Money Matters: China's IMF Representative Battles IMF Head

Elaine Meinel Supkis

Sometimes very small matters that barely make the news end up determining the fates if billions of people's lives. I sense the arcane banking accords, the Basel II understandings and the Pillar I, Pillar II and Pillar III developments are part of the triggering mechanism that is going to play a key roll in the coming financial and political confrontation of the depressed and dying US and Japanese economic systems. As I keep pointing out, the world's #1 and #2 economies cannot both be running dying currencies simulatneously without explosive results. Today, I am going to compare an interview with the head of the Chinese delegation to the IMF and the head of the IMF itself. Ouch! They tell totally different stories about negotiations!

On June 15, 2007, the Executive Board of the IMF adopted the Decision on Bilateral Surveillance over Members' Policies. In this regard, a reporter of the Xinhua News Agency interviewed Mr. Ge Huayong, Executive Director for China at the IMF.

Decision on Bilateral Surveillance over Members' Policies:

Reporter: As I know, the Executive Board of the IMF has recently adopted the Decision on Bilateral Surveillance over Members' Policies (the new Decision), whereas you have expressed reservations about that adoption. Would you please talk about the relevant circumstances?

Mr. Ge Huayong: In 1978, The IMF formally allowed its members to adopt floating exchange rate regime. Since then, the Decision on Surveillance over Exchange Rate Policies (1977 Decision) has been used as guidance on IMF bilateral surveillance over members. During the past three decades, the Executive Board has conducted biennial reviews on the implementation of the 1977 Decision, and concluded with only three minor amendments to the 1977 Decision.

Mr. de Rato put forward the IMF's Medium-Term Strategy in August 2005, soon after he took his post as the Managing Director of the IMF, and claimed that modernizing surveillance was a central element in the Strategy. In March 2006, the Managing Director further decided that review of the 1977 Decision would be an important measure to improve surveillance. The Executive Board supported the IMF to improve its surveillance to adapt to the developments of globalization. However, Directors differed much in their views on the necessity to revise the 1977 Decision.

This is a very important statement and it is now being passed hand over hand, by the ruling elites running all the world banking systems and organizations. Certainly, this is floating back to a certain individual in the IMF. I am going to interspace Mr. de Rato's latest speech about IMF regulations and rules because this is one fight that is going to become rapidly, very, very nasty. The incredible thing here is when we read de Rato's comments, he basically lied about China's assent to the changes he and his buddies pretty much made in unison over China's obvious objections.

Speech by Rodrigo de Rato, Managing Director of the International Monetary Fund, to the Bretton Woods Committee
Washington, D.C., June 12, 2007

6. I would like to concentrate mostly today on surveillance of our members' economies and of the global economy, which is the core mandate of the Fund. I will begin by talking about how we can be more attentive to our members' needs. Being more attentive requires at a minimum two things: that we focus on the right issues and that we are responsive to new challenges.

It really irritates me, the 'little boy' talk these adults use. Bush does this all the time. Instead of giving us information and an honest evaluation, he likes to say things like, 'I am the decider who decides.' Or Rumsfeld saying that garbled mess about 'known knowns and unknown knowns and known unknowns,'---bring the Knowns! And they are clowns. What is this yap about 'right issues and 'new challenges'? Evidently, the Chinese dragon was not very impressed with the Western and Japanese bankers throwing fairy dust in its eyes.

By the way, a word of warning: dragons have double eyelids. It is pointless to throw dust in their eyes. Back to the Chinese banking dragon discussing its hoard and what the IMF can do with its Ratzo director:

Three Executive Board meetings have been held since July 2006 to review the 1977 Decision and discuss the necessity of revision and detailed revision plan. Despite the discussions, division still remained in whether it was necessary and how to revise the 1977 Decision.

