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Imf Was In Awe Of The Monetary Charlatans (Not The Pop Group)

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http://www.bloomberg.com/news/2011-06-21/imf-policy-conclusions-misaligned-with-research-auditors-say.html

The policy conclusions from International Monetary Fund research don’t always follow the underlying analysis, thereby potentially harming the institution’s reputation, according to an internal audit.

“Many staff indicated that they often felt pressure to align their conclusions with IMF views,” the institution’s Independent Evaluation Office said in a report released today.

The office found that from 1999 until 2008 the “relevance” of research was hampered by insufficient consultation with the topic countries, the evaluation office said in a statement. The technical quality of working, regional and background papers was “quite uneven,” the study found.

The IMF has come under increased scrutiny in the wake of the financial crisis and amid concerns of European debt default and unrest in the Middle East and North Africa. An audit released in February found IMF economists missed signs of fragility that led to the 2008 financial collapse, partly because agency staff were “in awe of” monetary authorities in the U.S. and other major economies.

IMF directors “considered it critical for the credibility of the institution that the conclusions of in-house research are not biased by the IMF’s position on the subject or excessively influenced by other work done internally,” according to a separate statement from the IMF board.

So the IMF is just a grease monkey shocker and was in awe of our superstar central bankers.

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Excellent. They are breaking ranks and getting into the blame game stages. They know the writing is truly on the wall now and they are all trying to lay the blame for oversight elsewhere.

Not long until pay day me thinks. B)

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I think most people who have worked for US owned or dominated organisations will recognise this - you either comply with what the US wants or you are out the door.

Can't see why the IMF would be any different.

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http://www.bloomberg...ditors-say.html

So the IMF is just a grease monkey shocker and was in awe of our superstar central bankers.

It's all on the IMF website in a pdf - they totally missed everything yet still advise/instruct Govts on monetary policies!

The same economists who failed to predict the 2007 financial crash are still in the driving seat – and just as clueless in a crisis! When did the IMF learn about the economy? That's what people around the world should be asking as the IMF presents its latest assessment of the fiscal and economic prospects for nations around the world last week. Much of the world remains mired in the worst downturn since the Great Depression; a downturn that the IMF totally failed to predict, as noted by the IMF's own Independent Evaluation Office.

This was not a minor mistake; this was a horrendous failing. It's comparable to the surgeon amputating the wrong leg or leaving his operating tools inside the patient. This is the sort of incredible mess-up that most people lose their jobs over and likely never find work again in the same field.

Yet, as far as the world knows, not one person at the IMF lost their job. In fact, it's not even clear that anyone missed a scheduled promotion. As far as anyone can tell, an economic downturn that ruined the lives of tens of millions of people around the world has had no impact whatsoever on the people who actually have the responsibility for preventing such calamities, at the IMF and in other major governmental and international financial institutions.

This makes the IMF's stance behind the continued drive for austerity in much of world especially infuriating. How can Greek workers feel about being told that they will have to work longer for smaller pensions by IMF economists who can retire with six-figure pensions in their early fifties? The vast majority of Greek workers do their jobs. The IMF economists failed at their job. Beyond the issue of fairness is the question of competence.

The IMF economists obviously did not understand the implications of asset bubbles that were building up in the United States, the United Kingdom, Spain and other wealthy countries. The financial and economic crisis caused by the collapse of these bubbles caught them by surprise. This is really remarkable. While the IMF economists performed no worse than the vast majority of mainstream economists, this fact cannot provide much consolation for the people who are expected to rely now on their expertise.

Is there any reason to believe that the same people who were so completely clueless in their understanding of the economy just four years ago are now qualified to be giving advice to governments around the world? Did these people go back to school and re-learn economics? Did they at least take night classes where they could learn the basics of economics so that they would not make the same sort of mistakes again?

Judging from their latest policy prescriptions, there is little evidence that they learned much from recent history. Instead of encouraging Greece and other troubled euro-linked economies to go through additional rounds of austerity, which will only lead to further declines in GDP and higher unemployment, the IMF should be telling the European Central Bank (ECB) to increase its inflation target to a 3-4% range.

If the euro zone maintained a moderate rate of inflation, it would allow the Greek economy to become competitive without experiencing a wrenching process of wage deflation. It would also erode the real value of debt alleviating the burden on both heavily indebted countries and homeowners throughout the euro zone.

The IMF does not have to look far for respectable economists arguing for higher inflation as an alternative to continued austerity. Its own chief economist, Olivier Blanchard, made exactly this argument in an IMF paper last year (pdf). It would reasonable to expect that the IMF economists giving advice to countries around the world would at least be familiar with the writings of the organisation's chief economist. If there is an effective response to Blanchard's argument, it has not appeared on the IMF's website.

In fact, another benefit of going the route advocated by Blanchard is that the ECB, as part of its efforts to moderately increase inflation, could simply hold much of the debt that it buys for this purpose. In other words, if attaining a 3-4% inflation rate requires the ECB to buy an additional €3tn of the debt of member countries in order to pump reserves into the banking system, the ECB could simply hold this debt indefinitely.

This has the advantage that the interest paid on debt held by the ECB is refunded to member countries. This reduces the interest burden that these countries will face in future years as a result of the deficits needed to boost the economy in a crisis. At least for the debt held by the ECB, the interest burden would simply be an accounting entry. Interest would be paid to the ECB and then refunded to the member states.

To prevent the additional reserves from creating a problem of inflation once the economy has recovered, the ECB could simply raise its reserve requirement. This would have the same impact on the larger money supply as withdrawing reserves from the system by selling off its debt holdings, but the higher reserve requirement route has the advantage of reducing the interest burden of the debt for member states.

