Letter to my children & grandchildren: ‘It’s like a storm…

Letter to my children & grandchildren: ‘It’s like a storm…

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A new Bretton Woods moment is upon us.

A new Bretton Woods moment is upon us.

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1. Introduction: ‘A sisterhood and brotherhood of humanity’

I first want to thank Dr. Ernest Kwamina Addison for his excellent remarks and contributions as Chairman of the IMF’s Board of Governors.

Reflecting on the dramatic change in the world over the last year, I paid a visit to the Bretton Woods, New Hampshire, where 44 men signed our Articles of Agreement in 1944. Our founders faced two massive tasks: to deal with the immediate devastation caused by the War; and to lay the foundation for a more peaceful and prosperous postwar world.

At the conclusion of the conference John Maynard Keynes captured the significance of international cooperation as hope for the world. “If we can continue…The brotherhood of man will have become more than a phrase”, he said.

As we look forward to welcoming Andorra as our 190th member, the work of the IMF is testament to the values of cooperation and solidarity on which a sisterhood and brotherhood of humanity is built.

Today we face a new Bretton Woods “moment.” A pandemic that has already cost more than a million lives. An economic calamity that will make the world economy 4.4 % smaller this year and strip an estimated $11 trillion of output by next year. And untold human desperation in the face of huge disruption and rising poverty for the first time in decades.

Once again, we face two massive tasks: to fight the crisis today— and build a better tomorrow.

We know what action must be taken right now. A durable economic recovery is only possible if we beat the pandemic. Health measures must remain a priority—I urge you to support production and distribution of effective therapies and vaccines to ensure that all countries have access.

I also urge you to continue support for workers and businesses until a durable exit from the health crisis.

We have seen global fiscal actions of $12 trillion. Major central banks have expanded balance sheets by $7.5 trillion. These synchronized measures have prevented the destructive macro-financial feedback we saw in previous crises.

But almost all countries are still hurting, especially emerging market and developing economies. And while the global banking system entered the crisis with high capital and liquidity buffers, there is a weak tail of banks in many in emerging markets. We must take measures to prevent the build-up of financial risks over the medium term.

We face what I have called a Long Ascent for the global economy: a climb that will be difficult, uneven, uncertain—and prone to setbacks.

But it is a climb up. And we will have a chance to address some persistent problems — low productivity, slow growth, high inequalities, a looming climate crisis. We can do better than build back the pre-pandemic world – we can build forward to a world that is more resilient, sustainable, and inclusive.

We must seize this new Bretton Woods moment.

 

2. Building Forward: Three Imperatives

How? I see three imperatives:

First, the right economic policies. What was true at Bretton Woods remains true today. Prudent macroeconomic policies and strong institutions are critical for growth, jobs, and improved living standards.

One size does not fit all—policies must be tailored to individual country needs. Support remains essential for some time—withdrawing it too early risks grave and unwarranted economic harm. The stage of the crisis will determine the appropriate shape of this support, generally broader early on and more targeted as countries begin to recover.

Strong medium-term frameworks for monetary, fiscal and financial policies, as well as reforms to boost trade, competitiveness and productivity can help create confidence for policy action now while building much-needed resilience for the future.

That includes keeping a careful watch on risks presented by elevated public debt. We expect 2021 debt levels to go up significantly – to around 125 percent of GDP in advanced economies, 65 percent of GDP in emerging markets; and 50 percent of GDP in low-income countries.

The Fund is providing debt relief to its poorest members and, with the World Bank, we support extension by the G20 of the Debt Service Suspension Initiative.

Beyond this, where debt is unsustainable, it should be restructured without delay. We should move towards greater debt transparency and enhanced creditor coordination. I am encouraged by G20 discussions on a Common framework for Sovereign Debt Resolution as well as on our call for improving the architecture for sovereign debt resolution, including private sector participation.

We are there for our member countries—supporting their policies.

And policies must be for people my second imperative.

To reap the full benefits of sound economic policy, we must invest more in people. That means protecting the vulnerable. It also means boosting human and physical capital to underpin growth and resilience.

COVID19 has underscored the importance of strong health systems.

Rising inequality and rapid technological change demand strong education and training systems—to increase opportunity and reduce disparities.

Accelerating gender equality can be a global game-changer. For the most unequal countries, closing the gender gap could increase GDP by an average of 35 percent.

And investing in our young people is investing in our future. They need access to health and education, and also access to the internet—because that gives them access to the digital economy – so critical for growth and development in the future.

Expanding internet access in Sub Saharan Africa by 10 percent of the population could increase real per capita GDP growth by as much as 4 percentage points.

Digitalization also helps with financial inclusion as a powerful tool to help overcome poverty.

Just as the pandemic has shown that we can no longer ignore health precautions, we can no longer afford to ignore climate change—my third imperative.

