This page has been archived and commenting is disabled.
China-Led Bank Will "Keep America Honest," Provide Alternative To IMF, Nomura Says
The membership drive and subsequent launch of the Asian Infrastructure Investment Bank has been a favorite topic of ours since the UK threw its support behind the China-led venture in March.
London’s move to join the bank marked a diplomatic break with Washington, where fears about the potential for the new lender to supplant traditional US-dominated multilateral institutions prompted The White House to lead an absurdly transparent campaign aimed at deterring US allies from supporting Beijing by claiming that the AIIB would not adhere to international standards around governance and environmental protection.
In the weeks and months following the UK’s decision, dozens of countries (including many traditional US allies) expressed interest in the new lender and by the time the bank officially launched late last month, the US and Japan (who dominate the IMF and ADB, respectively) were the only notable holdouts.
As we never tire of discussing, the reason the AIIB matters is that it represents far more than a new foreign policy tool for Beijing to deploy on the way to cementing its status as regional hegemon.
The lender’s real significance lies in the degree to which it represents a shift away from the multilateral institutions that have dominated the post-war world economic order. In short, it’s a response not only to the IMF’s failure to provide the world’s most important emerging economies with representation that’s commensurate with their economic clout, but also to the perceived shortcomings of the IMF and ADB. The AIIB isn’t alone in this regard. Indeed, the BRICS bank can be viewed through a similar lens.
It’s against this backdrop that we bring you the following insight from Nomura’s Richard Koo, who suggests that the Greek experience with the IMF shows how the institution sometimes fails to deliver and by extension, how important it is for the countries in need to have more than one option when it comes to securing crucial aid.
* * *
AIIB a way around western opposition to IMF and World Bank reforms
In light of US and European opposition to IMF and World Bank reforms, few should have been surprised that China decided it made more sense to create a new institution than to stand around waiting for the status quo to change. Eventually it announced the creation of the AIIB.
Europe quickly declared that it would participate in the new institution. I see this as an attempt to smooth over relations with China after its earlier reluctance to allow the nation a more prominent role at the IMF.
The US administration, while arguing China’s voting rights needed to be expanded to make the IMF a truly global institution, ultimately faced opposition from the legislative branch of government. The end result was a significant loss of US influence with both Europe and China.
AIIB gives alternative to countries in need of help
The US sought to expand China’s voting rights and thereby maintain the IMF and World Bank’s central positions in the global economy because allowing the creation of a similar institution would give cash-strapped countries more than one “lender of last resort” to turn to.
Until now the IMF was the only choice for countries in need of financial assistance, which meant they had no choice but to accept the economic and fiscal reforms it demanded.
But if the IMF has competition, countries in need of help will most likely shop around for the institution offering the easiest terms, which means necessary reforms may be delayed.
China may also create an alternative to IMF
In its current form, at least, the AIIB has a different role from the IMF; it is designed to provide development funds, much like the World Bank or Asian Development Bank (ADB). Given that the World Bank and the IMF were created as a pair under the postwar Bretton-Woods regime, US officials may be concerned that China will come up with a sister institution to the AIIB that has an intended role similar to that of the IMF.
If the IMF’s rival is heavily under China’s influence, countries receiving its support will rebuild their economies under what is effectively Chinese guidance, increasing the likelihood they will fall directly or indirectly under that country’s influence.
Lending of development funds to the countries of Asia by a Chinese-led AIIB will also bring about an increase in the nation’s influence throughout the region. That would be of concern to the US, which has succeeded in extending its own influence in the area via the World Bank and IMF.
IMF and the US fundamentally misread Asian currency crisis
There is something to be said for the US argument that there should be only one refuge for economically troubled nations which takes responsibility for ensuring they carry out necessary reforms. However, that view is based on the underlying assumption that the US and the IMF will correctly diagnose the problems it encounters.
In reality, the US and the IMF completely misread the Asian currency crisis that began in 1997, and their errors caused tremendous damage to crisis-struck countries in the region.
The decision of many Asian countries to participate in the AIIB is probably due in part to a distrust of the US born during the currency crisis.
In that sense, I think the AIIB may come to play an important role in keeping America honest.
It is difficult to say at this point whether the AIIB will have a negative or a positive impact on the global economy. At the very least, however, I think the emergence of an international institution with a viewpoint different from that of western creditors will help enhance the quality of debate over emerging economies’ debt problems.
»
- 19443 reads
- Printer-friendly version
- Send to friend
- advertisements -
They are all bankrupt.
"Honest"?
Good luck!
Another political win for Obozo. Booyah!
Political win? When it is Obaozo vs Romney, Hitlery vs Trump, who gives a shit.
As I hear about all of the wonderful long term planning of the Chinese that is going to allow them to sit at the head of the table in the upcoming monetary shift I can’t help but see the huge mistakes they are making such as with their latest bubble in equities and have major doubts. The fact is they are a centrally planned government, and while they can make moves that appear to be in the right direction a as with this bank, so too did the Soviets, and central planning historically fails. More thoughts on China’s vulnerabilities.
it will take a lot more than a bank to keep America honest.
"shows how the institution {the IMF} sometimes fails to deliver"...
WTF?? The IMF has never failed to "deliver"! To the big multinational corporations and U.S. vested interests, that is. Forced privatizations that allowed the big corporates to scoop up valuable public assets for a song, cutting social spending to the bone, making the poorest even poorer - that has ALWAYS been the true intention of the IMF and on this count, he has an almost perfect 10/10. Greece will be no exception.
All this blabbering by Koo is a totally useless exercise in moronic masturbation when he fails right from the start to even properly recognize the IMF for what it is and was designed for. Oh well...
@ Newsboy
You made that sound like the US/Western controlled institutions were honest.
