Goldman Aligns Itself Against US, UK, And Europe, Alongside China In Choice For Next IMF Head

Tyler Durden's picture

Christine Lagarde's chances of heading the IMF just took a another step back. Why? Because the firm whose alumni are about to be or already are in key posts at the Fed, the ECB and the BOC, has said (through its moutpiece Jim O'Neill who "can't see how the EUR should be above 1.40" even as Thomas Stolper et al see it going to 1.55 in a year) that it is not too crazy about having a European replacement for DSK, and that "it might be better if some leadership and authority came from outside of Europe with a fresh set of independent eyes" (supposedly the fact that Lagarde has had no formaly economic academic brainwashing is not a factor). In other words, Goldman has aligned itself with China, which has made it clear that it may be wise if the next IMF leadership "reflected the New World Order." As such, the largely symbolic IMF conclave just became very interesting: while the IMF is largely a figurehead with the real backstop organization always being the Federal Reserve, Goldman appears to have just voted alongside China... and thus against Europe and the US.

From Goldman's Jim O'Neill:


Two weeks ago at a conference in Singapore, when asked to make some bold predictions about the future, I joked that the next head of the IMF would be Sir Alex Ferguson. Little did I know that within a week of that joke, the Fund would need a new leader.

I have been discussing the possible candidates for the new Head with many people this week, as have many others. The new leader should satisfy two broad criteria. One, he or she must be well versed in the many economic and policy issues that the IMF must handle and lead. Two, he or she must have a personality that can engage successfully with the many different members to orchestrate change as well as a better and more balanced world economy.  What the leader mustn’t be is simply a figurehead of a pure European and US “deal” to sustain the historic arrangement that the IMF always has a European leader and the World Bank has an American leader. If the IMF ends up with European leader, that person will have to face the additional burden of being regarded as such a product, adding to his or her challenges.

As is being discussed in the media, a number of candidates from the “Growth Market” world are in the mix, with names from Brazil, China, India, Mexico and Turkey being considered. From the developed world, the name of Christine Lagarde is dominant and she appears to be the favourite right now. The IMF has said they will find a new Head by the end of June.

A number of commentators are suggesting that, given the European debt crisis and the challenges facing European Monetary Union, the leader must come from Europe. This strikes me as a rather ridiculous argument on two fronts. First, if this were a critical factor in the decision, it would suggest that we should have had a Latin leader in the 1980’s and an Asian head in the late 1990’s. Furthermore, it implies that every time there is a country at the centre of a global crisis, its Finance Minister should become the head of the IMF. Second, I believe the exact opposite could be the case. In fact, to really solve the EMU crisis, it might be better if some leadership and authority came from outside of Europe with a fresh set of independent eyes.


The void at the IMF comes at a time when the IMF is needed to help move the crisis onto a sounder footing. It seems as though Europe’s leaders are already struggling, and the loss of Strauss Kahn is seen as an additional blow. Whether this is because of his personal expert knowledge or because he had the ear of German Chancellor Merkel is unclear, but he probably had both. Whether either of these two qualities is specifically helpful is more questionable.

At the core of the EMU problem are the difficulties facing German leaders concerning leadership. In my judgment, the EMU crisis is more one of governance and leadership and not really a sovereign debt crisis. As should be better known, the GDP-weighted average debt and deficit position of the Euro Area compares favourably with both the UK and US, and is considerably better than Japan. Each of Ireland, Greece and Portugal has current debts that on their own seem very problematic, and both Spain and Italy could be troubling. But remember, Belgium and Italy joined EMU in 1999 with debt levels of more than 100 pct of GDP, and this didn’t stop them from being allowed to join the system.

The problem for the Club Med countries is that, post the global credit crisis, investors are much more nervous about what they will and won’t invest in, and the current European position looks troubling. What appears to be now blatantly clear is that too many countries were allowed to join in 1999 and, as many skeptics have argued, it is not an optimal currency area. It is easy for me to offer this observation, but it is not easy for either the leaders of those countries  or Germany, or the EU, to change it. Removing any of them from EMU now could lead to a lot of unpredictable outcomes. This might not make life any easier for them or the remaining members, especially in the near term. At the other extreme, making the troubled countries more optimal members of the single currency might require not only a lot of adjustment pains, but also more of a true pan European world of rules and regulations, especially in terms of underlying fiscal tools and political decision making. This is really the choice facing Europe’s leaders, and it is not one any of them seem to be currently prepared to make. By default – pardon the unfortunate word – they are simply trying to persuade the world that “everything will be alright in the end.”