In spite of considerable reservation among many developing countries including China on the revised version proposed by the IMF staff and submitted in late May, the Fund speeded up its pace of reviewing the 1977 Decision early this June, and intended to bring it to the Board for adoption by a majority of votes cast on June 15. Considering the new Decision would replace the 1977 Decision as a legal framework for IMF surveillance over members' policies, we are of the view that such an important decision should not be made before the broadest consensus across the whole membership was reached.

China expressed reservations about the adoption of the new Decision, for division remained in a number of issues, in particular, the new Decision was unable to address concerns of some developing countries. China's standpoint received the understanding and support from some of the developing countries. However, the Board, which was perceived to be pushed by the IMF management and a few developed countries with a majority of voting power, adopted the new Decision after all. I feel regret for that.

This is pretty firm. China is obviously outraged at the speeding up of the process concerning the way countries report to the IMF and the way the IMF itself is structured. China is no longer the outsider begging to come in, it will be the world's #3 economy in another mere 4 months or less! This is highly significant.

The fading European powers joined with the US and Japan to attack China's growing girth. Namely, the world's strongest currency joined with the world's two weakest to attack the Bank of China that has the world's biggest FOREX reserves and a healthy yuan! This is a conspiracy, of course, a hostile conspiracy. When the G8 met this year, they attacked China repeatedly while being totally mum about the dollar and the yen, the Bert and Earnie duo of the developed world.

Here us de Rato lying yet again:

5. The central goal of the Fund's Medium-Term Strategy is to help our members address the challenges of 21st century globalization. To do this, we need a Fund that is attentive to the challenges our members face; a Fund that has the resources to help them meet these challenges; and a Fund that is trusted to give evenhanded advice and fair representation to all of our members. And we need to apply these principles to the changes we are making in each of the Fund's main areas of work, and to reform of our own governance and financing.

7. On the question of focus, I proposed some time ago that the Fund revisit the legal framework for our surveillance, which is set out in the 1977 Decision on Surveillance over Exchange Rate Policies. Work on reviewing this is now well advanced, and our Executive Board will be meeting later this week to consider the issue further. I don't want to go into detail today on what I expect to come out of that discussion—that would preempt the Board—but I do want to give some background on the motivation for proposing changes.

Blah, blah, blah...and so on. He is pretty slippery, this Ratzo character! He only wants to be fair! To do this, he must lie and misrepresent what really is going on. This is why he can't give any details! And his background discussion of motivations is TOTAL BUNK. I know what is motivating the IMF! They did warn the US and Japan they were making major mistakes and they did mention the trade imbalance but do note that since then, the entire burden of fixing this mess has been laid at China's doorstep!

I have shown in the past that the US had a trade imbalance with the world back when Madame Mao was terrorizing the Chinese people and their only export was the Little Red Book! China's trade with the US was miniscule when the Plaza Accords were finalized in NYC in the mid 1980s! That was a concerted attempt at making the dollar weaker than the yen and the DM!

So it is pure hogwash, China is causing our overspending sprees. Back to the Chinese Dragon who waxes wroth:

Reporter: Could you discuss any differences between the new Decision and the 1977 Decision?

Mr. Ge Huayong: The New Decision, although its name, compared with the 1977 Decision, was revised to be Decision on Bilateral Surveillance from Decision on Exchange Rate Policies, focuses in fact more on IMF surveillance on members' exchange rate policies, and establishes detailed indicators of the movements of the level of exchange rates. For example, the concept of fundamental exchange rate misalignment and indicators such as large and prolonged current account deficits or surpluses all serve for that purpose.

China, like myself, knows perfectly well who the guilty party is who has been handing out pieces of paper like the world is a big ticker tape parade. The US has been running deficits for 35 years, much of my life. The IMF had done absolutely nothing about this. Indeed, no international organization has so much as lifted a finger. Indeed, yet again, not only do they not do a thing about this, they ENABLE IT! Like the spouse of a drunk handing him a six pack every time he polishes off the last case of beer.

