Bloomberg reports that Christine Lagarde has stated that it is unfortunate that there are such things as democracies because they slow down changes which the market wants.
Her exact words
“It would be lovely from a market perspective if it was not just ‘currently’ but immediately, a signed, sealed, delivered done-deal overnight,” Lagarde said. “Unfortunately, those of you who have the privilege of belonging to democracies know things do not happen in that way, things take time.”
Someone should remind Lagarde that the people are the market, unfortunately for people the politicians forget who the most important people in the world, the electorate.
If the international community doesn’t work together, “the risk from an economic point of view is that of retraction, rising protectionism, isolation,” Lagarde said. “This is exactly the description of what happened in the ‘30s and what followed is not something we are looking forward to.”
I am not sure what Lagarde is getting at here, if she is implying that the current economic conditions are what led to WW2 she is mistaken.
http://en.wikipedia.org/wiki/Reichsbank
http://en.wikipedia.org/wiki/World_War_I
http://en.wikipedia.org/wiki/Weimar_Republic
It seems that Lagarde is claiming that closer integration is the way forward. She talks about governments in the Eruozone working closer together as being the answer.
She is exactly wrong but she is not the only one
In principle, more centralized fiscal and economic policies, including regional transfers, could prevent or damp such cycles. The proposed set-up does nothing to correct or prevent new imbalances, though. The underlying problems of weak economic growth in the euro area aren’t solved, and may be made worse by years of austerity. – Sebastian Dullien professor of international economics at HTW Berlin-University of Applied Sciences and senior policy fellow at the European Council on Foreign Relations. The opinions expressed are his own
How reducing diversification and concentrating pressure on one leg of a chair or indeed reducing the number of legs on a chair to one can increase stability is simply nonsense.
The problem with the economies in the Eurozone is not the governments per se , but a problem of the banks.
The governments in the Eurozone have major problems, no question, but these problems are down to the banks lending the governments more money than the governments themselves can service.
So the banks are at the source of the problem and the banks are the ones who are in trouble now.
The answer is definitely not closer integration of the baking industry and closer integration of countries economies, which are directly controlled by the banks.
The current economic problems in the Eurozone are down to banks making the same mistakes at the same time and having to face the consequences of their bad decisions at the same time.
If there is one thing that Europe does not need it is closer economic integration of the banks/economies.
The fact that it seems most of the major banks in Europe have made the same mistakes at the same time to roughly the same degree should show to anyone that there is something fundamentally wrong with he financial system.
There does not appear to be any real competition between the banks, in fact they seem to work together extremely closely.
They way forward for Europe is greater stability and the only way you can stabilise something is to move its support legs further apart.
There needs to be less integration between banks/countries and more diversification.
Diversification will ensure that problems are isolated and reduce the chances of all parties having problems at the same time.
Independence of banks and economies will help smooth out problems that are experienced in one corner of the diversified system.
Diversification and independence help smooth out any booms or busts that may be caused/happening in individual countries/banks. Diversification will also make it easier for banks/countries to help each other in times of crisis because they will not be all experiencing the same problems at the same time.
By bringing the banks closer together it is akin to bringing the legs of chair closer together and expecting it to be more stable. The results of closer cooperation and closer integration will inevitably lead to greater instability.
It is a simple fact of economics and physics.
————–
IMF’s Lagarde: Europe Crisis ‘Escalating’
By Nicole Gaouette – Dec 15, 2011 7:39 PM GMT+0200
IMF Managing Director Christine Lagarde gestures as she addresses a press conference during the second day of the G20 Summit on November 4, 2011 in Cannes, France. Photographer: David Ramos/Getty Images
The European debt crisis is growing to the point that it won’t be solved by one group of countries, Christine Lagarde, the managing director of the International Monetary Fund said today.
Lagarde said that if countries don’t work together, the world will face a situation similar to the 1930s, before the world slid into World War II.
“There is no economy in the world, whether low-income countries, emerging markets, middle-income countries or super- advanced economies that will be immune to the crisis that we see not only unfolding, but escalating at a point where everybody would actually have to focus on what it can do,” Lagarde said.
If the international community doesn’t work together, “the risk from an economic point of view is that of retraction, rising protectionism, isolation,” Lagarde said. “This is exactly the description of what happened in the ‘30s and what followed is not something we are looking forward to.”
Lagarde said the world economic outlook “is quite gloomy” with pervasive downside risk, downward revisions, slower growth than expected, higher deficits than predicted and public finances in shaky condition. “And that is pretty much true the world over,” Lagarde said.
The one exception, she said, is emerging markets and the Asian economies most badly hit during the 1990s economic crisis. They, too, will have to help manage the current crisis if the world is to weather the risk, she said. Leadership has to rest with Europe, she said.
Crisis Core
“It’s going to have to start from the core of the crisis at the moment, which is obviously the European countries and in particular the countries of the eurozone, which are sharing this monetary union,” Lagarde said.
She described the eurozone, the countries that use the euro, as a “monetary union which has not been properly been completed by an economic and fiscal union, which is currently in the works.”
As Europe’s leaders work to resolve their “monumental” challenges, the impatience of financial markets is a problem, she said.
“It would be lovely from a market perspective if it was not just ‘currently’ but immediately, a signed, sealed, delivered done-deal overnight,” Lagarde said. “Unfortunately, those of you who have the privilege of belonging to democracies know things do not happen in that way, things take time.”
‘Fiscal Solidarity’
Lagarde said international support would probably be channeled through the IMF for “organizing a collective financial responsibility, a fiscal solidarity and that element of risk-sharing that is expected, pretty much, around the globe.”
Lagarde spoke at the State Department, where Secretary of State Hillary Clinton had invited her to address an event to promote greater involvement of women in public policy.
The leadership skills that are needed to face this crisis are ones that management consultants such as McKinsey & Co Inc. have found women possess in abundance, Lagarde said.
“Because it’s a question of courage or actually facing the issues, not being in denial, accepting the truth, accepting the reality and then dealing with it,” Lagarde said. “And frankly, from my previous life either in the private sector, or as minister of finance, or in my current position, it’s a set of skills that women excel at.”
To contact the reporter on this story: Nicole Gaouette in Washington atngaouette@bloomberg.net
To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net
More Stories
Why Greeks Want The Bailouts To Stop
Banking Panics/Bank Runs – Government Created?
Banks – Have Governments Forgotten Their Purpose?