Interview with Ms Christine Lagarde, President of the European Central Bank, in "Challenges" magazine, conducted by Mr Pierre-Henri de Menthon and Ms Sabine Syfuss-Arnaud, and published on 8 January 2020.BIS
While Lagarde said MMT is no panacea, she didn’t reject it outright.Interestingly, Christine Lagarde finds that MMT economist's modeling is solid, but she can't quite bring herself to follow though. Still progress, even so.
“While it is tempting, when you look at the sort of mathematical modeling of it, and it seems to stand, there are big caveats about it, such as if the country is in a liquidity trap, such as if there is deflation. Well then, in those circumstances, it could possibly work for a short period of time probably, because interest rates stay low until such time when they start going up. And then it is a bit of a trap.”-- April 11, 2019, IMF press conference
On April 11, 2019, IMF boss Madame Lagarde gave a press conference to open the 2019 Spring Meetings. The Transcript – includes the Madame waxing lyrical about Modern Monetary Theory (MMT). And you might have confused the press conference for a stand-up comedy routine except you would have to be ‘in the know’ to laugh. But the significant aspect of the conference came when a question from Japan focused on MMT. In attempting to put down our work, Madame Lagarde actually admitted that a situation where the government runs big fiscal deficits, has a large-scale and on-going public debt-issuance program, where the central bank buys substantial proportions of that issuance, apparently ‘works’ under conditions that the currency-issuing government can always control. MMT 101. QED. Have a laugh....Bill Mitchell – billy blog
Reuters reported (July 8, 2018) that the awful Madame Lagarde was in France last week lecturing people on how the “joint euro zone budget could be designed with conditions so that it does not become a no-strings transfer of rich countries’ cash to poorer members”. Meanwhile, Jürgen Habermas was lecturing all and sundry on how a “frightened retreat behind national borders cannot be the correct response to … the politically uncontrollable functional imperatives of a global capitalism that is being driven by unregulated financial markets” (Source). Meanwhile, in the UK, the ‘Remainers’ think staying in the corrupt EU is a good idea because the Tories are so incompetent and divided. The state of the world. Misperceptions, misinformation and just plain poor analysis. There are tremendous opportunities for the Left to make political gains. But if they don’t abandon the type of ideas and language that is exemplified by Habermas’s latest entreaty and if they don’t undermine the likes of Lagarde and the Remainers (the pan-Europe contingent) then they will, once again, miss the boat.
In my recent book (with Thomas Fazi) – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017) – a central organising concept is that a progressive future is only possible if progressive citizens do two things:
1. Learn how the monetary system operates and understand the capacity of the currency issuer and the opportunities and constraints that the government has.In other words, educate ourselves so that we have the capacity to refute the neoliberal lies that sustains the current system that has seen progressive outcomes diminish markedly.
2. Take control of the political process and expunge neoliberal factions from progressive political parties (like the Blairites in the British Labour Party, almost all the Australian Labor Party, the Wall-Street embedded elites in the US Democrats, much of the traditional machinery of the European Socialist parties etc).Reclaiming the state is about reclaiming the legislative and regulative capacity of the nation state so that it is directed at advancing well being for the many rather than the few, to steal Jeremy Corbyn’s so excellent catch-cry....For those to whom MMT may be new, it is important to realize that the operational description of monetary systems, being purely descriptive, is value-neutral and doesn't favor any political point of view or value system. From the aspect of operational description, MMT simply sets forth the institutional arrangements of different monetary systems and explains the fiscal space that is avialable based on these arrangements, which are mostly legally established and therefore subject to the policy decisions of legislative bodies. Therefore, they can be changed by the same bodies that created them as well as interpreted by administrators, regulators and courts.
I am gratified that nine countries—the entire G7 plus Austria and the Czech Republic—have already volunteered for this assessment. This is a major vote of confidence in the new framework.IMF gets a new club to beat the emerging world that is now challenging the West. What's the likelihood of the IMF dealing with corruption in the West. This looks to be just another tool in the box of neoliberalism.