Ever since the Plaza Accords, the Bank of Japan bank rolled US wild spending because it benefitted the Japanese industrialists. Even when Japan's banking system and international trade took a huge hit at home thanks to the Gulf War I and the US recession, they never altered their goal to outstrip US industrial output and then ship it to the US. So they bought up nearly a trillion dollars and then held this huge stash out of circulation, allowing the US to run up a trillion in trade deficit with Japan!

The IMF didn't say a peep nor did it take measures to prevent this. When China suddenly, in less than 8 years, accumulated even more dollars and held them out of circulation, the IMF, the US Treasury and the Japanese all started screaming bloody murder. Aside from this being very childish, the stupidity of accusing China for doing what Japan had done for a long time is unfair. The IMF chief would love to have us think he and his fellow conspiritors are just being 'fair' when they gang up on China and suddenly change the rules. But this is, like most things said by all the heads of banks in the west, nothing but lies.

And here is Rato again:

8. The Fund's core mandate is to promote international financial stability. Our monitoring of exchange rates plays an important role in enabling us to perform this task. Exchange rates are a key link between countries' economies, and developments in exchange markets are often a leading indicator of economic problems. When economic relations between countries become disorderly, exchange rates can move abruptly, often with terrible consequences. And when a country maintains an exchange rate for a sustained period of time that is out of line with fundamentals, it may gain an unfair competitive advantage if the rate is undervalued. Or it may set itself up for a crisis if the rate is overvalued. In either case its policies are likely to result in misallocated investment, for partner countries as well as for itself. These are the things that, since the Second Amendment of our Articles almost thirty years ago, it has been the Fund's job to try to prevent.

9. But exchange rates are not the whole story. Balance of payments problems can come from many sources, not just "wrong" exchange rates. And it is not always exchange rates that need to change. Sometimes it is domestic policies that need to change to make an exchange rate sustainable. Or more often it is both exchange rates and domestic policies that need to change. Of course, we should always be looking at where the exchange rate is and what policies are driving it there, and paying special attention to exchange rate policies—both intervention and related policies. But I see it as a major deficiency of the 1977 Decision that it has nothing to say about policies other than exchange rate policies. At the same time, the Fund must preserve its focus and not be distracted from its mandate and comparative advantage.

HAHAHA. Disorderly markets are a problem? No shit, Sherlock! And who, pray tell, has made world banking, world financial markets a tad chaotic? Since 1970, no, since a certain someone devalued the currency, sold off 75% of the gold in Fort Knox and ran a fruitless war in Vietnam? Who was this person? This nation? And how did this certain nation 'fix' everything via rank inflation?

Ah, the answer is not North Vietnam. Nor China. Not even Russia. When America debased its currency and created inflation, our trade deficit was below $5 billion a year. When the first Chinse ship floated over here, our trade deficit was already well over $100 billion a year. Inflation was a real problem. Indeed, China 'fixed' our damn inflation but dropping wages and dropping industrial overhead like crazy. Boy, were we all happy as can be! We LOVED this a lot. Our rulers were overjoyed.

Only now are they unhappy.

From Market Watch:

China announced late Friday afternoon it will raise interest rates by 0.27 percentage points, a day after data showed the economy expanded rapidly in the second quarter, putting the nation on track for its fastest annual growth in more than a decade. In a statement published on its Web site, the People's Bank of China said it will raise the one-year yuan lending rate to 6.84% from 6.57% effective from Saturday. The one-year deposit rate will rise to 3.33% from 3.06%. The move marks the fifth time since April 2006 China's central bank has lifted the benchmark lending rate. Data released Thursday showed China's economy expanded 11.9% in the second quarter, up from 11.1% from the preceding three-month period. For the first half, China's economy expanded 11.5%, suggesting current momentum will see the economy post its strongest full-year growth since 1994, when GDP climbed 13.1%.

Is the US raising interest rates due to inflation? No? And the infernal Bank of Japan, are they raising interest rates above near zero? No? HAHA! But the Dragon is! And this has concequences:

From Bloomberg:

The rising cost of goods the U.S. imports from China may be an early warning signal that central bankers from the U.K. to India are about to pay a price for a cause they've championed: globalization.

