|Copyright:||(c) 2010 Voxant|
Show: THE CHARLIE ROSE SHOW
Head: Money Problems: A Conversation With IMF Managing Director; How to
Conduct a Story – Part 1
Sect: News; International
High: Tonight a conversation with
Spec: Economy; World Affairs; Financial Services; Currency; Music
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SIMON RATTLE, CONDUCTOR: I want to hear a story being told. I want to hear — I want to hear that if the violas play a phrase in different way, that the singer will hear that and react. I want to hear different enclosures. I want to hear the music shimmer. I want it to be when one note begins and ends.
You want all kinds of things that are impossible together. And you want people to breathe together in one way. So a lot of impossibility.
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During and after the global financial meltdown of 2008, the IMF broker rescued packages to countries like
Strauss-Kahn has the situation in
I am please to do have
And what I think is to have a comprehensive plan facing all the different problems, the fiscal deficit, the banking problem. And unless the leaders in
So there really now is to have a big plan as soon as possible. I understand that the leaders are aware that it takes some time. That`s the problem. You have 16 countries and each is to make a decision, and the decision-making process is really, really slow.
And until now the choice hasn`t been made with the different countries,
So I think it`s very difficult for them to build something like especially at the moment where it appears that it will be used for bailing out some other countries having the same virtues and economic behavior that the Germans, for example.
But the problem in the banking sector is limited to small number of banks. The big banks are safe and so I think it`s manageable. It`s manageable. I would say it`s a problem which is close. We`re talking about fiscal deficit, the banking sector. All this would appear as the focus. The real question is what`s the engine for growth in the coming ten years?
On the other hand they need to have some structural reforms making the economy more innovative. And this has been said for years by the IMF not only by the IMF but other institutions too. And they move very go very slowly and they do something. It would be unfair to say they do nothing but they`re not acting fast enough. So the question of growth and the growth of unemployment is the real question for the euro zone.
Some have it. It`s not right to say it looks contradictory to fix the fiscal problem at the same time we absolutely need to support growth. The answer depends on the country. It`s very diverse, that`s part of the problem, but it could be part of the solution.
So it`s tough, difficult, especially for the most vulnerable, and we at the IMF are trying to manage the situation that it`s partly protected. But on the other hand the fact the man on the street understand what`s going on leads to the result of the election they just had a month ago where the government finally won the election, maybe surprisingly for many, but won the election. What does that mean? It means that the demonstration, protesters, which I can understand. And if I was a Greek citizen, maybe we would be demonstrating the same way because people find it unfair. It`s not their responsibility that the situation is so dire. On the other hand most of the people do understand that there`s no other way. They have to do it. It`s decades of mismanagement that has to be solved a couple years, it`s very difficult. But they understand it. And that`s why I guess they will succeed.
But then how to do it? The different measure that we use, increasing taxes, they kind of taxes or another kind of taxes, that`s the role of government. And they take their own responsibility. Sometime we don`t agree, we say you shouldn`t do that. But at the end the countries are decide what they have to do.
So it`s not bad, but it`s uneven. And unevenness itself creates roots or seeds of a possible crisis, especially because when you have high process peck of growth in some part of the world and very low growth in other part of the world, it kind of flows from one part to the other one, which is just normal. There`s nothing wrong with that.
But the problem is the flow is too big for the reception countries to receive it without being totally disturbed and then you may have disruption in the emerging countries where a couple are huge. We`re talking about
You remember two years ago, two and-a-half years ago most people will say that we will have something as severe as the Great Depression. But we avoided it. I`m not saying we didn`t have any crises at all but we avoided something. Why? Just because different countries, big countries disapproved, the most important countries decided to work together and they succeeded.
So the question today is that many may believe wrongfully in my view that the crises is over and go back to their domestic problem and forget all about the global coordination. So our role is to try to force this coordination among the G20 countries.
The problem is to show them that even as they have different interests, they`re better off if they work together. Everybody is doing his homework rather than trying to find domestic solution, and that`s the rule. We provide studies, we provide advice showing that the win/win solution. Everybody decides to do for himself and then you have the jobs in terms of people left out in poverty if you work together.
The Chinese didn`t have to do, the U.S., the Europeans and so on. You`re talking about China and the so-called global imbalances, the fact that one half of the resources of the crisis is having countries with big surpluses, China is a good example, and the U.S. being the other example.
And the deficit problem in the U.S. I won`t say is not linked to the currency and the fact that the Chinese currency is undervalued in our view, substantially undervalued. But that`s not the whole story.
And the result of this will be the increasing the value of the country. When we talk with the Chinese authorities, they tell us we understand but we`re in charge how far our own people and we have to deal with our own people, which is just fair. The same thing is the same with other countries.
Our role in the IMF is to try to explain to everybody that there is a win/win scenario in which everybody will be better off and providing that – –
So the idea of moving together to reduce imbalances is right. The idea that you have kind of a silver bullet that can solve your own problem without any costs — in the U.S. economy the deficit is a big question. Today the main question is to support growth and I think the U.S. government is doing right. But in the median term solution has to be found to do it through the deficit. So this will not be filled by moving Chinese currency.
The question on the contagion is the right question, absolutely right in saying this. And to make sense in an economy like the Spanish economy is exactly what the European need today and the decision to do that have a lot of political education in terms of some countries bailing out some other countries, and that`s what they have to solve.
So the solution we propose is to have what we call kind of a tax insurance premium on the banking sector in normal times to accumulate resources that could be using in times of crisis or going to taxpayers asking for money.
But this kind of tax is modern place, and I`m afraid we don`t have a lot of success with it. And so the question of what kind effort should be put on the crisis is something which is a real question. The decision which hasn`t been made until now is the stability of the system was more important and the problem of contagion many that you`re talking about is more important than anything else. And there is so no such hacker in place.
Beyond all this you have the same problem which is the final taxpayer has to pay for a mistake made by the banking sector. And it`s absolutely unacceptable that the bank may take a huge risk and the result of high losses then society has to pay the losses. So you have to fine and that`s why that will finally make them pay for him seven and insuring himself against the risk he`s taking.
And the resources we have, that`s huge, but significant and may be used as a precautionary reserve for countries. I`m just back from
Another way if you kind of collective pot which is IMF where if needed you have kind of a contract with IMF telling that if you need the reserves we will provide them with reserves. And I just did this with
That`s a big change in the rule of time. It goes back to the use of institution 60 years ago. In 1944 people were talking about this idea having something which regulates the system.
Those countries are running very fast. That`s good for us because they create new demand. But if you want to be able to compete, then you need to keep advanced, and the place in which we can`t have this kind of advance is research and education.
When will you make a decision as to whether you will go back to