WASHINGTON: The
United States and China have diametrically opposing views on the
International Monetary Fund's financial resources.
Washington sees adequate firepower, whereas Beijing says it may be insufficient in the face of the eurozone debt crisis.
"As
the European sovereign debt crisis unfolds, demand for IMF financing
from its members has increased dramatically," China's central bank
chief, Zhou Xiaochuan, said in a speech Saturday to the IMF steering
committee.
"However, its available financial resources may not be adequate to meet the potential needs of the crisis-hit countries."
The United States is on the opposite track.
"The IMF has adequate resources," a US Treasury official who asked not to be identified said Wednesday.
The official pointed to a November 2010 agreement to double the permanent contributions, or quotas, of its member states.
But
before the quota reform can take effect, a sufficient number of
national parliaments must ratify it. About 40 have done so, of the 113
needed.
The subject is delicate for the United States, the biggest contributor to the Fund's resources.
Republican
lawmakers, who control the US House of Representatives, routinely voice
opposition to international institutions like the Washington-based IMF.
The IMF today has $630 billion available to help middle- and high-income countries.
Paring
off the financing already promised to Greece and to other countries,
and excluding its reserves cushion, the IMF has the capacity to lend
$383 billion over the next 12 months.
For the IMF managing director, Christine Lagarde, that may not be enough.
"The
Fund's credibility, and hence effectiveness, rests on its perceived
capacity to cope with worst-case scenarios. Our lending capacity of
almost $400 billion looks comfortable today but pales in comparison with
the potential financing needs of vulnerable countries and crisis
bystanders," she said in an IMF action plan released Saturday.
"It will be useful to discuss, soon, the needs and contingency options."
Since taking the IMF helm in July, Lagarde has made increasing its resources one of her battle cries.
Japan is on board, and is prepared to put more money into the coffers of the international emergency lender.
"It might be worthwhile to consider enhancing the Fund's financial resources," said Jun Azumi, the Japanese finance minister.
He
suggested that the 187-nation institution "establish a facility capable
of swiftly providing the necessary liquidity to member countries that
are good performers" to prevent contagion from crises.
Speaking
on behalf of six south American countries, the governor of Chile's
central bank, Jose De Gregorio, called for "higher priority" to be given
to the financing question.
There was no dearth of ideas for how to use any new resources.
It
was "worth considering the creation of a multilateral facility where
the Fund and central banks work together to provide liquidity to member
countries facing financing pressure," Nigerian Finance Minister Ngozi
Okonjo-Iweala said, representing 21 Sub-Saharan African countries.
-AFP/ac
US, with more than 13 trillion dollars of debt is the biggest contributor to the fund?
i wonder how the common americans feel when they read this.
Originally posted by dragg:US, with more than 13 trillion dollars of debt is the biggest contributor to the fund?
i wonder how the common americans feel when they read this.
Common americans living on debt are the root of all this problem.
The US and Europe have run out of ammunition. QE2 is not effective at all, so no point having QE3, as it will only raise inflation. The US congress and white house is squabbling on how to reduce debt and raise revenue without increasing taxes and the Obama plan to boost revenue by taxing the rich americans.
Greek will not be able to repay its debts for sure no matter what they do, dunno how is Europe going to continue to rescue Greece. If Europe let Greece default or kick Greece out of Europe, this will be start of financial contagion around the world. when this happens, this will be as scary as when Lehman Brothers collapsed in 2008 and almost bringing down the financial sector.
i really cannot stand the american treasury. who are they to tell the europeans what to do?
arent they the one who started the whole shit? and frankly the US 'solution' only delay and compound the problem, not solve it.
the US is the world'd most indebted nation in the history of the world. Do I need to even continue.
There is a big red default button and no one in US of A dares to press it...
Jim Rogers said US will default eventually, as it is unable to pay off its debts. it cannot continue to print money as it will create inflation and devalue its currency. US currency, according to him, is a flawed currency.
