IMF Agenda Under Trump Or Clinton

U.S elections are only months away and monetary policy is swirling. At the helm of much of the discussion is international policy at the International Monetary Fund (IMF).  

The IMF (also known as the Fund) is driven by bureaucrats that are not based around any democratically elected government. In fact, it exists outside of a government. It’s an autonomous part of an emerging scheme of global governance accountable only to a small elite of central bankers, finance ministers and heads of state.

As an institution it seemingly extends outwards and on the surface extends exponentially within the international community. It functions as the central bank of the world, taking deposits, called “borrowings,” from countries around the world and making loans to its members.

The bank prints money like most central banks, but this “world money” has the opaque name of special drawing right (SDR). There’s nothing new about this. SDRs were created in 1969, and hundreds of billions of them have been issued over the years. But the IMF only issues them when in a financial panic. They don’t issue them every day or when times are good.

So What Does The IMF Do In The Face Of A U.S Election?

They hunker down.

When looking into Donald Trump and his positioning on the IMF – it appears he has a limited scope on the Fund. That’s not a direct criticism of Trump.

The IMF is something that very few people know about. They like it that way.

Currently, the U.S maintains the number two guy at the the Fund.

His name, David Lipton.

David Lipton is America’s inside guy at the IMF. Lipton is Harvard trained and serves as First Deputy Managing Director. The current IMF Chairman is Christine Lagarde of France. She is the first female head of the Fund and the fifth from France following Dominique Strauss-Kahn’s disastrous exit. Per customary tradition over the past seventy years, Europe holds the reins at the IMF and the United States keeps leadership at the World Bank.

With brief historical context, I do not anticipate Trump gaining overnight interest in the Fund. He is, most likely, not going to change the U.S approach.

Much of the IMF agenda, from a U.S standpoint, will depend on who is the incoming Secretary of the Treasury is for 2017. The Secretary of the Treasury typically guides the presidential appointment of who will be the eyes and ears at the IMF. They will report directly back to the White House.

The IMF And The 2017 White House.

For a potential incoming Trump administration, expect an overload of appointments to navigate through. With the Trump campaign launching an internal project to purge the bureaucracy you can estimate that the IMF will not be high on the purge list.

As it stands now in government, there are an estimated 4,000 jobs in the federal bureaucracy that are vital positions, not including cabinet appointments. These people are distributed throughout the bureaucracy. They have been carefully selected by the Obama Administration and when the next U.S president comes in it will go two ways.

In a potential Hillary Clinton administration, she won’t be acting with urgency. She will be comfortable working through those who are currently in place. In essence, carrying the baton.

In contrast, Trump is out to make a significant purge. These types of “cleaning house” activities will take years and the IMF is not an immediately task. Expect the IMF and its associated U.S bureaucrats to keep their heads down, make friends and not to pick fights.

When The IMF Really Matters For The Next Administration.

If we have a panic like 2008, that’s when they act. This is called the shock doctrine. The shock doctrine is the idea that I’ve got an agenda and I recognize it’s unpopular. But once a panic hits, those in power are going to be so scared that they’ll do whatever is proposed. That’s what we could see, as is specifically when a big SDR issuance will be executed.

It’s not on a sunny day, but in a panic, the White House will be just as nervous. 

For now, we will watch it one step at a time.


Jim Rickards

for The Daily Reckoning

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