I continue to believe that without more severe contagion through the financial markets, the global importance of the troubled Club Med countries is much less than many believe. As I show at many speeches I give, 8 of the 10 most likely contributors to global GDP in the current decade will be so-called emerging economies. The combined GDP of these eight “Growth Economies,” Brazil, Russia, India and China (the four BRICs) as well as Korea, Indonesia, Mexico and Turkey, will increase by more than 5 times that of the Euro Area. And, by the end of the decade, their collective GDP will probably be bigger than the Euro Area. What happens to all of these countries will be much more important globally than what happens in the Euro Area.

If the Growth Eight were part of a regional club as is the EU, in my opinion it would seem a straightforward choice that the new IMF leader should come from one of their countries. Perhaps they should try to decide on a jointly preferredcandidate rather than each one promoting their own.

Of course, one country, China, stands at the heart of the Growth Eight’s prospects, and they alone will contribute half of their decade’s GDP change. In principle, China should have a big say about the IMF’s future. As I am also fond of showing, last year increases in China’s imports ($400 bn) were more than the size of Greece’s total economy. What happens to China’s imports in the coming years is a lot more important the issue of Greek debt.

But does this mean that the new head of the IMF should be Chinese? At a Goldman Sachs BRIC conference early last week, a client asked me whether I thought it would be appropriate for the new head of the IMF to come from a nondemocratic country. This was an extremely good and difficult question. My answer wasn’t very popular with fellow panelists or I suspect much of the Western audience. I suggested that citizens of China and Russia don’t seem to be too disturbed about not being democracies; they want a better standard of living and more wealth. What system of political structure delivers that seems less important. As it relates to the IMF, it is not a requirement to be a democracy to be a member, so it doesn’t strike me as though its leader necessarily needs to come from a democratic country. What an effective leader of the IMF needs to be is someone who understands the complex changing structure of the world, which involves both democracies and those which are not. It requires someone with strong leadership skills and vision. Perhaps my joke in Singapore might be worth exploring!

Jim O’Neill

Chairman, Goldman Sachs Asset Management

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SilverDoctors's picture

Banksters know the GIG is up on the LMBA/COMEX.  Time to move the party to asia.

Hyperinflation is on its way to our neck of the woods....check out this 1st hand account of a US businessman living and profiting through the Mexican Peso Devaluation.

Living Through a Currency Devaluation

covert's picture

off topic:

look at the video at the bottom:

time to celebrate!

zen0's picture

let us just remember that high inflation and hyperinflation are not the same thing.

TheGoodDoctor's picture

Shills to the God damned end.

CPL's picture

Yup, considering wars have been started over less.  Monday is going to be an interesting day

Manthong's picture

"..more wealth. What system of political structure delivers that seems less important."

He probably didn't mean it quite that way, but it's how the words came out.

MikeNYC's picture

Someone is defending 1,41 pretty f'in hard right now. That's OK, bitch, we're patient.

mynhair's picture

Yep.  Expect HUF to break first.  (Fingers crossed.)

zen0's picture

We meet today in the midst of another great transformation—one that is occurring more rapidly than most recognise.
The financial crisis has accelerated the shift in the world’s economic centre of gravity. Emerging-market economies now account for almost three-quarters of global growth—up from just one-third at the turn of the millennium.

From a speech by the Governor of the Bank of Canada, May 19th.

Might as well let the drivers drive, right?

FunkyMonkeyBoy's picture

Beware the New World Order.

Where you gonna go to, when you don't like your world fascist government?

topcallingtroll's picture

South america.

Plenty of opportunity. Few rules.
The few rules they have are ignored,
but pick a country in the top half of
the income distribution.

Guy Fawkes Mulder's picture

Apparently you are missing the concept of the New WORLD Order.

They run THE WORLD.

Even if select, choice locales on the globe evade their clutches for, say, a generation, your progeny is still damned to hell.

Not to mention that the "New" World Order is really for all intents and purposes The Old World Order, and they have plenty more experience in South America than you.

Smiddywesson's picture

You all assuming the world inches forward incrementally.  The wheels are coming off.  There will be no New World Order.  There will probably be no China as a unified nation soon, and the same goes for the USA.  The game is going to change all at once, everywhere, and all the little kiddies who could detail you on American Idol will say that nobody saw it coming.

ibjamming's picture

That's what I'm thinking too.  An "anti-globalism", an anti-NWO, a fracturing.


Like the collapse of the USSR...the states will secede, and probably form regional alliances, the ME will be a shambles, oil output will slow to a crawl, big time world depression as the world starves for energy.  The lights may stay on...but movement will come to a halt.  The population will halve within a year and slowly go to a third of the current levels.'ll be a good thing for the human species...we've been carrying too much dead wood for too long.  We're overdo a massive culling.  Whole "groups" may disappear as racism sweeps through formerly "diversified" societies.