China, a source of cheap manufactured products for the past two decades, may be starting to export inflation as the world economy grows at the fastest pace in a generation.

Prices of U.S. imports from China increased 0.3 percent in May from the previous month -- ``the first sign I've seen that this disinflationary pressure'' from China's cheap goods may be fading, former Federal Reserve Chairman Alan Greenspan said last month. Prices rose 0.3 percent again in June, the biggest back- to-back increase since record-keeping began in December 2003.

With monetary policy makers struggling to contain pressures from other forces beyond their control -- increased trade, faster capital flows and record commodity prices --officials including Bank of England Governor Mervyn King and New Zealand's central bank Governor Alan Bollard may have to raise interest rates or maintain them at higher levels for longer than they might prefer.

Confusion is growing. This is easy to understand: our rulers want to have their Chinese cookie and eat the Dragon, too. Alas for them and for us, this is not only impossible but dangerous! I know the Chinese ruling class. My parents knew everyone from the Mao days to the modern days. I lived with them and around them.

They have no intention of being our servants nor our slaves. They intend to dominate Asia and they intend to clip our empire down by around 50%. And this is NORMAL. This is what ANY NATION that has 25% of the world's population should expect! The US is the nation that is out of whack with reality. We have 3% of the world's population and we consume 25% of the world's resources! There is no way to square this circle. The US either consumes a lot less or we have WWIII.

From Bloomberg:

The yuan rose by the most in almost two weeks on speculation China will pursue a stronger currency to cool economic growth, after the central bank last week raised interest rates for the third time since March. Bonds may drop.

A stronger yuan would curb export sales that have flooded the financial system with cash, driving the fastest pace of economic expansion in 12 years in the second quarter. The currency gained 0.4 percent in June as the trade surplus widened 87 percent from a year ago to an all-time high of $26.9 billion.

The yuan is rising in value not because of speculators or even the higher interest rates. It is now rising because the Chinese are no longer putting dollars in its FOREX reserves. Every dollar we send to China is now going to enter the world's money stream! And this has concequences, everyone! In three years there will be no more SUVs driving madly about the US. There will be many mad SUV owners.

From Bloomberg:

The $100-a-barrel oil that Goldman Sachs Group Inc. said would prevail by 2009 may be only a few months away.

Jeffrey Currie, a London-based commodity analyst at the world's biggest securities firm, says $95 crude is likely this year unless OPEC unexpectedly increases production, and declining inventories are raising the chances for $100 oil. Jeff Rubin at CIBC World Markets predicts $100 a barrel as soon as next year.

We will be paying $100. Japan will be paying ¥12,115 and the European Union will be paying EU 72.30 and China will be paying CYN 757.27. There is an old Chinese curse, may your wish come true. In the case of the strong yuan, this is certainly a possible curse from hell! Because we are competing with China for the world's oil! And much of this oil sits under the feet of some very irritable people who are increasingly angry with us and are now waging wars all over the planet with us as they strive to get us out of their lands.

What if they sell oil to us with an extra tax in either money or blood? This is already happening. The oil from Iraq is the most expensive oil in the world...for us! A trillion dollars pumping it and lots and lots of blood, loss of face and destruction of our once mighty military machine. Which, quite frankly, we cannot afford. We go to China for funds to pay for it!

Back to the top story about the Chinese IMF banker complaining about the conspiring EU/US/UK/Japan bankers:

Reporter: How do you comment on the new Decision?

