IMF Accused of Double Standard on China's Currency Moves
NO ADVERTISING, GOVERNMENT OR CORPORATE FUNDING
DONATE TODAY

IMF Accused of Double Standard on China's Currency Moves


Ilene Grabel: An IMF internal report says it's been unfairly critiquing China and other Asian countries currency manipulations while ignoring similar practices by Western countries -   February 25, 2013
Members don't see ads. If you are a member, and you're seeing this appeal, click here

Audio

Share to Facebook Share to Twitter



I support The Real News because it is one of the very few outlets that informs without the superficial and pretentious claims of objectivity seen in MSM and even so-called public news sources. - Tony
Log in and tell us why you support TRNN

Transcript

IMF Accused of Double Standard on China's Currency MovesPAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore.

In the presidential election just passed, there was a lot of discussion about China, particularly accusations that China was manipulating its currency to keep its currency low and favor its exports to the detriment of the U.S. economy and its exports. Well, a new IMF report, an internal report on the IMF, says this position—and particularly actually targets its own organization, the IMF—is a little hypocritical—my word, not theirs, but that's the substance of it—that there's—the IMF tends to critique countries like China when they try to perhaps manipulate their currency, but they don't say much about it when it happens in the West, for example the United States with quantitative easing, which was all about manipulating its currency.

Well, now joining us to talk about the IMF and this report is Professor Ilene Grabel. She teaches international finance at the Josef Korbel School of International Studies at the University of Denver. She also writes for TripleCrisis blog. And her book with Ha-Joon Chang, Reclaiming Development, is set to be reissued by Zed Press in late 2013.

Thanks for joining us again, Ilene.

ILENE GRABEL, CODIRECTOR, GLOBAL FINANCE, TRADE, AND ECONOMIC INTEGRATION, UNIV. OF DENVER: Thank you. Pleasure.

JAY: So tell us a little bit about this kind of seems like dual standard and what this report said.

GRABEL: Sure. The IMF's independent evaluation office, which is an internal auditing body at the IMF, has been examining the quality and the tone of the IMF's advice to developing countries on the matter of excess reserve accumulation in the years leading up to the financial crisis.

And as I'm sure your listeners know, many countries keep large holdings of reserves—they're called official reserves. They're analogous in some sense to a country's own bank account. And in the years after the East Asian financial crisis of 1997, many developing countries really started to hoard official reserves. They tried to build up a lot of official reserves to protect their economies so that they'd never have to deal with the IMF again. And so we know that countries like China, Brazil, South Korea are [incompr.] countries that built up a lot of official reserves in the decade or decade and a half that followed the East Asian financial crisis.

In that time, the IMF has been looking very closely at that matter and has been arguing that developing countries build up [incompr.] official reserves; that creates global financial instability. And so the IMF has issued many reports over the last decade and a half essentially indicting developing countries for having too big of a bank account in the form of these large official reserve holdings. And what happened was in late December—.

JAY: Let me ask a question here.

GRABEL: Oh. Sure.

JAY: So just to be clear, so far, part of the motivation to have these big official reserves is they don't have to borrow money from the IMF. Is that right?

GRABEL: That's right.

JAY: And then the accusation of the IMF or the critique of the IMF is that countries use this large reserve to manipulate their currency, meaning that if they want their currency to go down, they can use these reserves to go buy another currency, another country's currency, and in other words pressure it up, and that way maneuver their currency down.

GRABEL: That's right. So governments use these holdings of official reserves in order to keep their exchange rate competitive. And so they're trying to keep what the IMF thinks of as an artificially depreciated exchange rate, so that their exports are cheap to consumers around the world and they can export a lot. And that certainly has been one motivation behind the accumulation of these official reserves on the part of developing countries.

The other motivation is that countries want to make sure that they have the resources that's really necessary to protect their currencies and their economies from speculative attack if that occurs, because they don't ever want to have to go to the IMF again to get a bailout, because those were so damaging and so painful during the East Asian financial crisis.

JAY: Right. So just to be concrete again, for example, China could buy a lot of U.S. dollars, and then their currency goes down a little bit in relationship to the amount of U.S. dollars they purchased, and that makes their exports more affordable. Now, isn't this exactly, more or less, what the U.S. did with quantitative easing by forcing their own rates down? And if that's true, then why—their currency rates down? And if that's true, then has the IMF critiqued the United States?

GRABEL: Two things. It's an interesting point that you make, Paul.

