Argentina and the Fund: From Tragedy to Farce

“If you owe your bank manager a thousand pounds, you are at his mercy. If you owe him a million pounds, he is at your mercy.” An old saying, the modern incarnation of which is often attributed to Lord Keynes.

Argentina’s revised program under an Extended Fund Facility (EFF) with the IMF was approved late last month. The associated Staff Report was dropped onto the imf.org webpage with minimal fanfare. It wasn’t posted to the main landing page, as with most Fund documents, only to the Argentina country page. This gives a hint at the internal enthusiasm for the document itself.

Roughly speaking, the new program rolls over the previous Stand-By Arrangement (SBA)—pushing back the repayment period to between 2026 and 2034 while returning to Argentina interest they paid in recent years. 

What can be said analytically about this revised document? 

Well, at one level there is much to be said. And some of what ought to be said we will say here. 

Continue reading “Argentina and the Fund: From Tragedy to Farce”

The public finance implications of QE unwind

An irrelevance theorem and a note of caution

Most of my stuff is now on the Money: Inside and Out substack hosted by Exante Data.

But occasionally there is something that is too technical or my thinking too incomplete meaning I should post here instead for comments. This is one such opportunity.

Since the Bank of England is contemplating active bond sales, doesn’t this create a risk for the taxpayer? Yes.

A tale of two Crises: Keynesianism, monetarism and the mistakes of modern macroeconomics

The British proverb “horses for courses!” is a reminder, we are told, that you need to choose the correct people for any particular task; there is no “best team” only the right team for the circumstances.

So too—or especially so—with macroeconomics. Unlike the physical sciences, where outcomes are invariant to the political or social greenscreen, macroeconomics is all about context. It is all about choosing right framework for the situation at hand, or “choosing the right metaphor.”

And as the contours of the post-pandemic macroeconomic landscape begin to take shape, a failure to pick the right metaphor is emerging with echoes of the post-GFC narrative—revealing the possibility of a policy mistake every bit as consequential as that committed during the recovery from GFC.

Continue reading “A tale of two Crises: Keynesianism, monetarism and the mistakes of modern macroeconomics”

Thomas Weiser’s recollections on the Greek Crisis

The Grecology substack last week highlighted how a stealth fight has emerged over the matter of sustainability of Greece once more. As noted there, an ESM blog pushed out by Rolf Strauch last week, making the case for sustainability, followed a short while after former IMF mission chief and European Department Director Poul Thomsen’s disparaging remarks at an online Economist conference. On that occasion, Thomsen downplayed the prospects for Greece within the euroarea still, lamented the inability of the Greeks to reform and the flaws in the European’s DSA. Indeed, Thomsen claimed the DSA being produced by the ESM is “not only wrong but also irrelevant” and that creditors only hold Greek assets because they believe they will be bailed out.

Continue reading “Thomas Weiser’s recollections on the Greek Crisis”

Is this the greatest IMF memo ever written?

When I discovered in 2008/09 that the IMF was engaged in systematic fraud in her work with Europe (subsequently with Argentina and others) I tried very had to get senior staff to see the flaws in the work that the Fund produces. After repeated efforts, and after being deliberately blocked by the head of my Department, SPR, from having this dealt with, I was resigned to write a memo. (The head of my Department was himself breaking staff rules at this very time, of course. Such are the ethics of the institution.)

Imagine working at NASA as a senior manager and being told your spaceship will not reach orbit, at massive human cost, because the maths do not add up–and doing nothing about it.

How can this be explained to the lay person?

Saving-investment balances and the Great Reflation

Once again, simple Keynesian thought-experiments that hinge on saving-investment balances prove to be the best way to think through what is going on at the moment. Macroeconomics is less about supply and demand, more about saving-investment decisions.

Anyway, in thinking about this series for Exante, the following short macro accounting framework was useful.