Obama's Big Win at G20: Europeans Lose Control of IMF

By Simon Johnson

The big news at the G20 was obviously about the IMF, with the Americans pulling out an impressive deal on funding (compare with our predictions…). But the money is not the biggest achievement. The big move was in terms of who will run the IMF in the near future - as I explain in my NYT.com column this morning, there is an implicit and almost immediate shift towards emerging markets.

President Obama had just the right tone yesterday. Admittedly, he was helped by the fact that we no longer have anything to be arrogant about, but still the way he reached out to other countries - while also pointing out that they made big mistakes and are currently in trouble - conveyed exactly the right message. The US will do much better if it lets emerging markets and developing countries have a serious and permanent place at the big table.

Among other things, this will fundamentally change the way the IMF operates. As a symbol and for its potential impact on the international economy moving forward, yesterday’s final loss of European control over the IMF really matters.

Comments

[Thomas Smic...:]

The summary statement from the G-20 tells me that Obama gave away the store in order to make nice and be loved by the G-19. Net result is a big loss of independance for U.S.

No further stimulus was provided according to the summary document. Control over compensation is to be regulated worldwide. The lisy of giveaways is a path to socialism.

As Medvedev stated, "Obama is my comrade."

Apr 04 10:51 AM

[muybonpain:]

A lone wolf,gorilla. Now that is something I would not like to tangle with.

Apr 04 10:56 AM

[oldasiahand:]

Simon is spot on. Obama did a good job playing with a weak hand. Opening up the top jobs at the IMF and the World Bank to merit based rather than narrow political candidates can only be to the good. No more neocons like Wolfowitz automatically being parachuted in. But the increase in resources to both institutions and the creation of more SDRs should marginally help the present global downturn as the money printing finds a brand new mechanism.

Apr 04 12:29 PM

[George Fiala:]

The fact is that it is the emerging third world countries who have money. We are the biggest debtors now.


On Apr 04 05:14 AM wildfirexx wrote:

> Does this mean the IMF will be controlled and run by the emerging
> third world markets, but the west will still be footing the bill?
> Sounds Insane to me!

Apr 04 12:48 PM

[Old Trader:]

As pointed out upstream a ways, an additional trillion dollars was promised to the IMF. I'm not TOO concerned, since, as I recall, the US is presently behind in paying on its current commitment to the IMF. There's a big difference between talk and action. Such proposals make for good sound bites and newspaper headlines, but unless implemented, mean little.

Someone else commented on Obama eating a little crow to appease the Europeans. May I suggest that there might be a cynical/Machevellian reason for this? There's no doubt the US can't turn around the global economy all by itself; everybody needs to pull together, to the extent that they can, and the Europeans have been reluctant to open the stimulus spigots. A few mouthfuls of humble pie by Obama MIGHT help convince Germany, France, and others to lend some more support to a global bailout.

Regarding opening the leadership role to emerging countries; there's no doubt they deserve a place at the table, and a voice in what happens, but a "leadership role"? I keep thinking about the direction the UN has taken, over the last couple of decades...not terribly confidence inspiring.

Apr 04 01:05 PM

[henarl:]

So now we've got the world's biggest spendthrift running a big give away program? Way to go!

Apr 04 01:26 PM

[LKofScotland:]

and the IMF loans what to whom again?

Apr 04 02:39 PM

[wcrxlp edit...:]

Vuke advice is best.

Check the IMF website: imf.org

Wade through the IMF declarations about transparency.

At some point you'll find the IMF financial statements. They really are there.

Read and understand the IMF financial statements.

If you don't have the time, just look at the IMF general department "assets."

At the top of the list of assets, instead of "cash" you'll see "currencies" which is subcategorized with such enticing labels as "usable currencies" and "other currencies."

Not "cash." Then you'll wonder why "currencies" and not "cash."

Then you'll be reassured when you see "gold" listed as an asset.

But then you realize "gold" is only a small percentage of the assets that are "currencies" (2%). But then again, "gold" is an important asset based on its relative size to the non-currency assets (30%) at the IMF.

"Investments" are also listed as a general asset class. No detail is given in the footnotes other than the reassurance for readers that what are probably government bonds do not include "asset-backed securities."

Vuke described the IMF as a shell. He's probably right but the amount of gold on the IMF balance sheet qualifies the IMF as very expensive tortoise shell.

Apr 04 04:03 PM

[I am not a ...:]

Exactly,these clowns in the White house and holders of other governments leadership positions have sold our souls to the holders of the purse for short term political gains and listing in the history books. Goodness help our decendents.


On Apr 04 09:32 AM Leftfield wrote:

> Nice photo op, nice drama, nice ending. I think they only promised
> $1 trillion to the IMF, could have been worse. All we have to do
> is follow their example and spend up a storm. Oops, forgot, we would
> have to pay it back.

Apr 04 04:44 PM

[nmelendez:]

China just reached an agreement to trade yuan with the Argentie peso. China is diversifying it's currency with a bunch of countries. These will interchange goods based on their respective/agreed upon exchange rate. Bye bye dollar.

