic official prittle-prattle – suggesting the IMF borrow without providing it with the resources (capital) to engage in such borrowing. There is also $6 bn for the poorest countries, to be paid for by IMF gold sales and profits. Nice, but chicken feed. Finally there is the decision to support a general allocation of SDRs equivalent to $250 billion to increase global liquidity, $100 billion of which will go directly to emerging market and developing countries. The problem is that this requires the approval of the US Congress, which is deeply hostile to any additional money for any of the Bretton Woods institutions. A special allocation of SDRs is also out of the question, because the US has not yet ratified the fourth amendment to the IMF’s articles (approved by the IMF’s Board of Governors in 1997!). So apart from the $240 bn (or perhaps only $200 bn) already flagged well before the G20 meeting, the only hard commitment to additional resources (or to resources that have any chance of being available for lending and spending during the current contraction) is the $6 bn worth of alms for the poor from the sale of IMF gold. That’s what I call a bold approach!

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