IMF points finger at central banks – but are they listening? | Philippe Inman
IInternational agencies saw their influence wane after the financial crash of 2008, as support for multilateral agreements gave way to quick fixes between governments. The International Monetary Fund and the World Bank, which hold their joint spring meetings next week, have suffered like many others.
So when IMF boss Kristalina Georgieva points her finger at the big central banks – the US Federal Reserve, the European Central Bank, the People’s Bank of China, the Bank of Japan and the Bank of England – the question is: are any of them listening?
After flirting with austerity in 2009 and 2010, IMF officials largely rejected public spending cuts as a path to growth, but that message went unheeded in most major capitals. The Washington-based organization has produced reams of literature arguing that inequality is bad economics and climate change is an emergency, met with loud applause and little action.
Georgieva said in a staged speech on Thursday that inflation “is a threat to financial stability and a tax on ordinary people struggling to make ends meet.” She subscribes to the orthodox view that central banks should take “decisive action,” which is a euphemism for raising interest rates.
She also warned them to watch out for ripple effects and urged governments to mitigate the impact on countries that must borrow to survive. While developed countries suffer from runaway inflation and higher interest rates, the greatest threat is to emerging and developing economies which not only face “the added risk of higher borrowing costs, but also to the risk of capital outflows.
But does anyone notice? Zambia, Chad, Ethiopia and Sri Lanka top a long list of countries that have previously been unable to finance their debts. Many of them owe money to foreign investors who buy distressed government debt through institutions such as BlackRock, the world’s largest money manager.
There could be deals next week brokered by the IMF, World Bank and ministers on the G20 board to ease current debt payments, but the outcome will likely mean that existing loans made by governments western countries, or the IMF and the World Bank themselves, will be rescheduled. over a longer period of time. No one expects a confrontation with private lenders.
These small steps are not enough. These countries should see part of their debt cancelled. And not only by public bodies, but by all lenders, who must be forced to admit, just as the big banks are forced to do, that when a borrower’s circumstances have changed, sometimes long after the loans have been made, repayments on any will prevent a lasting recovery.
End of the rental boom?
Residential property rents are skyrocketing in the UK, as are property values: two trends that have increased the costs of raising a family since the financial crash of 2008. Whether you’re buying a house or renting it , the cost has been increasing for some time. Ultra-low mortgages encouraged the trend, prompting young people to take out larger mortgages for 30 years or more.
From a global perspective, a decade-long property boom has doubled the value of the property market to $350bn (£270bn), four times the size of the £90bn global economy. dollars. Over 80% of global investment is in real estate. Dhaval Joshi, the chief European strategist at BCA Research, describes this incredible wealth stored in the housing market as “breathtaking”. It’s not just the British. Everyone bets on the same thing.
During this unprecedented boom, investors extracted massive gains. Rents have increased by an average of 40% worldwide over the past 10 years. Can this continue? Will young people continue to work to pay the ever increasing rents/mortgages? All eyes are on central banks and whether they continue to raise interest rates. If they do, it may tip the scales.
Musk makes Twitter a target
We don’t know why Elon Musk wants to buy Twitter. He says it would be a better business if it was privately owned by him. He is not making the most of the opportunities available to him, he said, adding in a letter to the board that the company is “the platform for free speech in the world” but cannot achieve this “societal imperative” in its current form and “must be transformed into a private enterprise”.
One thing is certain, he has put Twitter in play as a takeover target. Mark Cuban, the maverick American financier, said some of the big money-swamping tech companies — Google, Amazon, Facebook — will consider a takeover. At a cost north of $43 billion, that seems unlikely.