Mr. Ge Huayong: First of all, the most remarkable changes in the world economy in the past three decades are economic globalization, adjustment of international division of labor and advances in science and technology. The IMF should, based on these fundamental changes in the world economy, adopt a new way of thinking in the discussion of the role of exchange rate in economy and adapt to its surveillance over exchange rate policies against the backdrop of evolving economic reality. Second, the IMF surveillance should deal properly with the relationship between external stability and internal stability. Internal stability is always the highest priority in any countries' design and implementation of economic, financial and monetary policies so as to contribute to external stability. An external stability would be unsustainable if it was achieved at the cost of internal stability and therefore, the most effective and feasible way to achieve systemic stability is through promoting an external stability consistent with internal stability. Third, concepts and indicators introduced in the new Decision should be clear and accurate; otherwise they might invite controversies and be misused. The new Decision is far from being satisfactory in this regard.

Hahaha. I love this! The IMF is famous for inspiring riots, insurrections and coups! This is their function! Far from 'saving' anyone, they SAVAGE the poor. Right now, they have stopped. Why?

Because Hu and Wen always pre-empt them! When the knives were out for Argentina, out popped the Chinese and they gave better terms on their own loans! When the IMF was kicking the Africans in the teeth, the Chinese had their wonderful convention with all the African nations. My, how did the western press howl like banshees over that one! They accused China of enslaving the Africans!

Indeed, the Chinese dragon here refers to not only the Africans but the Arab nations when he suggests the IMF doesn't listen to them at all! You can bet, this isn't all talk of his, either! They have this thingie called 'telephones' and the Chinese figured out how to use them to call up people and make arrangements with them.

Anyway, the 'internal stability<=>external stability phrase is a gem. And true, too! The IMF always sacrifices internal stability when they want some external goodie gum drop for the international banking community which represents the various empires of the last 100 years, you know, the guys who started WWI and WWII.

And back to Rato:

11. There is another aspect to attentiveness, which is identifying and responding to problems in innovative ways. This is what the Fund has done on the issue of global economic imbalances. You all know about our first Multilateral Consultation, which focused on reducing global imbalances while sustaining strong global growth. During the recent Spring Meetings, the five participants—China, the euro area, Japan, Saudi Arabia, and the United States—jointly set out their policies in a document circulated to ministers representing the Fund's 185 members. This is a very significant development. The policy plans set out by the participants were concrete and mutually consistent. If implemented, they will reduce imbalances while sustaining growth. And the fact that the participating countries agreed to put forward these policies and discuss them in a multilateral setting shows their recognition of the global nature of the problem, and shows their commitment to multilateralism.

'We are the innovators who innovate!'---Love this. And the IMF is reducing world imbalances...gads. This is part of the plan to make me laugh to death. Better than sending CIA assassins up my little mountain. The statement that China and Saudi Arabia both agreed to this new plan to fix the world banking system before it explodes is another pure LIE. The Chinese representative is very clear that China and Saudi Arabia did NOT agree to the agreements at all! Quiet the contrary. And this is why this little interview will cause suddering and shaking in the great Imperial banking houses while cheering up all the third world nations savaged by the IMF in the past.

Back to the new leader of the Third World nations:

Reporter: Given that there were many different opinions in the course of discussions, how do you see the implementation prospect of the new Decision after its adoption?

Mr. Ge Huayong: Whereas the questions I raised above, I do not think it to be an ideal decision and problems that might emerge in its implementation are as follows: on the one hand, because consensus had not been reached on some important issues and fundamental concepts, the implementation of the new Decision might result in significant difference with regard to policy assessment and policy recommendations, particularly if some imprudent concepts and methodologies that are not accepted widely were adopted in the surveillance, the IMF's reputation and surveillance function might be substantially undermined. On the other hand, the IMF surveillance under the guidance of the new Decision might put a majority of developing countries, emerging market economies in particular, under more pressure, while have little impact on developed countries, therefore unable to reflect the equality of surveillance. With a scrutiny into the global economic architecture, you will find that those that could exert vital influence on the global systemic stability are mostly the countries issuing international reserve currencies. The New Decision does not differentiate de facto influences among countries on systemic stability and consequently, the IMF might pay insufficient attention to its surveillance over systemically important countries issuing international reserve currencies.

