Go Lean Commentary
If you had a benefactor – think scholarship for your college education – and your benefactor files for bankruptcy, should you be concerned, weary and/or pessimistic that future monies will continue to flow?
That would be stupid!
It is only logical that you would be expected to find another benefactor. (This is not just academic – in 1991 when the Soviet Union dissolved, the Caribbean country of Cuba was left out in the cold).
Europe, the continent, the countries and the people have been the Caribbean’s benefactor for many years in our history. It is time now to reckon with that! We must review, reflect and reconcile this past, present and our future interactions, especially when it comes to economic crises, escalations and bailouts.
When we refer to reconciling Europe’s past, we refer to the Imperial Conquests, Slave Trade, Slavery, Colonialism and Post-Colonialism.
When we refer to Europe’s present, we refer to all the recent developments in modern day Europe, as in the events of the recent economic crises; think Sovereign Debt Crisis with Greece and others.
When we refer to Europe’s future, we are referring to the tenuous status in their integration movements – think European Union (EU), IMF, and the resultant unrest on the European mainland.
This commentary opens a 5-part series on European Reckoning. This entry is 1 of 5 in this series from the movement behind the book Go Lean … Caribbean in consideration of root history of Caribbean colonialism and how modern reconciliation developments are exacerbating our communities. We are all mostly independent and sovereign countries in the Caribbean, so it is expected that we would now be mature and responsible; we must now be protégés not parasites of the European world. The other commentaries in the series are cataloged as follows:
- European Reckoning: IMF Apologies
- European Reckoning: China seeks to de-Americanize the world’s economy
- European Reckoning: Settlers -vs- Immigrants
- European Reckoning: Christianity’s Indictment
- European Reckoning: Black “Greco-Roman” Wrestler victimized for his hair
In this series, reference is made to the Great Powers of the Western Hemisphere, sometimes called the Western Alliance. This refers to the White/Christian European nations and North America (US & Canada). In fact, sometimes the Western Alliance is cross-labeled with the North Atlantic Treaty Organization (NATO) also called the North Atlantic Alliance; this is an intergovernmental military alliance between 29 North American and European countries.
While none of the 29 NATO members include any Caribbean independent states, 16 Caribbean Overseas Territories are thusly aligned as dependents of the American (2), British (6), Dutch (6) and French (4) imperial powers. Plus with the Caribbean Basin Security Pact, the full Caribbean – except Cuba – is aligned with NATO members: United States and Canada.
The reference to Europe in this series of commentaries is to “White Westerners”. This special sub-group had wielded absolute power on the planet. It is time now to look back at that history and “call a spade a spade”!
In this first submission of this series, the overt favoritism of economic bailouts toward White Westerners was exposed and commiserated. This reflects the need for reconciliation. For the Caribbean, considering our European history, presence and future, we need to participate in this reconciliation. See this article here addressing the flawed favoritism of the International Monetary Fund (IMF), (the intergovernmental financial institution composed of 189 countries working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world”). It appears that the ‘International’ in the brand IMF has not been as global as they claimed. The full article is presented here:
Title: IMF admits disastrous love affair with the euro and apologises for the immolation of Greece
By: Ambrose Evans-Pritchard
The International Monetary Fund’s top staff misled their own board, made a series of calamitous misjudgments in Greece, became euphoric cheerleaders for the euro project, ignored warning signs of impending crisis, and collectively failed to grasp an elemental concept of currency theory.
This is the lacerating verdict of the IMF’s top watchdog on the fund’s tangled political role in the eurozone debt crisis, the most damaging episode in the history of the Bretton Woods institutions.
It describes a “culture of complacency”, prone to “superficial and mechanistic” analysis, and traces a shocking breakdown in the governance of the IMF, leaving it unclear who is ultimately in charge of this extremely powerful organisation.
The report by the IMF’s Independent Evaluation Office (IEO) goes above the head of the managing director, Christine Lagarde. It answers solely to the board of executive directors, and those from Asia and Latin America are clearly incensed at the way European Union insiders used the fund to rescue their own rich currency union and banking system.
