STOCK MARKET WATCH -- Monday, 1 April 2013

[OrwellwasRight]

39. Interestingly, the IMF is beginning to renounce its "free capital" stance.

Last edited Mon Apr 1, 2013, 02:17 PM - Edit history (1)

But those who benefit by it refuse to change their tune.

http://www.iisd.org/itn/2013/01/14/the-imfs-new-transfers-policy-and-the-trading-system/

In late 2012, the International Monetary Fund (IMF) officially endorsed an “institutional view” on the management of capital flows. Though the IMF will continue to urge nations to eventually liberalize all capital transfers, henceforth the IMF will advise nations, under certain circumstances, to deploy capital controls on inflows and outflows of capital. In its new view the IMF pointed out that such advice may conflict with obligations that nations have under trade and investment treaties, and offered to provide a forum for reconciliation. This short note provides an overview of the new IMF view, pinpoints how it may conflict with country obligations under trade and investment treaties, and discusses remedies for reform.

What the IMF decided

On December 3, 2012 the IMF made public an Executive-Board approved “institutional view” on capital account liberalization and the management of capital flows. In a nutshell, the IMF’s new ‘institutional view” is that nations should eventually and sequentially open their capital accounts (IMF, 2012b). This is indeed in contrast with its view in the 1990s that all nations should be uniformly required to open their capital accounts regardless of the strength of a nation’s institutions. The IMF now recognizes that capital flows also bring risk, particularly in the form of capital inflow surges and sudden stops that can cause a great deal of financial instability. Under such conditions, and under a narrow set of circumstances, according to the new ‘institutional view’ the IMF may recommend the use of capital controls to prevent or mitigate such instability in official country consultations or Article IV reports. In other words, the IMF now sanctions staff and management to recommend the use of capital controls to nations under certain circumstances. And under a very narrow set of circumstances a nation may receive recommendations to discriminate capital flows based on residency.

The United States Trade Representative, responsible for negotiating all trade agreements and for carrying out policy at the WTO, has yet to respond that it will adjust its negotiating goals accordingly, likely because its Wall Street and US Chamber of Commerce constituents do not want to have to deal with any restrictions on removing their money from developing countries when their economies go south -- even though such rapid extractions of money compound the problem and often eventual losses for investors, not to mention creating havoc for domestic working people.