Although adverse impact might arise during the implementation of the new Decision, I still hope that the IMF could adhere to the principles consented by members and explicitly enshrined in the new Decision, try its best to avoid any deficiencies that might undermine the effectiveness of surveillance, and concretely contribute through its surveillance to international financial stability and economic prosperity.

Reporter: What impact would you foresee on China should the new Decision be implemented?

Mr. Ge Huayong: China has always maintained good communication and dialogue with the IMF. The IMF values highly and supports China's reform and opening-up policies and economic development. In recent years, China's exchange rate regime reform, promoted in accordance with the three principles of "being self-initiated, controllable and gradualistic", has progressed smoothly, winning the understanding and support of a majority of the IMF's Executive Directors. We cherish such cooperative relationship and are ready to further cooperate with the IMF on the basis of mutual understanding and respect and in accordance with the Articles of Agreements. We would like to push forward the exchange rate regime reform under the guidance of the above-mentioned three principles. I believe that, as long as the IMF pays due regard to members' circumstances, takes into account the fundamental changes in the international economy and finance and holds an objective and neutral position with mutual understanding and respect, it is able to improve and strengthen its cooperation with members. I expect the cooperative relationship between China and the IMF to be continuously consolidated and improved through joint efforts by both sides.

As usual, the Chinese talk about harmony and getting along and not rocking the boat. This is most amusing since the Japanese are hacking holes in the world's financial boat and the US has grown so bloated, its end of the ship is sinking rapidly. China is basically saying, if everyone wants to get along, they have to imitate China NOT JAPAN! And this takes me back to the basic fact here: the world's #1 and #2 economies both have dying currencies that roil world banking systems as well as the commodity and exchange markets!

In the middle of Ratzo's speech is this little gem, an item that made all the gold bloggers and reporters online to sit up and yell:

Selling a small proportion of the Fund's gold reserves—400 metric tons, which is equivalent to one-eighth of total Fund holdings of gold—and investing the proceeds. Recognizing the need not to disrupt the gold market, the committee urged the Fund to coordinate with the Central Bank Gold Agreement so as not to add to the announced volume of official gold sales.

I don't know about you all, but 400 metric tons ain't a feather. I buy coal, for example. If my yearly supply of coal were gold, it would be 1/400th of this and I would be very, very rich. I could use $22 million. I find it very odd, nay, insane, that all the major conspiritor bankers in the world, namely, Europe, Japan and the US are all saying gold is worthless and they don't need it at all in any way, shape or form because it is old-hat!

Except for China. China is now the #3 buyer of gold. I'm certain the Chinese are perfectly happy the price of gold will drop again thanks to this huge infusion. They will happily trade crummy, dying dollars for GOLD! This gold will vanish into China's vaults and caverns and you can bet, they won't let it back out all that soon, either.

This is so stupid! If the Chinese want something, we should reconsider our rejection of this thing! We are such babies! Do we really imagine the world will go 100% for fiat currency right when the #1 and #2 economies are both killing their currencies and destroying their financial stability at home???? Of course not!

And here is Ratzo with some more lies and more evasions:

18. The third principle that I set out was that the Fund must be trusted to give evenhanded advice and fair representation to all of our members. We must meet this duty in our surveillance work. Some of the aspects of the Board's discussion of surveillance on which there has been very strong agreement is that surveillance must be evenhanded and candid, regardless of the member concerned. If you look at our reports I hope that you will find our discussion of China's exchange rate as candid as that of Chile's, and our discussion of fiscal policy in the United States as firm and direct as our discussion of the budget of the United Arab Emirates.

And how firm was the discussion with the US? Or did they give the world's biggest baby a huge lollipop? China knows! The G8 didn't condemn either Japan or the US! They ganged up on China. And Russia. Next: I talk again about the Basel II accords and the Pillar I, II and III business. The unwinding of this big ball of twine is now accelerating, the news everyday brings bad tidings so far as this latest attempt at eliminating risk and using conspiracies of bankers to 'fix' fundamental problems caused by these very same people in the first place.

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