The three main bailouts for Greece, Portugal and Ireland were unprecedented in scale and character. The trio were each allowed to borrow over 2,000pc of their allocated quota – more than three times the normal limit – and accounted for 80pc of all lending by the fund between 2011 and 2014.
In an astonishing admission, the report said its own investigators were unable to obtain key records or penetrate the activities of secretive “ad-hoc task forces”. Mrs Lagarde herself is not accused of obstruction.
“Many documents were prepared outside the regular established channels; written documentation on some sensitive matters could not be located. The IEO in some instances has not been able to determine who made certain decisions or what information was available, nor has it been able to assess the relative roles of management and staff,” it said.
The report said the whole approach to the eurozone was characterised by “groupthink” and intellectual capture. They had no fall-back plans on how to tackle a systemic crisis in the eurozone – or how to deal with the politics of a multinational currency union – because they had ruled out any possibility that it could happen.
“Before the launch of the euro, the IMF’s public statements tended to emphasise the advantages of the common currency,” it said. Some staff members warned that the design of the euro was fundamentally flawed but they were overruled.
“After a heated internal debate, the view supportive of what was perceived to be Europe’s political project ultimately prevailed,” it said.
This pro-EMU bias continued to corrupt their thinking for years. “The IMF remained upbeat about the soundness of the European banking system and the quality of banking supervision in euro-area countries until after the start of the global financial crisis in mid-2007. This lapse was largely due to the IMF’s readiness to take the reassurances of national and euro area authorities at face value,” it said.
The IMF persistently played down the risks posed by ballooning current account deficits and the flood of capital pouring into the eurozone periphery, and neglected the danger of a “sudden stop” in capital flows.
“The possibility of a balance of payments crisis in a monetary union was thought to be all but non-existent,” it said. As late as mid-2007, the IMF still thought that “in view of Greece’s EMU membership, the availability of external financing is not a concern”.
At root was a failure to grasp the elemental point that currency unions with no treasury or political union to back them up are inherently vulnerable to debt crises. States facing a shock no longer have sovereign tools to defend themselves. Devaluation risk is switched into bankruptcy risk.
“In a monetary union, the basics of debt dynamics change as countries forgo monetary policy and exchange rate adjustment tools,” said the report. This would be amplified by a “vicious feedback between banks and sovereigns”, each taking the other down. That the IMF failed to anticipate any of this was a serious scientific and professional failure.
In Greece, the IMF violated its own cardinal rule by signing off on a bailout in 2010 even though it could offer no assurance that the package would bring the country’s debts under control or clear the way for recovery, and many suspected from the start that it was doomed.
The organisation got around this by slipping through a radical change in IMF rescue policy, allowing an exemption (since abolished) if there was a risk of systemic contagion. “The board was not consulted or informed,” it said. The directors discovered the bombshell “tucked into the text” of the Greek package, but by then it was a fait accompli.
The IMF was in an invidious position when it was first drawn into the Greek crisis. The Lehman crisis was still fresh. “There were concerns that such a credit event could spread to other members of the euro area, and more widely to a fragile global economy,” said the report.
The eurozone had no firewall against contagion, and its banks were tottering. The European Central Bank had not yet stepped up to the plate as lender of last resort. It was deemed too dangerous to push for a debt restructuring in Greece.
While the fund’s actions were understandable in the white heat of the crisis, the harsh truth is that the bailout sacrificed Greece in a “holding action” to save the euro and north European banks. Greece endured the traditional IMF shock of austerity, without the offsetting IMF cure of debt relief and devaluation to restore viability.
A sub-report on the Greek saga said the country was forced to go through a staggering squeeze, equal to 11pc of GDP over the first three years. This set off a self-feeding downward spiral. The worse it became, the more Greece was forced to cut – what ex-finance minister Yanis Varoufakis called “fiscal water-boarding”.
“The automatic stabilisers were not allowed to operate, thus aggravating the pro-cyclicality of the fiscal policy, which exacerbated the contraction,” said the report.
The attempt to force through an “internal devaluation” of 20pc to 30pc by means of deflationary wage cuts was self-defeating since it necessarily shrank the economic base and sent the debt trajectory spiralling upwards. “A fundamental problem was the inconsistency between attempting to regain price competitiveness and simultaneously trying to reduce the debt to nominal GDP ratio,” it said.