Apr 04 08:05 PM

[Moon Kil Woong:]

It's always the same, the banks are backed by the Fed who are bankers. Now 3rd world countries will be backed by the IMF who will be pressured by 3rd world countries to keep loaning to them with llaxer controls. When will anyone learn? The people who poison the punch shouldn't be allowed in the kitchen.

If banks want bailouts they should abide by strict rules set by non bankers and ridged accounting laws. If 3rd world countries want bailouts they should abide by an austerity program because their covernment is too incapable or incompetent to run their economy.

If they want the keys to the car that they keep driving off the cliff they can fund the IMF with their own money too. It may make Obama friends, but the IMF should be in the position to demand harsh measures. Otherwise it simply doesn't work. Just take a look at the US Fed and Treasury as an example.

They spend more time licking boot 99% than whooping ass 1%. And we all know why.

Apr 04 09:34 PM

[Dan H:]

Yea! Change we need....still bailing out FAILED institutions of crony capitalism. If he had any guts he would flush the pot, and stop trying to make the turds liquid.


On Apr 04 09:46 AM Landrew wrote:

> Cobra 1,
> You are so right! BO is giving 1.1 TRILLION of whose money? Our money!
> You fund it, you own it, just like the autos, banks, insurance.<br/>Bo
> was the sucker in this mess. Leadership of another sinking ship as
> he refuses to let capitalism work. Meanwhile back at home JPM still
> has 80 TRILLION in derivatives BO and GECKO are trying to unload
> on taxpayers.

Apr 04 10:27 PM

[Glen L.:]

I have to laugh at people who want to give Obama a chance to prove what he's made of, and laugh harder at those who think he's a leader who will think and act independently in the nation's best interest. Obama is just another demagogic politician with zero education in economics, pretending that he knows what he's doing and understands how to bring the US -- and the whole world! -- out of a depression caused by the very government he presides over. His prescription, via his brain trust: more of the same bubble-blowing that led to this fiasco.

A couple of factoids for Obama worshippers: #1 recipient of AIG political contributions (over $103K) in 2008: Barack Obama (#2: Chris Dodd); and he voted for the bailouts as Senator last year without even reading the bill.

Go ahead, follow the leader... like Stevie Wonder leading Ray Charles.

Apr 04 11:19 PM

[User 180638:]

I thought we elected Obama because we believed he can, indeed, fix it quickly. NO???. Giving excuse already?


On Apr 04 08:59 AM americanincanada wrote:

> I don't see any of what is happening as Obama's fault yet, wherever
> we are and wherever we are going is still set by the overwhelming
> errors and failures of the previous administration. The US is losing
> its financial clout as the rest of the world is quite happy to see
> it bogged down in expensive wars. All of the ideas we want to promote,
> from free markets to individual responsibility and freedom, have
> lost ground.

Apr 05 12:06 AM

[therealjg:]

Another BHO groupie misunderestimates what happened at G20. "Just the right tone" - ugh! Tones and catering to sniffy Europeans don't solve problems. Neither does mortgaging our kids' future with pointless spending. But you groupies are blind. You'll never see it, even when it's as evident as DNA stains on a blue dress.

Apr 05 12:17 AM

[User 180638:]

Oh I forgot, we haven't paid enough for the wall street and corrupted politicians, so we should pay for IMF and overseas abortion? How stupid can one be?? At least Europeans and Chinese are smarter. Someone calculated the bailout money, if it is given evenly to each household in America, each will get more than $400,000, enough to buy all the houses in the market and increase the aggregate demand and set the economy going.

Spend to prosperity,?? China knows better than that and commented what was commented last few weeks.

Apr 05 12:18 AM

[User 180638:]

Oh I forgot, we haven't paid enough for the wall street and corrupted politicians, so we should pay for IMF and overseas abortion? At least Europeans and Chinese are smarter. Someone calculated the bailout money, if it is given evenly to each household in America, each will get more than $400,000, enough to buy all the houses in the market and increase the aggregate demand and set the economy going.

Spend to prosperity,?? China knows better than that and commented what was commented last few weeks.

Apr 05 12:19 AM

[ArtfulDodger:]

Nothing but more Obama worship.

Apr 07 10:40 AM

[User 357469:]

Washington is run by Big Business (Oil, Banks, Pharma, etc). One President has no more ability to fix things than another.

On Apr 05 12:06 AM User 180638 wrote:

> I thought we elected Obama because we believed he can, indeed, fix
> it quickly. NO???. Giving excuse already?

Apr 13 04:26 PM

[americaninc...:]

No, he was elected by independent people in the middle who thought, in error as it turns out, that he would bring an end to the very divisive atmosphere that has characterized government in the Clinton, Bush years. These crucial swing voters did not think they would get a quick fix, that was the domain of the committed Democrats. These voters don't like what they have seen so far and the results will be apparent in the next election.


On Apr 05 12:06 AM User 180638 wrote:

> I thought we elected Obama because we believed he can, indeed, fix
> it quickly. NO???. Giving excuse already?

Aug 29 10:09 AM