G-7 and IMF

D

drsteph

Both the G-7 and the IMF met this weekend, with apparently some significant results.

1. G7 to allow Japan to continue to tighten

http://www.boston.com/news/world/as...s_free_hand_on_policy_as_boj_aims_to_tighten/

2. After what was probably an unproductive meeting between Bush and Hu, the big guns are being called in to force China to revalue and ease the trade deficit lest it upset the reserve currency status of the dollar (& its alternative, the Euro)

http://today.reuters.com/business/newsarticle.aspx?type=tnBusinessNews&storyID=nN21270692

3. Further adding to the pressure on China to revalue, the IMF is being called in as the new G7!

http://business.timesonline.co.uk/article/0,,16849-2149187,00.html

http://news.ft.com/cms/s/28488ca2-d301-11da-828e-0000779e2340.html

4. And check THIS out!!!

Economists said the United States needs the dollar to fall again to help cut its ballooning trade gap, but Europe and Japan do not want sharp rises in their currencies, which could make their goods uncompetitively expensive and snuff out fragile economic recoveries.

So if the dollar must weaken, it is best it weaken against the currencies of non-G7 countries.

But the IMF, using the leverage of its 184-strong membership, appears the only institution with the clout to broker a deal between the old-line industrialized countries and the emerging powerhouses of Asia and elsewhere.

"This sounds like a good idea," said James Glassman, chief U.S. economist with JPMorgan Chase in New York. "It does make sense in much of the world."

Whether the fund will be more successful in convincing countries to take real action on policy and exchange rates remains to be seen, but there is a big opportunity in simply having all players at the table with equal status.

"Elevating the IMF above the G-structures in terms of foreign exchange coordination right now is very sensible," said Jim O'Neill, chief global economist at Goldman Sachs in London.

"Currency market interest in what the IMF is doing and saying is now higher than it has been for many, many years. It is now up to the IMF to seize the moment."
More...

http://www.ndtvprofit.com/homepage/news.asp?id=246001

5. Note the above which allows the IMF to monitor and potentially enforce trade disagreements. Considering the disaster of the doha round of trade talks currently set to go useless as of 2006 when the president's authority to unilaterally negotiate expires, this is probably looked upon as a means to end the doha round and gain some useful results.

6. Note that pressure can only be applied by the IMF in such cases where there are outstanding loans owned by the IMF or world bank. What is the BRIC's exposure to the IMF/World Bank?

So... you have until September to set up your trades. If you buy what these reports are saying, how do you plan your macro strategy? Aside from long China equities (a no-brainer), what else?
 
It's funny the whole group has taken China on.

There is a article in barron's this weekend that mentions the Yuan revaluation spectacle.

It compared it to when Japan revalued it's Yen in the 80's because of US pressure and the terrible consequences it had for the country, which is just finally getting back together.

A Chinese "pop" could really hurt. Wonder if these guys really know what they are asking for....

Never a dull moment in this business.......


:)
 
Once debts are paid...the IMF has no further influence....

The IMF will never overcome politics....

The IMF has implemented ruinous policies to the developing countries...and are always a big big negative politically...

The IMF will never tell China what to do....and now that Brazil and Argentina are rid of them...they would never go back to them...

Because along with the loan come unwanted US demands that are good for the US ...and bad for the local voting population...

No...the IMF will not be a solution....besides where is it going to get the kind of money that the US is going to need in the near future??

The IMF will never represent a politically favorable climate....
 
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