The IMF thought the fiscal multiplier was 0.5 when it may in reality have been five times as high, given the fragility of the Greek system. The result is that nominal GDP ended 25pc lower than the IMF’s projections, and unemployment soared to 25pc instead of 15pc as expected. “The magnitude of Greece’s growth forecast errors looks extraordinary,” it said.
The strategy relied on forlorn hopes that the “confidence fairy” would lift Greece out of this policy-induced nose-dive. “Highly optimistic” plans to raise $50bn from privatisation sales came to little. Some assets did not even have clear legal ownership. The chronic “lack of realism” lasted until late 2011. By then the damage was done.
The injustice is that the cost of the bailouts was switched to ordinary Greek citizens – the least able to support the burden – and it was never acknowledged that the true motive of EU-IMF Troika policy was to protect monetary union. Indeed, the Greeks were repeatedly blamed for failures that stemmed from the policy itself. This unfairness – the root of so much bitterness in Greece – is finally recognised in the report.
“If preventing international contagion was an essential concern, the cost of its prevention should have been borne – at least in part – by the international community as the prime beneficiary,” it said.
Better late than never.
Source: Posted July, 29 2016 ; retrieved January 10, 2019 from: https://www.telegraph.co.uk/business/2016/07/28/imf-admits-disastrous-love-affair-with-euro-apologises-for-the-i/
The foregoing article highlights: “Asian and Latin American stakeholders are clearly incensed at the way European Union insiders used the [IMF] fund to rescue their own rich currency union and banking system”. Maybe just maybe, Europeans are not as egalitarian and pluralistic as they claim. Maybe just maybe, when push comes to shove they first look after their own before supporting others, even though they are contractually obligated to do so.
This is Tribalism 101…
Tribalism is the state of being organized by, or advocating for, tribes or tribal lifestyles. Human evolution has primarily occurred in small groups, as opposed to mass societies, and humans naturally maintain a social network.
In popular culture, tribalism may also refer to a way of thinking or behaving in which people are loyal to their social group above all else, or, derogatorily, a type of discrimination or animosity based upon group differences.
This ‘Tribalism’ is the reckoning that Europe is doing right now regarding the IMF. They are reconciling their past, present and future and recognizing that they now have to build trust, anew – see the Appendix VIDEO below.
This is also the reckoning that we, in the Caribbean, must do. How should we deal with fiscal/monetary escalations – rescues of our currency and banking systems? The conclusion from this commentary is that we need to do the heavy-lifting ourselves and facilitate our own solutions for economic and fiscal management. The proposed solution: the Caribbean Central Bank (CCB) as a formal “cooperative” among the region’s Central Banks. The CCB will be the sole controlling agent of the monetary policies of a regional currency union: Caribbean Dollar. When there is economic dysfunction and a need for “receivership”. That role would be assumed by the CCB, not the IMF.
This theme of technocratic monetary stewardship aligns with previous Go Lean commentaries; see a sample list here:
|http://www.goleancaribbean.com/blog/?p=16210||In Defense of Trade – Currency Assassins: Real Threat|
|http://www.goleancaribbean.com/blog/?p=15796||Lessons Learned from 2008: Righting The Wrong|
|http://www.goleancaribbean.com/blog/?p=15787||Lessons Learned from 2008: Too Big to Fail –vs- Too Small to Thrive|
|http://www.goleancaribbean.com/blog/?p=14248||Leading with Money Matters – Almighty Dollar|
|http://www.goleancaribbean.com/blog/?p=13744||Failure to Launch – Economics: The Quest for a ‘Single Currency’|
|http://www.goleancaribbean.com/blog/?p=6563||Lessons from Iceland – Model of Banking Recovery|
|http://www.goleancaribbean.com/blog/?p=3858||European Central Bank unveils 1 trillion Euro stimulus program|
|http://www.goleancaribbean.com/blog/?p=3814||Lesson Learned from the Swiss unpegging their currency: Franc|
|http://www.goleancaribbean.com/blog/?p=3582||For Canadian Banks: Caribbean is a ‘Bad Bet’|
|http://www.goleancaribbean.com/blog/?p=833||One currency, divergent economies|
|http://www.goleancaribbean.com/blog/?p=467||Barbados Central Bank records $3.7m loss in 2013|
Now is the time for the Caribbean region to lean-in for this roadmap described here-in the book Go Lean … Caribbean. The benefits of this roadmap are too alluring to ignore: emergence of an $800 Billion economy, with solid technocratic management of a regional currency union. Finally, we will have the opportunity to stand-up as a protégé to our North American and European counterparts. We will not be looking to them to bail-us-out; we will forge our own growth and clean-up and own mess. We will be mature … finally.
