The IMF has been sending out some very confused signals from its spring meeting, being held in Brazil this week. If I have read the bulletins that I have received correctly, and appropriately interpreted them within the context of the UK, which some of them specifically address, then the messages appear to be at least fourfold.
Firstly, they are not convinced that the risk of inflation in the UK is over as yet, and so are demanding caution.
Second, they have downgraded UK growth expectations for the year to well under one percent. That appears realistic, especially if in response the their demands on inflation interest rates stay above any reasonably required level.
Third, they suggest that there is no room for tax cuts, which is a political rather than an economic choice on their part, although it is one that I would support.
Fourth, they do, instead of tax cuts, demand investment in public services.
However, and fifth, they also expect that government debt be constrained.
In principle, these various claims are reconcilable. However, they do require a very particular political economic perspective to be taken, which embraces the idea that the capacity of the state is limited, that the creation of money is exogenous to it, and that priority must always be given to private sector activity, even if the basic needs of many are not met.
It really is time that the IMF worked out what the economic priorities of the 21st-century are. In particular, they should appreciate the promoting an environment in which the interests of rent-extracting global monopolies are prioritised is never going to meet the needs of most people. When they have got over serving the interests of that lobby group, we might get more coherent policy from them.
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I don’t think the IMF let alone most people of this country understand the following question:-
“Why is it a necessity to have one money creating agency in a country that doesn’t need to automatically retire all that it creates?”
I have no idea what you are suggesting
Sorry
I’m talking about allowing for the non-government sector to net save.
The IMF or anyone else for that matter can’t talk casually about balancing a government’s books without recognising this or indeed the accompanying phenomenon that the non-government sector drives government deficits in terms of its desire to net save. MMT 101 or Wynne Godley 101.
OK
But that was deeply opaque
Riddles do not help the expression of simple economic ideas
The IMF was critical recently of British debt rising from 92% of GDP to 98% in a recent forecast. I tried to find a similar recent IMF commentary on Japan, which according to the IMF has debt of 261% of GDP, but I cannot find anything with the appropriate wailing and gnashing of teeth. Reinhart and Rogoff’s thesis on debt didn’t stand up, but bankers and economists keep on going, simply because nobody ever brings them to account.
Agreed
Thank you, John and Richard.
Many people who cite the pair are not aware or downplay the analysis by the University of Massachusetts which debunked their fantasy and exposed the errors in their spreadsheet calculations, as per https://theconversation.com/the-reinhart-rogoff-error-or-how-not-to-excel-at-economics-13646.
Indeed. Only in economics is blatant failure a cast iron guarantee of lifelong tenure.
Bill Mitchell is equally critical of the IMF
https://billmitchell.org/blog/?p=61673
And here’s a part of the “deficit necessity riddle” that economists and politicians ought to understand not merely at a country macroeconomic level but also a global one:-
“Further, as a result of the US running large external deficits, in part to ensure there were sufficient US dollars in the system – given its central role in the convertibility system, and also because of its prosecution of the Vietnam War, nations started building up large US dollar reserves.”
https://billmitchell.org/blog/?p=61673
The IMF has never had social and economic justice as any part of its aims. They left that to the World Bank group (whose track record is a different matter). The IMF was set up by the rich countries to prevent the gross deflation of the pre-war era; but Keynes lost the power play, failed to get an international fiat currency; and the IMF was dominated by the US, leading to dollar hegemony and ‘exorbitant privilege’.
The ‘conditionalities’ (that is, neoliberal dogmas – ‘labour market liberalisation’, openness to free trade and foreign investment etc) imposed on any nation that has the misfortune to become a client (or victim?) of IMF ‘support’ are the mechanism of this rich-nation and monetary hegemony.
At least all they’re giving the UK is comments and advice; but sadly our current (and likely, next) leaders are all drinking from the same fountain.
Some say the IMF is part and parcel of the US military