FYI, american are alway in debt since day 1. Debt for them is as easy as a drink a glass of milk, their economy built on debt, not surplurs, it is the depth of the debt that churn them on to work again inorder to reduce the debt to a managing level. So, do not think america debt is the cos of all these problem, to be fair, without american high consumers spending and vibrant tech and entertaining economy, most of people here will still be living in a third world society
It is true, that if Americans did not live beyond their means for so long, the world would not have developed so rapidly.
In addition, I doubt Jim Rogers is right. The present Americans are beginning to worry, which is a good thing. At the present state, I highly doubt they are not able to repay their debt. 3 factors that I see:
1) The US, on paper, has the biggest amount of gold in the world. I remember it was 3000+ tonnes, but let's just say we take a simple number of 3000 tonnes
2) The US has the largest estimated untapped oil reserves in the world. Estimates put that at 2.3 trillion barrels of oil.
3) Taxes can still be played around with. If they stop this bickering, and move to have a better tax structure (read simplified), it will help them immensely in better tax collection, hence removing the need to increase taxes and just focus on better tax collection.
If you assume that US sells its gold of 1500 tonnes, at today's prices of US$1700.00 per oz, US has a total of 50,000,000 oz (1500 tonnes x 1000 kg x 1000g / 30g where 30g = 1 oz) = US$85,000,000,000. That's $85 billion.
If the US drills half of its oil reserves out, for simple estimates, let's say 1 trillion barrels of oil, where 1 barrel of oil is for simplicity factor = US$80, the US can generate $80 trillion. Removing the estimated cost of drilling, labor, selling, etc, let's put it at 50% cost, it's still $40 trillion.
Increased efficiency in tax collection will help them to better handle their annual budget, thus leaving their natural reserves to pay off their debts. The current US debt is $17.3 trillion. Given its natural reserves, it can pay back its debt.
It's the right thing to do though, to manage its debt, because the dumb presidents add > $1 trillion debt to the total debt every year.
At the rate they are going, in 20 years, if the US does not rein in its debt, it will indeed become a really serious situation. That's when Jim Rogers may be right.
Originally posted by dragg:US, with more than 13 trillion dollars of debt is the biggest contributor to the fund?
i wonder how the common americans feel when they read this.
When Europe falls... it's time for North Am to move their manufacturing there. Bye bye Asia.
They are mostly opportunistic first.... charitable after.
Originally posted by jojobeach:When Europe falls... it's time for North Am to move their manufacturing there. Bye bye Asia.
They are mostly opportunistic first.... charitable after.
have they ever been charitable?
Originally posted by Rooney9:The US and Europe have run out of ammunition. QE2 is not effective at all, so no point having QE3, as it will only raise inflation. The US congress and white house is squabbling on how to reduce debt and raise revenue without increasing taxes and the Obama plan to boost revenue by taxing the rich americans.
Greek will not be able to repay its debts for sure no matter what they do, dunno how is Europe going to continue to rescue Greece. If Europe let Greece default or kick Greece out of Europe, this will be start of financial contagion around the world. when this happens, this will be as scary as when Lehman Brothers collapsed in 2008 and almost bringing down the financial sector.
its like trying to make a hanphone with old worn out batteries work again.after that it will get damaged again.
Originally posted by sgdiehard:have they ever been charitable?
Ofcors. They got rid of Saddam and Osama for free didn't they ?
Originally posted by jojobeach:Ofcors. They got rid of Saddam and Osama for free didn't they ?
do you think they told the whole world a lie about WMD to get rid of Saddam for you and I ?
and you think if the 911 didn't happen they gave a damn about Osama, the one they trained and financed?
Originally posted by sgdiehard:do you think they told the whole world a lie about WMD to get rid of Saddam for you and I ?
and you think if the 911 didn't happen they gave a damn about Osama, the one they trained and financed?
Opportunistic first... charitable after lah !
Frankly, nowadays anti-china sentiments are getting strong in the USA. If given a choice.. the majority of Americans here would rather lord over Europe than Asia.
Hardly surprising US and China are at odds wat...