MICHAEL ROBERTS: I think the IMF, and that clip shows it, is worried that the huge increase in inequality of income and wealth in many countries, like the US and the UK, over the last 20 or 30 years is reaching such extreme levels that there is serious danger of social and political unrest. The great status quo of globalization and neoliberal policies and international activity in the direction of big business is being threatened by this high inequality. Their economists have now started to switch round and have found evidence to show that it doesn't really make a lot of difference to growth if big corporations and CEOs at the top of big companies who are earning fat salaries are taxed more in order to redistribute income effectively to those people who need it more and can be more productive.TRNN
In fact, their evidence shows that a higher rate of marginal tax has little or no effect on growth, and you could raise it from the levels which, Donald Trump's talking about knocking it down to God knows where, 15% or lower. Well, the marginal rate according to the IMF economists in their latest report could be as high as 60% or 70% and it would make little difference to growth, but it will make a significant difference to improving the redistribution of income....
I would like to consider the possible impact of three innovations—virtual currencies, new models of financial intermediation, and artificial intelligence.
Some of these innovations have already found their way into our wallets, smartphones, and financial systems. But that is only the beginning.
Are you ready to jump on my pod and explore the future together? As one of your fellow Londoners—Mary Poppins—might have said: bring along a pinch of imagination!
1. Virtual currencies
Let us start with virtual currencies. To be clear, this is not about digital payments in existing currencies—through Paypal and other “e-money” providers such as Alipay in China, or M-Pesa in Kenya.
Virtual currencies are in a different category, because they provide their own unit of account and payment systems. These systems allow for peer-to-peer transactions without central clearinghouses, without central banks.
For now, virtual currencies such as Bitcoin pose little or no challenge to the existing order of fiat currencies and central banks. Why? Because they are too volatile, too risky, too energy intensive, and because the underlying technologies are not yet scalable. Many are too opaque for regulators; and some have been hacked.
But many of these are technological challenges that could be addressed over time. Not so long ago, some experts argued that personal computers would never be adopted, and that tablets would only be used as expensive coffee trays. So I think it may not be wise to dismiss virtual currencies.Better value for money?
For instance, think of countries with weak institutions and unstable national currencies. Instead of adopting the currency of another country—such as the U.S. dollar—some of these economies might see a growing use of virtual currencies. Call it dollarization 2.0.
IMF experience shows that there is a tipping point beyond which coordination around a new currency is exponential. In the Seychelles, for example, dollarization jumped from 20 percent in 2006 to 60 percent in 2008.
And yet, why might citizens hold virtual currencies rather than physical dollars, euros, or sterling? Because it may one day be easier and safer than obtaining paper bills, especially in remote regions. And because virtual currencies could actually become more stable.
For instance, they could be issued one-for-one for dollars, or a stable basket of currencies. Issuance could be fully transparent, governed by a credible, pre-defined rule, an algorithm that can be monitored…or even a “smart rule” that might reflect changing macroeconomic circumstances.
So in many ways, virtual currencies might just give existing currencies and monetary policy a run for their money. The best response by central bankers is to continue running effective monetary policy, while being open to fresh ideas and new demands, as economies evolve.
Better payment services?
For example, consider the growing demand for new payment services in countries where the shared, decentralized service economy is taking off.This is an economy rooted in peer-to-peer transactions, in frequent, small-value payments, often across borders.
Four dollars for gardening tips from a lady in New Zealand, three euros for an expert translation of a Japanese poem, and 80 pence for a virtual rendering of historic Fleet Street: these payments can be made with credit cards and other forms of e-money. But the charges are relatively high for small-value transactions, especially across borders.
IMFInstead, citizens may one day prefer virtual currencies, since they potentially offer the same cost and convenience as cash—no settlement risks, no clearing delays, no central registration, no intermediary to check accounts and identities. If privately issued virtual currencies remain risky and unstable, citizens may even call on central banks to provide digital forms of legal tender....
Earlier today, I was listening to an interview with IMF head Christine Lagarde dance around the issue of the unsustainability of Greece’s debt load. And she said something very telling. She said that debt haircuts were not on the table but that maturity extensions and interest rate reductions were, but only AFTER Greece implemented reforms demanded by the Troika."Liberalized free markets and fiscal discipline" is neoliberalism in a nutshell.
What’s important to realize when Lagarde says this is that although she’s talking about Greece, the negotiations with Greece are not really about Greece itself per se. They are about the maintaining or imposing an economic paradigm for every country in the EU that Greece was not meeting – and this is a paradigm that the IMF supports as much as the ECB and the EU. Greece is just being used as an abject lessons for other larger EU economies.
