IMF Reforms and the 70th Anniversary of Bretton Woods
By JC Collins
This year marks the 70th anniversary of the United Nations Monetary and Financial Conference, otherwise known as the Bretton Woods Conference. The conference ran from July 1st to July 22, 1944, and implemented such global institutions as the International Monetary Fund and World Bank. So it is very fitting that the BRICS institutions are now being mandated during the same dates 70 years later.
As detailed in the last post, BRICS and the Bank for International Settlements, the BRICS countries have established the New Development Bank and Contingent Reserve Arrangement (CRA) to be centered around the United Nations for “systemic legitimacy”, the same as was facilitated in 1944.
Both of these BRICS institutions are meant to facilitate the global processes of the World Bank and the International Monetary Fund. The official announcement from the BRICS themselves confirms this:
“We are pleased to announce the signing of the Treaty for the establishment of the BRICS Contingent Reserve Arrangement (CRA) with an initial size of US$ 100 billion. This arrangement will have a positive precautionary effect, help countries forestall short-term liquidity pressures, promote further BRICS cooperation, strengthen the global financial safety net and complement existing international arrangements…”
The phrase “complement existing international arrangements” does not imply competition with or overthrow of the existing system. Complement strongly implies working together on common goals and initiatives.
Once again from the BRICS official announcement:
“We remain disappointed and seriously concerned with the current non-implementation of the 2010 International Monetary Fund (IMF) reforms, which negatively impacts on the IMF’s legitimacy, credibility and effectiveness. The IMF reform process is based on high-level commitments, which already strengthened the Fund’s resources and must also lead to the modernization of its governance structure so as to better reflect the increasing weight of EMDCs in the world economy. The Fund must remain a quota-based institution. We call on the membership of the IMF to find ways to implement the 14th General Review of Quotas without further delay. We reiterate our call on the IMF to develop options to move ahead with its reform process, with a view to ensuring increased voice and representation of EMDCs, in case the 2010 reforms are not entered into force by the end of the year. We also call on the membership of the IMF to reach a final agreement on a new quota formula together with the 15th General Review of Quotas so as not to further jeopardize the postponed deadline of January 2015.”
This doesn’t sound to me like the BRICS countries created the New Development Bank and CRA to overthrow and by-pass the IMF or World Bank. It sounds like they are preparing for the full integration and consolidation of global financial governance under the IMF and SDR umbrella.
It’s strange how so many can read the official announcement and interpret what was written as the nail-in-the-coffin for the SDR. I propose that it is building confidence in the SDR multilateral currency process and creating the necessary transition points.
As I’ve stipulated again and again, a process of Hegelian Dialectic is being used to transition the global financial system from one of a unilateral US dominated system to a multilateral SDR supra-sovereign currency system. The sovereign debt crisis and forthcoming currency crisis will be used as the problem stage while social and geopolitical unrest will be leveraged for reaction purposes. The third and final stage will be the solution, which will be the pre-planned and pre-designed supra-sovereign SDR multilateral reserve currency.
Many times I am asked the question of why do it this way? To answer the question we need to travel back to the creation of the Bretton Woods system and understand how it was implemented near the end of World War 2 when most countries were decimated and tired of war.
There was immense pressure from all sides to implement a new financial system so the world could begin the rebuilding process. The sense of urgency felt in those July days of 1944 would have to be felt again, along with similar pressures, for there to be an evolution of the old system to a new Bretton Woods multilateral system. The pressure and urgency is and will be felt by the sovereign debt crisis and currency chaos. This pressure and urgency will ensure a collective embrace of the SDR and other multilateral frameworks.
Further evidence that the BRICS countries are aligned with the larger SDR mandates can be found in the following:
From the U.S.-China Joint Fact Sheet Sixth Meeting of the Strategic and Economic Dialogue, July 7, 2014:
“Both sides commit to implement our G-20 commitments to move more rapidly toward a more market-determined exchange rate system and greater exchange rate flexibility to reflect underlying fundamentals, avoid persistent exchange rate misalignment, and refrain from competitive devaluation.”
“To enhance data transparency, China is making technical preparations with the International Monetary Fund for subscription to the Special Data Dissemination Standard.”
“The United States and China commit to further strengthen macroeconomic communication and cooperation, and to discuss important economic policies with each other in a timely manner.”
“The United States and China commit to continue strengthening their cooperation in the IMF and G-20, improving the IMF’s quota and governance structure, ensuring the completion of the 15th general quota review, reaching a final agreement on a new quota formula, and further enhancing the voice of emerging markets and developing countries. The United States commits to complete the domestic approval of the 2010 IMF quota and governance reforms as soon as possible. The two sides reaffirm the importance of maintaining a strong and adequately resourced IMF.”
As a side note to this US – China Joint Meeting, both the People’s Bank of China Governor Zhou Xiaochuan and Federal Reserve Chair Janet Yellen were both participants. And of course most readers by now will remember that Zhou Xiaochuan is on the Executive Board of the Bank for International Settlements.
From the Fiscal Year 2015 U.S. Treasury Budget:
“Treasury is seeking appropriations and authorization language within the FY 2015 request for the International Monetary Fund (IMF). In 2010, G-20 Leaders and the IMF membership decided on a set of quota and governance reforms designed to strengthen the IMF’s critical role within the international system. The 2010 reforms are an important step in modernizing IMF governance to better reflect countries’ economic weights in the global economy, while preserving U.S. leadership and veto power.”
“The proposed appropriations and authorization language would reduce U.S. participation in the IMF’s New Arrangements to Borrow (NAB) by approximately $63 billion and increase the U.S. quota by an equal amount, for no net change in the overall U.S. financial commitment to the IMF. The proposal also authorizes the United States to accept an amendment to the IMF Articles of Agreement that will facilitate changes in the composition of the IMF Executive Board while preserving U.S. influence in the Board.”
“Completing the IMF reforms is a national security and economic policy priority for the United States. The Administration is proposing a discretionary funding approach, but we are willing to work with Congress on other approaches to get legislation passed as soon as possible, including mandatory funding approaches.”
There can be no realistic case made to support the proposition that the BRICS countries are attempting to overthrow or by-pass the International Monetary Fund or international banking cartel. There are those trying to convince the disorganized masses that this is in fact what is happening but the publications and speeches by all parties themselves tell a very different story.
There are many reasons why the US is supporting the IMF Reforms on one hand while delaying the reforms on the other. Perhaps Americans will do good to consider how their opinions and expectations are being cleverly manipulated when it comes to the emerging multilateral system. Once again inner divisions are being masterfully externalized to mold the masses.
And don’t forget how the system will be centered around the United Nations for systemic legitimacy. – JC