Personally, I hope they can keep it together for another 50 years...I'm getting too old to farm.

What I really think will happen is WW III.  Over oil.  I think a ME invasion is coming...maybe soon.  Oil is too costly...the middleman has to go.  I think the "west" wants that land back to get that oil...and it will take it.  Cutting energy costs by half...$50 oil would be THE thing to end this global depression and rocket us back into expansion again.  Besides, it would allow us to reset half our debt too.  China would be against us in WW III, so any debt we owe them would be wiped out with the click of a keyboard.  We'd seize Chinese and ME assets.  It's really the ONLY way out of this mess.

natureoftheexperiment's picture

I'm parallel with your realistc outlook, but if Bernake and the FOMC go ahead with QEx3, won't the effects be artifical? What I'm trying to say is, that no matter what happens, the only outcome is war.

zen0's picture

ain't noboby say it good....just is. Where you gonna go, sinner man, all on that day?

Popo's picture

Just a ploy. They're looking for legal absolution for any future investigation.

topcallingtroll's picture

It doesnt matter what china wants.

We have a longstanding agreement with europe that they run the imf and we run the world bank.

When china allows free convertibility of their currency and starts wearing big boy pants they can have some influence.

i-dog's picture

Contrary to TD's headline, I don't think that Goldman siding with China is necessarily against the US interest: the US bankstas would love to use China as the excuse to have their own puppets at the head of both the IMF and World Bank. What is strange, to me, in this case is that China is seen to be acting against Europe's bankstas and in favour of the US bankstas.

XRAYD's picture



“We should say thank you,” said Mr. Diamond [CEO Barclays], who earlier this month defended his bank’s lucrative bonus payments before British lawmakers, “a very heartfelt thank you.”


With him on stage, the French Finance Minister Christine Lagarde was not impressed: “The best way the banking sector can say thank you is with good financing for the economy, sensible compensation packages and reinforcement of their capital.”

The opposition is the same as against Elizabeth Warren and protecting consumers. . Anything that might put the vampire on a diet is bad for the world of Goldman et al.



scratch_and_sniff's picture


Someone will eventually call them "fair weather friends", but we all know they were never anyone’s' friend. How do they get away with it, how do they manage to slime their way into every despicable position imaginable? How do these demonic deranged grasping greedy spastics get away with it? HOW!!??


anony's picture

Well, one possibility is this:

Substitute these names for the Big Jefes in all the most powerful financial and government positions:

Corleone, Capone, Luchiano, Bonnano, Pugliese, Rocco, Testa, Gotti,

Instead of the current ones:

Shapiro, Geithner, Blankfein, Rubin, Summers, Greenspan, Friedman, Gensler, Fuld, Madoff, Frank, Schumer,

Now do you know how?

ibjamming's picture

Yup...the USA has become the Mafia.  We offer "protection", and all you do is pay us a vig...a percent of your business.  We're a global scale Mafia...plain and simple.

Use of Weapons's picture

What happens to China’s imports in the coming years is a lot more important the issue of Greek debt.


Here's what's going to happen to China's imports in the coming years: they're going to slow down, then cease when the shit hits the fan.

Take a look at the following table, and you'll see a country essentially "stocking up" for the next large internal push towards self-sufficiency. Given coal, nuclear and even green energy options being chased, and high-tech industry being taken on, China's goal is (and always has been) self-sufficiency.

For oil / gas, well... they have a large neighbour for those.


Hmm. ZH hates tables. Great.

85 Electrical machinery and equipment 314.4 29.0 27 Mineral fuel and oil 188.7 52.1 84 Power generation equipment 172.3 39.4 26 Ores, slag and ash 108.6 54.9 90 Optics and medical equipment 89.8 34.1 39 Plastics and articles thereof 63.7 31.3 28, 29 Inorganic and organic chemicals 58.2* 37.2* 87 Vehicles, excluding rail 49.5 74.5 74 Copper and articles thereof 46.1 55.8 72, 73 Iron and steel 34.5* -6.1*


zen0's picture

China has always considered itself the "Middle Kingdom". Why? Because in the Chinese Universe, there are 5 directions...East, West, North, South, and Center.

Everything flows from the center, and into the center.

YHC-FTSE's picture

Almost every article on ZH these days resemble a Dali painting: Surreal, but very interesting. 


I never thought I'd ever find myself nodding with the black squid, but Jim does make a few good points. 

Kayman's picture


but Jim does make a few good points. 

