Having noted previously IMF Managing Director Christine Lagarde's comments that for the IMF to "thrive", the world has to "goes downhill," today's warning this morning that the global economy "may not have the tools to handle another shock," seems to come at an inopportune time. Indeed, as Heat Street notes,it seems nothing can stop this woman...
Does being the Managing Director of the International Monetary Fund mean never having to say sorry? As Christine Lagarde blunders on from one mishap to another with apparent insouciance, it would appear so.
On December 12 Lagarde is scheduled to go on trial before French court in a fraud case. She is accused of providing preferential treatment to businessman Bernard Tapie when she was the French finance minister in 2007. She allegedly signed off a payment to Tapie of €403 million in 2008 in a case against the French public bank Crédit Lyonnais after allowing an out-of-court arbitration in the dispute – although she denies any wrongdoing.
Lagarde’s predecessor as head of the IMF, Dominique Strauss-Kahn, resigned in 2011 after he was accused of sexually assaulting a hotel employee – he was also embroiled in an array of other sexual and financial scandals.
Whatever the truth in all this, from a British perspective there is another concern.
During the EU referendum we were sternly told to defer to this international outfit run successively by dubious French politicians. (By way of balance I should point out that Strauss-Kahn’s predecessor as IMF chief was Spanish politician Rodrigo Rato – last year his was arrested for alleged fraud, embezzlement and money laundering).
Those who showed reluctance to do as we were told by the IMF were scoffed at by the Remain campaign for ignoring the “experts”. The point was made that if the IMF stated a Brexit vote would be followed by an immediate recession, this was not opinion but an objective statement of the reality that faced is. Refusing to concede this was to engage in “post-truth politics”.
Of course, the cussed British refused to fall into line. We were not bedazzled by the spreadsheets and graphs. We had seen the pictures of George Osborne and Lagarde going “mwha mwha” at the summit meetings which represented their natural habitat. We could smell a set up involving Lagarde, who by the way is paid $467,940 per year plus $83,760 for expenses – all tax-free.
Anyway, just over a hundred days on we can see who the real proponents of “post truth politics” were.
IMF left shamefaced after peak pessimism over Brexit vote https://t.co/skSkRBa5sr— Old Holborn ? (@Holbornlolz) October 5, 2016
Before the referendum Lagarde said: “We have looked at all the scenarios. We have done our homework and we haven’t found anything positive to say about a Brexit vote.” She said that a vote to Leave would trigger a stock market crash and a collapse in house prices. The FTSE 250 has just closed at a record high. Average house prices have continued to nudge ever higher.
Just days before the Referendum the IMF declared that voting for Brexit would wipe up to 5.5% off GDP.
But now the IMF predicts that rather than plunging into a recession, the UK will be the fastest growing major economy this year. At the same time it is sticking to its gloomier long term forecasts.
As Larry Elliott, Economics Editor of The Guardian, puts it:
“So what do you do if your forecasts turn out to be a little wide of the mark? Either you put your hands up and admit you were wrong. Or you brazen it out. You say that it is too early to say. You say that eventually you will come right.
“No prizes for guessing which option the IMF has taken. Its half-yearly world economic outlook report says the UK will do fine in 2016 but is going to find the going a lot tougher in 2017.”
It is rather doubtful what role the IMF has in the 21st century. When it was set up in 1944 its job was to manage fixed exchange rates – but we have had floating exchange rates since the 1970s.
In the modern world private capital markets are able to provide loans to Government when they consider it prudent to do so. Why do we need to politicise the process with an international bureaucracy?
The IMF has lost its way. It allows Governments and other institutions bail-outs which permit them to escape economic reality for a while – and often makes them take bad advice as part of the bargain.
Could the IMF take a new direction and be a true force for stability and economic rigour? Perhaps. But at the very least it needs to be put under new management.
After her dishonest and arrogant interference in the British EU referendum, Christine Lagarde has no credibility. She should resign.