“It is inconceivable that policymakers today, aided by their theoretical understanding of the mechanisms and by the statistical information at their disposal, would begin to make the serious errors committed by the governments in 1929-32.” J. Tobin
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.
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.
*This was written in November, published today only with a change in tense to reflect these are comments on the OBR’s previous forecast and not what will be revealed later this week. In short, be cautious about the headlines that surround the OBR’s medium-term forecasts.*
With Sunak’s Spring Budget later this week, and associated Office for Budget Responsibility’s (OBR) forecast update, it’s worth recalling some key judgments from Autumn.
Last week’s press conference was the second time less than 12 months that the European Central Bank’s (ECB’s) communication of a key policy initiative fell short. The first occasion, of course, was on 12 March last year, during the announcement of the EUR120 billion asset purchase program (APP) expansion, when President Lagarde insisted “we are not here to close spreads”—a comment that has the rare distinction of being footnoted and clarified in the transcript. Just 6 days later the Pandemic Emergency Purchase Program (PEPP) was rushed through, a program certainly designed to closed spreads.
The original Argentina-IMF program agreed in 2018 with the Macri administration is coming under growing scrutiny as a replacement arrangement is being negotiated once more. Last week, legislators sent a letter to IMF Managing Director Georgieva to complain about the Fund’s involvement with Argentina, apparently broken into 31 different points.
In particular, Senators are suggesting the Fund broke the Article VI of the IMF’s Articles of Agreement in the original program, under pressure from Macri via the Trump administration, and that as a result the Fund should accept responsibility for the failure—including by setting no conditionality in the program under negotiation.