Didn't mean to.
Will they be making "margin" loans?
Nomura supports arresting & caning short sellers?
/////
Ok, the caning is an exaggeration but not by much ;-)
They, at times, execute financial criminals over in China.
Caning will be the least of the convicted's worries.
And as for trusting Chinese Banksters?
Yeah. Right. They are just as criminal as our Banksters. Over in China the Politically connected Financial Criminals are too big to jail and too big to execute.
Again the wealth disparity leads to an elitist class which are not subjected to the penalties of the law, and the servant class ,where the laws are onerously enforcdd and violators punished. It is not that much different than the USSA...except we do not execute financial criminals...yet.
How many negative SDR dismal points do we have to purchase in order to turn a profit?
http://www.imf.org/external/np/fin/data/rms_five.aspx
another group of kleptocrats, they won't be keeping anyone honest
I wonder if, a year from now, China's banks will be as hard to find as the reactor cores at Fukushima.
Sure seems that way
The "Asian Pivot" goes all the way back to Nixon for those wondering.
Long before anyone else was investing in China the USA was banging down the door.
Folks talking about this now seem pretty late to the party.
Should still be interesting to see if the USA does have a mid cycle correction finally though...
The special interest groups have failed in Henry Kissenger's petrodollar theory.
Keeping America honest is a fool's errand.
In reality, they are ALL THE SAME. IMF, FED, BIS, BRICS...the same slimy motherfuckers populate their ranks, all they ever do is change their suits and rearrange the alphabet. Trust me: this whole shitshow going on right now is to make the BRICS look like saints compared to the western institutions, so that the world accepts them as 'saviours in a time of darkness' which is coming to the west, oh, right about...NOW. Whether the BRICS, FED, IMF or whatever, it will STILL be a monetary system where THEY have more than YOU - only this NEXT time, after all the fun and games wear off, you will wake up and realize that they now OWN YOU ENTIRELY.
So now the UK is in bed with China and the Saudis are doing deals with Russia. Yeah... the fat lady is singin.
And the Saudi's and Israel have united based on our Banana dictator president of United States.
They can no longer fly planes into a building, new approach is needed.
Let America embrace the AIIB..it provides competition..isn't that what capitalist America endorses...
In addition to catering to emerging economies can they also cater for submerging economies? I think that may well be the area with the most growth potential.
Fuck the SDR
China can't compete even in dishonesty; they need a bank of their own ... see told you .. it is not possible to learn from other's mistakes.
The simple fact is that the United States will never be #1 alone again. It's not because they're incapable, but the PTB want it that way in order to diversify control over a larger swath of the globe.
If you're an Oligarch, you want your reach to be as far as possible in order to expand your influence, over social and political options.
This time in history is earily similar to the early 20th century.
History repeats, and lots of people die.
The PBoC is probably shorting paper gold as well. They're allowing the yuan to appreciate vs the $usd so shorting xau/usd is a proxy xau/cny short, and China is also very concerned with inflation.
The rub with this is that if you're engineering a crisis where you acknowledge lots of people are going to die, it's way more likely that overpopulated East Asia is going to suffer that crisis. There's no reason to depopulate an already underpopulated North America, aside from some arbitrary "oh well it's North America's turn in front of the fan" sort of reasoning. There might be reason to depopulate Europe if you were a PTB just so you have a lovely place to live, but the US isn't going to be the big bad of that narrative. And if war breaks out, well, North America's got much easier access to Europe than Asia does.
China led bank. Cool. I bet they have 7% growth as far as the eye can see.
Funny how they can make their markets grow and their banks gain, yet their penis sizes never deviate an inch...
(I'm talking bankers. Get your racist mind out of the gutter!)
And you know all about their penises because ?...
They've always got their hands in other people's pockets...
the only thing the fed has to do to pull the rug out of the aaib is to raise rates significantly.
this will cut the rug out from under ALL the emerging markets and create a serious crisis and cash will flood back to the u.s.
talk about cutting your nose to spite your face.
that is crisis capitalism under a global debt cartel. the chinese aiib may have life, but it will need to be reborn after the first real chinese stock market crash.
Slanty-eyed RED COMMIE fuckers ought to learn how to drive (and how to use the toilet instead of using the side of the road).
Did your parents have any children who aren't retarded?
Right somebody is going to keep pedophile banksters honest without putting them into prison for life. Give me an F'n break.
Where is TruthIsSunshine to tell us ZH loves China? Just wondering if TIS read the last few articles showing China is in a recession.
Remember, stocks is a leading indicator!
:)
IMF & World Bank are supported by cabal banksters.
Their modus operandi is to make most of the world in deep debt by financing unproductive projects.
By making nations deeply in huge debts , they aim to control their policies.
So that their natural resources are controlled by western countries who will make money.
But the indebted nations will remain in debt forever.
-----
JEWHAD - Debt is their nuclear weapon
http://www.gnosticliberationfront.com/Sumerian_Swindle_v1.pdf
Word has it a new casino is opening across town advertising the loosest slots and the coldest drinks.
Buffet opens at 10.
These fuckers think it is all technical, just put another bank here or there, or manipulate this or that.
But it is about TRUST, fools.
"The lender’s real significance lies in the degree to which it represents a shift away from the multilateral institutions that have dominated the post-war world economic order." Funy funny.....
Meet the new bo$$
Same as the old bo$$
https://www.youtube.com/watch?v=tLlDVpPhROU
CHINA and HONESTY
CHINA AND HONESTY
That is like roundpeg and square peg
Infinite and absolute
repulsive and attractive
north and south
Bitchen and disgustin
Same crooks and the same fiat scam and debt slavery.
who gives a fuck, its just an international row between the elites about who gets to control the planet... fuck'em all.