We focus on climate change because it is macro-critical, posing profound threats to growth and prosperity. It is also people-critical and planet-critical.

In the last decade, direct damage from climate-related disasters adds up to around $1.3 trillion. If we don’t like this health crisis, we will not like the climate crisis one iota.

Our research shows that, with the right mix of green investment and higher carbon prices, we can steer toward zero emissions by 2050 and help create millions of new jobs.

We have an historic opportunity to build a greener world—also a more prosperous and job-rich one. With low interest rates, the right investments today can yield a quadruple dividend tomorrow: avert future losses, spur economic gains, save lives and deliver social and environmental benefits for everyone.

 

3. The IMF’s Role

At the Fund, we are working tirelessly to support a durable recovery— and a resilient future as countries adapt to structural transformations brought on by climate change, digital acceleration and the rise of the knowledge economy.

Since the pandemic began, we have committed over $100 billion—and we still have substantial resources from our $1 trillion in lending capacity.

We will continue to pay special attention to the urgent needs of emerging markets and low-income countries—especially small and fragile states, helping them to pay doctors and nurses and protect the most vulnerable people and parts of their economies.

Our unprecedented action was only possible thanks to our members’ generous support. The doubling of the New Arrangements to Borrow and a new round of bilateral borrowing arrangements preserves this financial firepower. Members have also stepped up with essential contributions to our Catastrophe Containment – and Relief and Poverty Reduction and Growth—Trusts.

This has allowed us to support our low-income members with debt relief and to triple our concessional lending. We are engaging with members to further boost our concessional lending capacity adapt our lending toolkit and increase support for capacity development.

IMF staff, working day and night, have been magnificent in this crisis. My sincere thanks to them and my Management team.

My deep appreciation also to our Executive Directors – they have been there every step of the way over the past six months.

 

4. Conclusion: Seize the Moment

The best memorial we can build to those who have lost their lives in this crisis is, in the words of Keynes“that bigger thing”— building a more sustainable and equitable world.

Our founders did it. It is now our turn. This is our moment!

Now it’s my pleasure to introduce my friend, and great partner to the IMF: President David Malpass of the World Bank Group.

 

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61 arrestaties in Frans onderzoek naar kinderporno.

61 arrestaties in Frans onderzoek naar kinderporno.

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61 arrestaties in Frans onderzoek naar kinderporno, van jeugdtrainer tot imam

Foto ter illustratie.

De Franse politie heeft 61 mensen gearresteerd die verdacht worden van betrokkenheid bij een groot kinderpornonetwerk. Minstens drie van hen verkrachtten hun kinderen voor de camera. De arrestanten zijn mensen uit alle lagen van de maatschappij en uit alle beroepsgroepen, melden Franse media. 

Via AD.nl

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NATO Warships & submarines take part in one of the largest military exercise of its kind

NATO Warships & submarines take part in one of the largest military exercise of its kind

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NATO Warships & submarines take part in one of the largest training military exercises of its kind of the north Donegal Coast

 

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Get ready for a digital new world currency – The economist 2018

Get ready for a digital new world currency – The economist 2018

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The Economist 1988 : Get Ready for the Phoenix in 2018 – 2020

 
the.dude (35)in #phoenix • 3 years ago

QUESTION: Mr. Armstrong; Are you aware of the 1988 Economist article predicting that in 30 years from then we would all be using the same currency? That is strangely your target of 2018 when you have warned that the Monetary Crisis will begin then. I met an attendee from your 1985 WEC there in Hong Kong. He said you gave that date of 2018 way back at that conference. Did the Economist take your work for that article?

ANSWER: The Economist did not really make a forecast. They were just generalizing what might happen in 30 years from then. I do recall speaking to them back then, but I disagreed with the concept that everyone would be shopping with the same currency around the world. I was one of the people called in back in 1985 when they were creating the G5 (now G20) at the Plaza Accord. I had originally proposed back then that we adopt the SDR at the IMF as the new reserve currency.

After dealing with many governments at that time, it became crystal clear that this idea of a single world currency that people would be using in everyday commerce was not practical. It was at the Plaza Accord in 1985 when the idea of the Euro was born. This article in the Economist was inspired by this idea of surrendering monetary authority to a single government in Europe. We can see how screwed up the outcome has been. After working with governments in Europe and America, it was abundantly clear that a single currency that would be used in daily commerce by everyone would never exist without monumental collapse in governments and a new one world government. But that would not last very long as we see the rebellion in Europe against Brussels. It demands also the surrender of one’s culture.

This idea of a one world government where everyone willingly surrenders their sovereignty and culture to some central power is the stuff of movies. Here is a letter from the White House. The chief objection is universal. It requires the surrender of domestic policy objectives to international.

