Wolfowitz Legacy Is Reviving Asian Monetary Fund
By William Pesek
May 21 (Bloomberg) -- Lost in the brouhaha over Paul Wolfowitz's tenure at the World Bank is what it means to Asia.
The word ``means'' is used here since Wolfowitz hasn't left yet amid a furor sparked by his involvement in a pay raise for his companion. His departure is effective June 30. So, the multilateral institution is stuck with an infamously unilateralist leader for six more weeks.
There's another reason to discuss Wolfowitz's 23 months as World Bank president in the present tense: His legacy is a work in progress. It's called the Asian Monetary Fund, and his peers at the International Monetary Fund may not be happy about it.
An Asia bailout fund was considered during the 1997-1998 crisis. It died a quick death amid strong U.S. resistance to Asia creating a counterpoint to the IMF, one over which the U.S. Treasury Department would have zero influence.
The IMF, of course, drew much ire during the crisis for demanding fiscal austerity and higher interest rates in return for bailouts. Since then, Asian governments have worked to wall off their economies from speculators and to stop outsiders dictating policies. Hence the unprecedented build-up of currency reserves. China alone has more than $1 trillion.
Earlier this month, finance ministers from 13 Asian nations agreed to pool part of their $2.7 trillion of foreign-exchange reserves to prevent a repeat of the crisis that depleted the region's holdings 10 years ago....
Where to begin?
1) The World Bank and the IMF are two separate institutions. They share data with each other and the BIS in Basle.
Does anyone know whether or not Paul Wolfowitz has ever even visited the IMF's offices?
2) Paul Wolfowitz was running the Paul Nitze School at Johns Hopkins in 1997. The President was the Democrat William Clinton; his Secretary of the Treasury was Robert Rubin--now at Citigroup. The head of the IMF was Michel Camdessus.
What in Amaterasu's name does Wolfowitz have to do with the IMF's response to the Asian currency crisis?
3) What does the World Bank have to do with it, for that matter?
4) Let us look at some numbers. Big numbers.
China has $1 trillion+ in its currency reserves; Japan has $915 billion. The ROK has $243 billion; Hong Kong has $135 billion. Singapore has $134 billion; Malaysia has $88 billion. Even the crisis kingdom of Thailand has $70 billion. To put that last number into perspective, the United Kingdom, a country with an economy 13 times larger than Thailand's, has only $84 billion in its currency reserves.
There is absolutely no need for an Asian Monetary Fund at this time. The whole currency swap announcement was a public relations stunt, nothing more. In 1997, the region was importing capital like crazy. A sudden reduction of the capital flow from the industrialized countries caused the collapse of the pegged currency regimes of the weakest nations and pummeled the won. Now the region is a huge net capital exporter--mostly financing investment and spending in that most ridiculously spendthrift nation the United States!
Furthermore--who will have the authority to run a pool of $2.7 trillion? (Seriously, you officials who made the announcement, who will have this authority?) The IMF's entire one year forward lending capacity is just $190 billion--and the IMF has 2,716 individuals on staff.
One could go on and on.
I must admit--I was less than kind to Fujioka Nobukatsu yesterday.
This op-ed by Pesek, however, is on a whole new level of bizarre.