Inch by inch

I stumbled upon this speech by David Lipton, the first deputy Managing Director at the International Monetary Fund, when I was searching for the latest Article IV report on China by the Fund. The speech was delivered some two months ago.

His prescription for a EM safety net is similar to what Raghu has been advocating and it is good to see him make it very clear that it should be in the control of EMs. But, there is no direct mention of the logical consequence of that – a change in the governance of international and multilateral institutions.

On capital flows, he blurs his lines.

There is no mention of the pernicious role of monetary policy in stoking the ills in all that is happening. In fact, in its latest briefing note for G-20, it had endorsed negative rates and calls for more of it, including asking the Federal Reserve to go slow in returning to normal. Not that the Federal Reserve needs much convincing on that one. That is why in my MINT column today, I wrote that the Fund endorsed snake oil.

The cozy incestuous consensus among policy-academic elites in the world is rather strong. Or, to put it somewhat more positively, it takes a lot of push to move an inch.


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