I was not sure if I was going to write this article. I mean, why become a target of such a powerful group with such a critical article. However, after watching such negative impact from large pools of money deployed for self-determination purposes and what appears to be abuse of powers and inherent resulting dangers, I am compelled to do so.
When pure at heart and cause, the deployment of large pools of capital to assist with social and economic stability can bring prosperity and safety acting as a natural buffer to economic downswings. But when wielding such power, it’s easy to cross the virtuous and ethical lines and justify poor decisions and policies for insular and egotistical pursuits.
The IMF believes they have the most accurate economic and financial recipes, especially as it applies to Greece and their best policies moving forward. But as the old adage goes – Economists are like a broken clock, they are correct twice a day. The IMF firmly believes they know better than others and not willing to consider other collective reasoning. Competitive reasoning has taken over and they appear determined to be proven correct regardless of the costs. This is how a good natured cause succumbs to negative human impulses such as greed, jealousy, hostility, self-gratification and strife.
The IMF has dug themselves into a corner insisting conditions in Greece will remain dire and their economic recovering prescriptions are the only viable solutions. Worse, as they publicly spar with the other Greek creditors, the patient gets sicker. Eventually these public spats and comments lead to such a lack of confidence their forecasts become self-fulfilling as credit contracts and economic malaise rolls around again.
Never have these detrimental policies and statements of the IMF been more evident of those last month. The IMF made comments that they were going to insist on another round of Greek bank recapitalization, going against the collective thoughts of other Greek creditors. This led to losses of up to 50% of publicly traded Greek bank stocks. Fifty percent in one month? And the IMF’s primary purpose is to ensure the stability of the international monetary system?!? Such destruction of wealth has resulted in nations going to war in the past. Such a run on the banking sector can subtract significantly from GDP. These comments and resulting effects on financial markets impact individuals’ savings and livelihood. Reckless.
What I find most appalling is after spreading fear throughout the banking sector and the economy (they recently changed their position on Greek bank recapitalization), the IMF raised Greek 2018 GDP forecast from 2.4% to 2.6%. Had they not just wreaked havoc on the markets, economy and confidence, would they have raised it to 3%, 4% or even more?
Let’s find out. The IMF should pursue virtuous policies without being compelled to visibly act out publicly when disagreements. They should act with dignity and respect that is commensurate with the power they wield. Otherwise, please disarm the IMF. They need to find their economic cooperative roots and once again become the righteous group chartered instead of a group determined to self-fulfill their own prophecies.
by Michael Carino, Greenwich Endeavors, 10/11/17
Michael Carino is the CEO of Greenwich Endeavors and has been a fund manager and owner for more than 20 years. He has positions in Greek Equities.