"What system of political structure delivers that seems less important."

Yeah, that democracy thing sure is a nuisance.

Hitler would have loved to hear that when Nazi Germany was the growth engine of Europe.

And this from a Goldman shill. Maybe Goldman held shares in I.G. Farben after all.

These slime buckets would sell their children's kidneys at the right strike price.

Arius's picture

how about their own talking about psychopaths...

JR's picture

Kayman, you brought O’Neill down with one of the most succinctly articulated verbal jabs in the business; you are the greatest…in whatever you write.  Thanks.

falak pema's picture

Hey Kay, you don't want to bad mouth Amerika's best and brightest financial boys...Or they'll ask you to step up to bat and take a swing at finding a real solution. gets complicated...and some guys blow their nuts all over the in suite 2806. Just saying, these guys are deal makers in a game that is "Cut and Run" at its best. Last man out in the currency war right now, where GS is big, gets to hear 'nut cracker's suite'... and its NOT sweet!

Kayman's picture


I fear not Goldman. I fear the collapse of this country.

The real solution is writing down all the debt and starting over. 3 decades of paper mirages cannot be solved with another decade of paper.

Ben has provided top end liquidity, but the gangrene must be cut out. And yes, it will be painful.

YHC-FTSE's picture

No arguments about the potential organ donors from Squiddy progeny. :)


They say the best liars are those who interweave the truth with deceit, and he has done a superb job in the above speech about the EMU - surely you agree? That's why Jim owns a super yacht and we post whining diatribes on websites. 


As I said, things get more surreal by the day. As for democracies - yep, it is certainly the best form, but only because we get to fire our leaders, not because we can hire them. And when it's a two party race with both parties in the wide pockets of the corporations, then it's no choice at all is it? BTW, Hitler was widely lauded about Germany being the growth engine of Europe in his day. While on that era, surely you know the quote about how Fascism should be called Corporatism - the perfect marriage between the corporations and the state - attributed to Mussolini? It describes the present day USA perfectly. 


With the current troubles in the EU, I think it should be a European MD at the head of the IMF - and yes, it shouldn't exist, but it does so I'm dealing with it - Gordon Brown or Axel Weber are my choices because imo they are most likely to re-evaluate the SDR.

Kayman's picture

Hitler was widely, but not universally lauded, for the "miracle" growth of the economy.

An economy that was financed through debt and theft. Ultimately leading to war to keep the top spinning.

Hitler looted France with a "point-of-the gun" fixed exchange rate.  Then German soldiers started sending French goods back to the Fatherland.

Debt and Theft. Isn't that what our New World Order finance system relies on ?

The math says there is a limit to Ben's balance sheet and unchecked public debt and I do not need to dust off my differential calculus books to confirm it.

YHC-FTSE's picture

"Debt and Theft. Isn't that what our New World Order finance system relies on ?"


Perfectly put! 


My instincts tell me that Ben's balance sheet has an off-book option called the IMF, where debt-as-assets of entire nations are traded like candy in fiat USD, and therefore keeping the world demand for the greenback for as long as nobody challenges its supremacy. As he prints ever more trillions of dollars expecting the other countries in Club IMF to add their blood to limit the dilution of the USD, millions of people with a modicum of wealth will feel the decimation of their assets, and billions will starve.  


That is why, in order to keep the dollar hegemony, Ben/TPTB find it imperative to destroy any chance of a review of the SDR, and the pricing of commodities in anything other than fiat USD.  If a common medium of exchange for selling and buying and settling debts that is not controlled by one entity (Fed) alone ever emerges on the international scene, it will mean the collapse of the dollar, sooner rather than inevitably later. It seems to me that America wants to take every other country with it, as it collapses into its own footprint, and that is why I want a review of the SDR to include other currencies as well as commodities so that some nations who haven't been so reckless can survive the fallout. 

nmewn's picture

So we can dispense with the duo inverted, half pike back flip and stick the entry into the DSK pool?

Just as it was getting interesting, it was those damn commies all the time ;-)

buzzsaw99's picture

I prefer that a Chinese firm usurp the functions of the squid completely. At least they use their own money.

Dejean Splicer's picture

I doubt the lizard people will be able to co-opt China like they have done to the US. They have well defined boundaries. If anything Chinese culture will assimilate them.

Colonel Tso's matzoh balls with a green teabag.

sethstorm's picture

I prefer that the US co-opts the functions of China's government completely, including the land governed by China.


THE DORK OF CORK's picture

This is a old story repeating itself - I am reminded of the Spanish decline in the middle part of the last century - they lived the high life for a while but the bankers transported the   Gold to Switzerland and then the party was over.