Think of it this way: 25 years ago, the EU signed on to the idea of a single currency in Maastricht. The question marks at the time were Belgium and Italy – Italy because of its constant currency devaluations and Belgium because of high government debt loads. The EU figured out how to deal with Belgium and Italy by creating the stability and growth pact which said that all member states had to keep their deficits under 3% and get their debt under 60%, or at least moving in that direction. Underneath these simple rules lies a whole economic ideology though. And that orthodoxy says long-term growth and a stable currency are best maintained by liberalized free markets and fiscal discipline.…
DESVARIEUX: So Bill, lot of news coming out of the IMF this week. What have you been tracking exactly?The Real News Network
BLACK: Okay, so here’s the 30 second background. IMF stands for International Monetary Fund. It’s an international group that is supposed to assist countries that are suffering an acute financial crisis as opposed to the World Bank which is supposed to help folk more generally in development. And by tradition, the World Bank is run by an American and the IMF is run by a European. In this case by a series of French Politicians, currently Madame Lagarde and it’s the IMF and she have gotten into a series of major embarrassments recently.…
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.…Same story the US with the lead to the 2008 financial crisis. The FBI had warned of massive fraud in the mortgage market in December, 2004.
Several new articles have appeared in the last few weeks in the major media outlets expressing surprise that central banks have had little effect on economic growth despite the rather massive buildup of their ‘balance sheets’ via various types of quantitative easing programs. I have indicated before that I am coming to the view that most of the media, politicians, central bankers and other likely types (IMF and European Commission officials etc) seem to be in a constant state of ‘surprise’ as each day of reality fails to confirm what they said yesterday or last week (allowing for lags :-)). What a group of surprised people we have to effectively run our nations on behalf of capital. Poor souls, constantly be shocked out of their certainties. That is what Groupthink does – creates mobs that deny reality until it smacks them so hard in the face that they can only utter “that was surprising!” And in that context, the latest media trend appears to be something along the lines of ‘well let’s get the turbines moving’ or ‘those helicopters are about to launch’ and when we read that and what follows we learn that the media input into our lives only reinforces the smokescreen of ignorance that we conduct our daily lives within.…Bill Mitchell – billy blog
Putin’s supposed “offer” at the G20 to restructure the $3 billion debt Ukraine owes Russia has been universally misunderstood.
It was not a real offer at all.
Firstly, it was not made to Ukraine - which is the country that owes the money - but to the IMF’s Christine Lagarde.
Secondly the “offer” is conditional on the IMF - or the US or EU - guaranteeing to pay Russia the money if Ukraine defaults.…Again the press gets it wrong.
In his Monday column on MarketWatch David Marsh entitled his opinion piece: “Varoufakis vidicated, while Lagarde emerges as a loser”. Of course the point is not whether I have, or have not, been vindicated. The crucial issue concerns the viability, or otherwise, of the latest Greek deal. From day 1 I have been arguing that Ms Christine Lagarde has an interest in a negotiating impasse (between Greece and its creditors) so that she does not have to confess to the simple fact that the IMF’s staff will rebel if she signs another unsustainable loan agreement with a country whose debt is as unpayable as they come. For David’s analysis, read on…Yanis Varoufakis
Russian President Vladimir Putin and IMF Managing Director Christine Lagarde discussed the outcome of Greece’s referendum over the phone, and the need for a sustainable program going forward.
#Juncker wage cuts never on the table
— Kathimerini English (@ekathimerini) June 29, 2015
But as far as we are concerned, Greece is a member of the euro zone. When they are prepared to talk, and to continue negotiations, we stand ready to do that. we have constantly in the last few days showed a lot of willingness to progress, flexibility in what they can adjust to. And we stand ready to continue to doing that.
The International Monetary Fund (IMF) has agreed on a scheme of war financing for Ukraine. For the first time, according to Fund sources, the IMF is not only violating its loan repayment conditions, but also the purposes and safeguards of the IMF’s original charter.
IMF lending is barred for a member state in civil war or at war with another member state, or for military purposes, according to Article I of the Fund’s 1944-45 Articles of Agreement. This provides “confidence to members by making the general resources of the Fund temporarily available to them under adequate safeguards, thus providing them with opportunity to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity.”
To deter Russian and other country directors from voting last week against the IMF’s loan, and releasing their reasons in public, the IMF board has offered Russia the possibility of, though not the commitment to repayment for Gazprom’s gas deliveries, and the $3 billion Russian state bond which falls due in December.
On March 11 the IMF board agreed to approve an Extended Loan Facility (EFF) for Ukraine for a total of 13.4 billion Special Drawing Rights (SDR), currently equivalent to $17.5 billion. Here are the IMF papers spelling out the details.
