Friday, May 20, 2011

The IMF’s Golden Opportunity

Already the maneuvering is underway in respect of who will be the next managing director of the International Monetary Fund. Dominique Strauss-Kahn’s resignation was a big blow to the French. So some are hoping for a French comeback with the President Sarkozy’s finance minister, Christine Lagarde, though under the headline “Dirty?” the Drudge Report is fronting a story from France24 saying that the ruling party is “in hot water” over her “alleged involvement in awarding millions in damages to a high-profile business tycoon.” Others reckon the moment is right to end the assumption that the IMF post will go to a European and instead give the highest profile post in international monetary affairs to someone from one of the newly emergent economic powers such as China or Brazil.

Well, we find ourselves wondering, what about someone like Robert Zoellick? He is currently the president of the World Bank. The way things have, for the most part, been run in recent decades, the World Bank has gone to an American and the IMF to a European. But if the time is right to re-think that, why not explore something different, making the decision based not on regionality but on policy. Or, give the IMF to Mr. Zoellick and let a European or Asian lead the World Bank. What intrigues us about Mr. Zoellick is that he startled world leaders by issuing in the Financial Times an op-ed piece calling for the restoration of a role for gold in global monetary matters.

It was particularly startling given Mr. Zoellick’s membership in the status quo establishment. He had, after all, been the United States’s trade representative and a partner in Goldman Sachs. But there he was in the Financial Times, itself a left-of-center newspaper, calling for, among other things, a plan “to build a co-operative monetary system” that, he said, would need to involve “the dollar, the euro, the yen, the pound and a renminbi.” And, he added: “The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values.”

Mr. Zoellick clearly comprehended the newsworthiness of what he was saying. “Although textbooks may view gold as the old money,” he wrote, “markets are using gold as an alternative monetary asset today.” The reaction was, for a few hours, stunned silence. “You could hear a pin drop,” wrote James Grant in the New York Times. The FT’s redakzia was so un-nerved by what they had printed that they promptly issued an editorial saying that Mr. Zoellick didn’t know what he was talking about and that, indeed, the gold standard is, like Keynes once pronounced, a “barbarous relic.”

All the more reason, we say, to put Mr. Zoellick on the list for managing director of the IMF. No doubt it’s too far a reach for Mr. Obama, but it’s fun to dream. Mr. Obama is, after all, the man who ran on the campaign for change. And he once named a Republican, Jon Huntsman, to be ambassador to Communist China. Why not send, in Mr. Zoellick, a Republican to the International Monetary Fund. The fact is that restoring a role for gold in the international monetary system — and our own — would be a clarifying step for both parties, indeed would diminish the political-ness of international monetary matters and help restore the ability of the system to transmit true prices. If we had someone to lead the IMF into this struggle, it would give the institution itself a new life and purpose in the years in which it will be trying to put the tragedy of Mr. Strauss-Kahn behind it.

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