First, certainly, the U.S.'s three rounds of quantitative easing have had the effect of keeping the dollar at a somewhat depreciated level. And so, certainly the U.S. has been pursuing quantitative easing as a way to keep U.S. rates low, and also with the hopes that that would keep the dollar at a somewhat lower level than it would otherwise be.

The U.S. has not been criticized by the IMF for doing so. The IMF has acknowledged that there are, in the IMF's language, spillover effects from quantitative easing for the U.S., but it certainly hasn't criticized the U.S. for its contributions and the spillover effects from quantitative easing on other countries in the world economy.

JAY: And is this a bit of a pattern, this double standard?

GRABEL: It is, it is. In several IMF reports over the last few years, IMF staff have really praised monetary authorities in Japan, and also in Switzerland: they have also engaged in currency market interventions that have been designed to keep their own currencies—the yen and the Swiss franc—from appreciating too much, so as to promote exports from Japan and exports from Switzerland. The IMF supported those kind of interventions, at least in public statements about them, but at the same time has been openly critical of countries like China and other countries that the IMF claims are manipulating their currencies unfairly.

JAY: And it's countries like China. But is it also specifically targeting China? I mean, is China really the issue here?

GRABEL: It appears to be the case that a lot of the IMF's criticism of excess reserve accumulation—that's the language that's used in this report—really is a kind of trojan horse that's designed to advance the interests of powerful countries like the U.S. who have long been critical of China's currency management regime. And so, yes, I'd say that one could read into this recent report that the IEO understands that there is a kind of trojan horse aspect to the IMF's obsessive focus on what China is doing with its currency.

JAY: Alright. Thanks very much for joining us, Ilene.

GRABEL: Thank you.

JAY: And thank you for joining us on The Real News Network.

End

DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.


Comments

Our automatic spam filter blocks comments with multiple links and multiple users using the same IP address. Please make thoughtful comments with minimal links using only one user name. If you think your comment has been mistakenly removed please email us at contact@therealnews.com

Comments


Latest Stories


As Trial Approaches, What Has Changed Since Freddie Gray's Killing?
Who "Recovered" in Post-Katrina New Orleans? (1/2)
Members of Syriza's Central Committee Defecting to Popular Unity
Bullock Trial Begins Friday
Why is Sanders Silent on U.S. Foreign Policy?
Reaganism and Thatcherism were Intellectually Dishonest - Heiner Flassbeck on Reality Asserts Itself (1/5)
First Canadian Officer Convicted for Mass Arrests at 2010 G-20 Toronto Summit
What Would Happen to the Eurozone if Greece Leaves?
Katrina Victims Were Forced into Exile
National Day of Action Pushes Democratic Senators to Support Iran Deal
International Law and "The Responsibility to Protect" - Vijay Prashad on Reality Asserts Itself (4/4)
Days of Revolt: State Violence and Counter Violence
The Sky Is Not Falling? China's Stock Market Impact
Why is Saudi Arabia Now Supporting the Iran Deal?
The PLO's "Game of Musical Chairs"
GRITtv with Laura Flanders: New Orleans and the Economics of Recovery
Chelsea Manning, the Nuremberg Charter and Refusing to Collaborate with War Crimes - Vijay Prashad on Reality Asserts Itself (3/4)
A Fire In My Soul
Smoke and Mirrors of Corporate Buybacks Behind the Market Crash
Computer Voting and Stealing Democracy
Questioning the Underlying Structures of Property and Power is "Off the Table" - Vijay Prashad on Reality Asserts Itself (2/4)
AIPAC Spending Millions to Defeat Iran Deal, But Efforts Are Falling Flat
Sanders: Great White Hope or Hype?
Moving Towards a Police State - Michael Ratner on Reality Asserts Itself (7/7)
Decades of Relentless Austerity in Canada Could Defeat the Conservatives
Chicago Parents Launch Hunger-Strike for Community Input in School's Future
Athlete Turned Artist & Movement for Black Lives Conference
Marx and Tolstoy Helped Me See the Limits of Liberalism - Vijay Prashad on Reality Asserts Itself (1/4)
Greek Left Platform Creates New Popular Unity Party
Macedonian Police Clash With Refugees at Greek Border

RealNewsNetwork.com, Real News Network, Real News, Real News For Real People, IWT are trademarks and service marks of IWT.TV inc. "The Real News" is the flagship show of IWT and Real News Network.

All original content on this site is copyright of The Real News Network. Click here for more

Problems with this site? Please let us know

Linux VPS Hosting by Star Dot Hosting