Unfortunately, we don't hear the IMF pushing for a more expansionary policy from ECB. Nor do we hear it discussing ways that the ECB (and other central banks) could reduce the debt burden for its member states. It seems that the IMF's economists' understanding of the economy is no better today than it was before the economic collapse.

http://www.guardian....s-greece-crisis

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It's all on the IMF website in a pdf - they totally missed everything yet still advise/instruct Govts on monetary policies!

The IMF economists obviously did not understand the implications of asset bubbles that were building up in the United States, the United Kingdom, Spain and other wealthy countries. The financial and economic crisis caused by the collapse of these bubbles caught them by surprise. This is really remarkable. While the IMF economists performed no worse than the vast majority of mainstream economists, this fact cannot provide much consolation for the people who are expected to rely now on their expertise.

This isn't quite true, see my Gordon Brown thread in the sig, there are numerous IMF reports warning of the housing bubble. The trouble is these reports clearly aren't what the leaders want to hear. So instead we have another part of the IMF writing reports telling everyone what they want to hear, it's no surprise that our dear leaders take these reports to heart and ignore the other reports. The IMF fails because it's wants to keep everyone happy, unfortunately if your role is that of a global "manager" you have to be prepared to upset people.

http://www.abc.net.au/news/stories/2003/04/13/831019.htm

Sun Apr 13, 2003 9:04am AEST

The International Monetary Fund has predicted Australia's housing boom is likely to bust.

In its six monthly World Economic Outlook, the IMF predicts the housing bubbles in Australia, England, Ireland and the United States will burst.

IMF research director, Kenneth Rogoff, has told ABC TV's Inside Business, Australian home prices have risen by 50 per cent since the last peak, and the boom cannot be sustained.

I think also there is an issue of crying wolf, because collapses are impossible to exactly when they will implode those fueling the bubble will keep pumping it up further and the more you say it will collapse and then it doesn't clearly it's different this time.

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...OK ...it didn't take Einstein to work it out...but...the IMF were warning Gordo the Clown for years about the UK Housing Asset Bubble ...and of course the Clown ignored the warnings ....the depth of the bubble only came to light when the frauds were revealed ....what we should be really concerned about is very few people have been brought to justice for the fraud element.... :rolleyes:

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This isn't quite true, see my Gordon Brown thread in the sig, there are numerous IMF reports warning of the housing bubble. The trouble is these reports clearly aren't what the leaders want to hear. So instead we have another part of the IMF writing reports telling everyone what they want to hear, it's no surprise that our dear leaders take these reports to heart and ignore the other reports. The IMF fails because it's wants to keep everyone happy, unfortunately if your role is that of a global "manager" you have to be prepared to upset people.

http://www.abc.net.a...4/13/831019.htm

I think also there is an issue of crying wolf, because collapses are impossible to exactly when they will implode those fueling the bubble will keep pumping it up further and the more you say it will collapse and then it doesn't clearly it's different this time.

See what you're saying but -

Read their own criticism of themselves (complete with 'Orwellian' words)

The IMF's ability to correctly identify the mounting risks was hindered by a high degree of groupthink, intellectual capture, a general mindset that a major financial crisis in large advanced economies was unlikely, and incomplete analytical approaches.

Weak internal governance, including unclear lines of responsibility and accountability, lack of incentives to work across units and raise contrarian views, a review process that did not "connect the dots" or ensure follow-up, and an insular culture also played a big role, while political constraints may have also had some impact.

Several cognitive biases seem to have played an important role.

Groupthink refers to the tendency among homogeneous, cohesive groups to consider issues only within a certain paradigm and not challenge its basic premises (Janis, 1982). The prevailing view among IMF staff—a cohesive group of macroeconomists—was that market discipline and self-regulation would be sufficient to stave off serious problems in financial institutions.

They also believed that crises were unlikely to happen in advanced economies, where "sophisticated" financial markets could thrive safely with minimal regulation of a large and growing portion of the financial system.

http://www.ieo-imf.o...ear_Warning.pdf

Once the bankers were unleashed "Market discipline" went out the window - the bankers went into full balance sheet covering up and other full-on frauds making themselves billions in instant cash bonuses. (hiding what they were really up to from boards and shareholders who didn't have a clue what all these ultra 'sophisticated' investments were that no one could understand!)

Edited by erranta

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See what you're saying but -

Read their own criticism of themselves (complete with 'Orwellian' words)

Once the bankers were unleashed "Market discipline" went out the window - the bankers went into full balance sheet covering up and other full-on frauds making themselves billions in instant cash bonuses. (hiding what they were really up to from boards and shareholders who didn't have a clue what all these ultra 'sophisticated' investments were that no one could understand!)

The IMF's ability to correctly identify the mounting risks was hindered by a high degree of groupthink, intellectual capture, a general mindset that a major financial crisis in large advanced economies was unlikely, and incomplete analytical approaches.

Yes this was happening, more alarming at the top of the IMF who where too busy smooching with the elites rather than being bearish as their role really requires. The groupthink element isn't just confined to the IMF it was all over academia the computer modelists had taken control, hence when Roubini said a crisis was coming he was debunked for not showing a mathematical model which the modelists demand. What those using the complex equations failed to grasp was that they didn't have a future prediction machine, they hadn't eliminated risk and they couldn't control all variables. In essence garbage in garbage out, but the models worked for a time, just long enough to convince the foolish that this time it was different and they could managed the system. These same models will also have infected the IMF and hey why use your brain when you can drink champagne and smooch whilst the computer does all the hard work for you.

The report isn't critical enough on this issue. It's the problem of the herd, this won't be addressed.

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  • 311 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • up 5%



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