Caviar Emptor's picture

In more recent times, I remember Goldman and Steve Friedman cozying up to the Japanese at the height of their power in the 1980s. Same jockstrap, different scrotum. 

gookempucky's picture

Exactly CE as now the new iphone is the LONGEVITY BOND, these guys need to burn.



Goldman Sachs, Deutsche Bank and JPMorgan Chase, which bundled and sold billions of dollars of mortgage loans, now want to help investors bet on people's deaths.
Pension funds sitting on more than US$23 trillion of assets are buying insurance against the risk their members live longer than expected.

Investment banks see this as an opportunity to package that risk into bonds and other securities and create a new market for those willing to bet on life-expectancy rates. If pensioners die sooner than expected, investors profit. If they live longer, investors must compensate the pension fund for the additional costs it faces

disabledvet's picture

how does one finance a trillion dollar deficit with gold?  obviously it can't be done.  nor of course can it be done with bailouts, nor can it be done with debt monetization schemes however well conceived.  in the end only economic growth through greater production, greater market efficiencies, sound fiscal and monetary policies and for lack of a better word "political transparency" by being functionally honest with the folks about how this will work going forward.  the bond vigilantes have been out in full force for a year now--they are in effect enforcing a rule of money about debt repayment schemes that don't work.  we know one that does for a time:  repayment through a depreciating currency. every time the euro surges the crisis in the emu grows.  i think it goes without say that the next head of the IMF must come from Europe because "that is where the crisis is" and clearly the "more we understand how interconnected we are in the end" the "less worse" i guess it will be for all of us in the end.  As Ben Franklin said of the American revolution:  "we should all hang together or most assuredly we will all hang seperately."  no nation or "group of people's" is immune from the ravages of what Warren Buffet so poignantly called "weapons of financial mass destruction."

falak pema's picture

Btw Dork, great game from Leinster!! What a match! that DSk is gone, I don't see the haircut option, shot down by Geithner, being resuscitated by who-ever is next from IMF side. This Greece-Spain spiral is a game changer in Euro zone by the looks of it. I didn't expect this unwind so soon...But when the king of IMF falls and all say "hail the new king" ...all old bets are off!

I wonder what the Irish will say in this new twist of euro zone twister!


sethstorm's picture

The lesson?  If the banks decide to move things, make the move impossibly painful or that you're waiting on the other side to repatriate.

silberblick's picture


Goldman is just aligning itself with China to get privileges, perhaps on the Hong Hong exchange.

Follow the link below to find out why the Hong Kong Mercantile Exchange must be seen and understood as an extension of the Chinese government and its long term goals, and consequently, why it will not help create an equitable or realistic price discovery mechanism for gold. Not for now anyway.


topcallingtroll's picture

Goldman definitely sees a big potential market with lots of inefficiencies to exploit.

gookempucky's picture
Goldman is just aligning itself with China to get privileges Or set up a buddy for needed asylum when their house of DOUCHE comes down ??


Source: Financial Times

Pakistan has asked China to build a naval base at its south-western port of Gwadar and expects the Chinese navy to maintain a regular presence there, a plan likely to alarm both India and the US.

“We have asked our Chinese brothers to please build a naval base at Gwadar,” Chaudhary Ahmed Mukhtar, Pakistan’s defence minister, told the Financial Times, confirming that the request was conveyed to China during a visit last week by Yusuf Raza Gilani, Pakistan’s prime minister.

Hitherto, China has shied away from moves that might alienate the US and Beijing’s neighbours, such as India, Malaysia and Indonesia. “China’s rise is a beneficial force for peace and we have no hegemonic ambitions,” said a Chinese official familiar with Beijing’s security policy.

But Christopher Yung, senior research fellow at National Defense University in Washington, said in a recent paper “the nature and degree of China’s access to out-of-area bases will be the ultimate indication and warning” of its eventual intention to become a global military power. A Pentagon official said: “We have questions and concerns about this development and [China’s] intentions. But that is why we believe it is important to have a healthy, stable and continuous military-to-military relationship.”

A senior Pakistani official familiar with Sino-Pakistani discussions on naval co-operation said: “The naval base is something we hope will allow Chinese vessels to regularly visit in [the] future and also use the place for repair and maintenance of their fleet in the [Indian Ocean region].”

falak pema's picture

"brotherhood" takes on new meaning and a new geo-political dimension. Tough times ahead for USA power play in subcontinent. Maybe, O'b has already integrated this in his coming military pull-back plans from Pak/Afgh.

sethstorm's picture

Now would be a very good time to have the US overthrow the China-supporting Pakistan leaders.