There is no possible way this is happening without the entire world collapsing and a single government emerges by FORCE. Politics as we know will could no longer function. Politicians argue vote for them and they will tax the rich and hand it to the poor. How can that take place in such a system? They could not promises nonsense against the global trend as they do currently. The policy would be determined at the central power and politicians would be subordinate in every country unable to offer anything to get elected.

I do not support the corruption that has engulfed the world. However, this idea that everyone will be using the same currency is a pipe-dream with no basis in reality for the amount of political change would require a bloodbath in revolution. It could NEVER unfold willingly with the political system we currently have. Even then, counter-revolutionary forces would emerge. It will not be just BREXIT, it will be countless civil wars against a central political institution.

The very best will be a single new reserve currency to replace the dollar. But every country would still need to retain its own currency because the business cycle cannot be defeated so while some countries benefit, others must suffer. The entire world cannot possibly have a trade surplus all simultaneously until we begin trading with other planets.

The Economist wrote:
Title of article: Get Ready for the Phoenix
Source: Economist; 01/9/88, Vol. 306, pp 9-10

THIRTY years from now, Americans, Japanese, Europeans, and people in many other rich countries, and some relatively poor ones will probably be paying for their shopping with the same currency. Prices will be quoted not in dollars, yen or D-marks but in, let’s say, the phoenix. The phoenix will be favored by companies and shoppers because it will be more convenient than today’s national currencies, which by then will seem a quaint cause of much disruption to economic life in the last twentieth century.

At the beginning of 1988 this appears an outlandish prediction. Proposals for eventual monetary union proliferated five and ten years ago, but they hardly envisaged the setbacks of 1987. The governments of the big economies tried to move an inch or two towards a more managed system of exchange rates – a logical preliminary, it might seem, to radical monetary reform. For lack of co-operation in their underlying economic policies they bungled it horribly, and provoked the rise in interest rates that brought on the stock market crash of October. These events have chastened exchange-rate reformers. The market crash taught them that the pretense of policy co-operation can be worse than nothing, and that until real co-operation is feasible (i.e., until governments surrender some economic sovereignty) further attempts to peg currencies will flounder.

The new world economy

The biggest change in the world economy since the early 1970’s is that flows of money have replaced trade in goods as the force that drives exchange rates. as a result of the relentless integration of the world’s financial markets, differences in national economic policies can disturb interest rates (or expectations of future interest rates) only slightly, yet still call forth huge transfers of financial assets from one country to another. These transfers swamp the flow of trade revenues in their effect on the demand and supply for different currencies, and hence in their effect on exchange rates. As telecommunications technology continues to advance, these transactions will be cheaper and faster still. With unco-ordinated economic policies, currencies can get only more volatile.
….
In all these ways national economic boundaries are slowly dissolving. As the trend continues, the appeal of a currency union across at least the main industrial countries will seem irresistible to everybody except foreign-exchange traders and governments. In the phoenix zone, economic adjustment to shifts in relative prices would happen smoothly and automatically, rather as it does today between different regions within large economies (a brief on pages 74-75 explains how.) The absence of all currency risk would spur trade, investment and employment.

The phoenix zone would impose tight constraints on national governments. There would be no such thing, for instance, as a national monetary policy. The world phoenix supply would be fixed by a new central bank, descended perhaps from the IMF. The world inflation rate – and hence, within narrow margins, each national inflation rate- would be in its charge. Each country could use taxes and public spending to offset temporary falls in demand, but it would have to borrow rather than print money to finance its budget deficit. With no recourse to the inflation tax, governments and their creditors would be forced to judge their borrowing and lending plans more carefully than they do today. This means a big loss of economic sovereignty, but the trends that make the phoenix so appealing are taking that sovereignty away in any case. Even in a world of more-or-less floating exchange rates, individual governments have seen their policy independence checked by an unfriendly outside world.

As the next century approaches, the natural forces that are pushing the world towards economic integration will offer governments a broad choice. They can go with the flow, or they can build barricades. Preparing the way for the phoenix will mean fewer pretended agreements on policy and more real ones. It will mean allowing and then actively promoting the private-sector use of an international money alongside existing national monies. That would let people vote with their wallets for the eventual move to full currency union. The phoenix would probably start as a cocktail of national currencies, just as the Special Drawing Right is today. In time, though, its value against national currencies would cease to matter, because people would choose it for its convenience and the stability of its purchasing power.
…..

The alternative – to preserve policymaking autonomy- would involve a new proliferation of truly draconian controls on trade and capital flows. This course offers governments a splendid time. They could manage exchange-rate movements, deploy monetary and fiscal policy without inhibition, and tackle the resulting bursts of inflation with prices and incomes polices. It is a growth-crippling prospect. Pencil in the phoenix for around 2018, and welcome it when it comes

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