Yes, we can … make the Caribbean, our homeland, a better place to live, work and play. 🙂
About the Book
The book Go Lean…Caribbean serves as a roadmap for the introduction and implementation of the technocratic Caribbean Union Trade Federation (CU) and the aligning Caribbean Central Bank (CCB), for the elevation of Caribbean society – for all member-states. This CU/Go Lean roadmap has these 3 prime directives:
- Optimization of the economic engines in order to grow the regional economy to $800 Billion and create 2.2 million new jobs.
- Establishment of a security apparatus to ensure public safety and protect the resultant economic engines.
- Improve Caribbean governance to support these engines, including a separation-of-powers between the member-states and CU federal agencies.
The Go Lean book provides 370-pages of turn-by-turn instructions on “how” to adopt new community ethos, plus the strategies, tactics, implementations and advocacies to execute so as to reboot, reform and transform the societal engines of Caribbean society.
Download the free e-Book of Go Lean … Caribbean – now!
Who We Are
The movement behind the Go Lean book – a non-partisan, apolitical, religiously-neutral Community Development Foundation chartered for the purpose of empowering and re-booting economic engines – stresses that reforming and transforming the Caribbean societal engines must be a regional pursuit. This was an early motivation for the roadmap, as pronounced in the opening Declaration of Interdependence (Pages 12 – 13):
xi. Whereas all men are entitled to the benefits of good governance in a free society, “new guards” must be enacted to dissuade the emergence of incompetence, corruption, nepotism and cronyism at the peril of the people’s best interest. The Federation must guarantee the executions of a social contract between government and the governed.
xii. Whereas the legacy in recent times in individual states may be that of ineffectual governance with no redress to higher authority, the accedence of this Federation will ensure accountability and escalation … for good governance, justice assurances, due process and the rule of law. As such, any threats of a “failed state” status for any member state must enact emergency measures on behalf of the Federation to protect the … member states and the Federation as a whole.
xxiii. Whereas many countries in our region are dependent Overseas Territory of imperial powers, the systems of governance can be instituted on a regional and local basis, rather than requiring oversight or accountability from distant masters far removed from their subjects of administration. The Federation must facilitate success in autonomous rule …
xxiv. Whereas a free market economy can be induced and spurred for continuous progress, the Federation must install the controls to better manage aspects of the economy: jobs, inflation, savings rate, investments and other economic principles. Thereby attracting direct foreign investment because of the stability and vibrancy of our economy.
xxv. Whereas the legacy of international democracies had been imperiled due to a global financial crisis, the structure of the Federation must allow for financial stability and assurance of the Federation’s institutions. To mandate the economic vibrancy of the region, monetary and fiscal controls and policies must be incorporated as proactive and reactive measures. These measures must address threats against the financial integrity of the Federation and member-states.
Sign the petition to lean-in for this roadmap for the Caribbean Union Trade Federation.
Appendix VIDEO – IMF’s Christine Lagarde: Truth and transparency are key to rebuilding trust – https://youtu.be/0Iia6FUzVc4
CNBC International TV
Published on Apr 22, 2018 – The International Monetary Fund (IMF) welcomed calls from the U.S. that it should push for more transparency in global trade and lending, the Fund’s boss said Sunday.
IMF Managing Director Christine Lagarde said she’s “delighted” U.S. Treasury Secretary Mnuchin wants the Fund to increase transparency on trade imbalances and debt sustainability in countries like China, an effort she said is already underway. “It’s clearly a project that we have been working on, that we will continue to work on, and I’m delighted that he’s supporting us,” Lagarde said in an interview with CNBC’s Elizabeth Schulze at the IMF Spring Meetings  in Washington.
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