A Russian central banker who has served at the IMF comments: “the Fund should not place military spending below the line. But if you try to nail the Fund down on that, you would be wasting your time. The Fund has internationally-renowned expertise in doublespeak and hypocrisy. What the Fund is doing around Ukraine was at first laughable; now has become outrageous. No matter what, the Fund will keep financing the civil war in Donbass because the Americans want the fighting to continue and spread. Period.”....
Although the Obama Administration claims it will not deliver lethal military equipment, it has been offering loans, repayment guarantees, and cash support for Ukrainian military agencies to buy it through third countries. Russian analysts call this a takeover by the Pentagon of the Ukrainian defence budget. Details of the line items totalling UAH 85 billion (about $4 billion) approved this month by the Verkhovna Rada can be read here....Seems that charters, like contracts, are to be broken when they interfere with TPTB. Hypocrisy?
Ukrainian President Petro Poroshenko has admitted that a new $17.5 billion loan from the International Monetary Fund and its associated austerity measures will not improve the lives of ordinary Ukrainians—but will help pay foreign creditors and fund the ongoing civil war in the country’s embattled eastern region.
“Life won’t improve shortly,” Poroshenko said in televised comments on March 10, one day before the IMF approved the loan. “If someone understands the reforms as improvement of people’s living, this is a mistake.”
One reason for the cooled expectations is what he called the “tough wartime conditions.” He also announced a fourfold increase in defense spending, a boost that according to Business New Europe, “will inevitably impact already limited means for social welfare and pensions.Truthdig
Yves here. Ukraine is going into an IMF program in even worse condition that Greece with its various loans from the Troika in 2010, and we can see how well borrowing more when you were already overindebted worked out for Greece. In addition, this interview with Michael Hudson makes clear that the loan to Ukraine is wildly out of line with IMF rules, making it painfully obvious that this “rescue” is all about propping up the government so it can continue to wage war rather than economic development.Michael Hudson lays out the neoliberal playbook being run by the IMF, which is headed by a European (Christine Lagarde) but whose board is dominated by the US with the largest voting interest.
The head of the International Monetary Fund (IMF) is urging France to speed up structural reforms to bolster economic growth and warning against using weak inflation as an excuse to relax public deficit reduction efforts.Or maybe Lagarde is a mole for Le Pen.
In an interview with French daily Les Echos to be published on Monday, IMF Managing Director Christine Lagarde said the French government must implement "truly, rapidly and fully structural reforms likely to generate growth".
"Even if inflation is weaker than expected, it cannot be used as a screen to postpone the necessary efforts on (public) spending", she added.Business Insider
[Christine] Lagarde told the conference that progress in building a safer financial system was being held back because of “fierce industry pushback” against the introduction of new regulations.
[Mark] Carney went much further, warning that the entire capitalist system is at risk. Unbridled faith in financial markets, corruption and rising inequality had damaged the “social fabric,” he said. Inequality was “demonstratively” growing and risked undermining what he called the “basic social contract” based on fairness.WSWS
“We simply cannot take the capitalist system, which produces such plenty and so many solutions, for granted,” he declared. “Prosperity requires not just investment in economic capital, but investment in social capitalism.”
Unchecked market fundamentalism, he warned, could “devour the social capital essential for the long-term dynamism of capitalism itself.”
In its editorial on Piketty, the Financial Times asserted that if there were problems in the accumulation of extraordinary wealth derived from “monopoly profits,” then “enlightened governments” should step in and “remove barriers to entry so that unfair rents disappear.”
In other words, let the “magic of the market” and competition do their work in lessening inequality.
The fundamental flaw in this analysis was exposed by Marx more than 160 years ago. As he explained, the very aim and logic of competition is not more competition, let alone fairness, but the creation of monopoly as “one capitalist kills many.” [economies of scale]
The present economic situation, in which a few dozen major banks and transnational corporations monopolise and dominate the world economy, providing ever greater wealth to the ruling corporate and financial elites and their hangers-on, is precisely the outcome of the “free market” and competition.
The FT’s attack on Piketty is an attempt to deal with social inequality and its explosive political consequences by denying it.
Carney has decided to follow a different course in an attempt to head off deepening opposition and hostility to the capitalist system.
He is calling on the very financial interests that have plundered the wealth of society for their own benefit to undergo a miraculous transformation and become more socially responsible, in order to prevent political and social upheaval. Both efforts are doomed to failure as social reality brings an intensification of the class struggle.