PKT message, Re. The IMF in Argentina

Below is a message which I posted today to Gang8.

Gunnar

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Some time ago, I made the point on PKT - to less than rousing reception - that academic economists who bad-mouth orthodox IMF monetary policy prescriptions (including Stiglitz now that there is mileage to be had in doing so) conveniently disregard that the IMF does not generate the orthodoxy itself.

In this respect, the IMF is the messenger of news in the monetary field which, when last I checked, is the logical outgrowth of what mainstream and monetarist scholars have been teaching their students for the past fifty years or so.

Of course, the argument why it is asinine to charge the intellectual sins of orthodoxy to the IMF as such cuts no ice among those whose intellectual capital is invested in mainstream and monetarist orthodoxy.

As for Palast's charges of "arrogance" against IMF staff in negotiations with Argentina and other countries in distress, this is the equivalent of what in Iceland we call hanging the baker for the smith - the smith in this case being the entire IMF membership whose collective wisdom, as (a) enshrined in the IMF's Articles of Agreement, (b) updated twice a year by a Committee of IMF Ministers of Finance and Governors of Central Banks, and (c) supervised on a daily basis by the IMF Executive Board, whose 25 members are appointed by the IMF's 180 odd member countries.

And how might the IMF's academic critics hope to gain some credibility?

By (1) recognizing, and (2) advocating that, in the case of monetary screw-ups of the Argentine variety, the rule should be to let BYGONES BE BYGONES - that is, IF the legacy of past monetary mistakes is strangling current production possibilities THEN the ONLY workable way out of the mess is to remove the stranglehold of the past over the present.

In Preface to 'Tract on Monetary Reform', Keynes noted the self-evident fact that this is the ONLY way in which monetary messes of monumental proportions can be resolved - but, as he noted, (my paraphrase), it is a technical resolution which is certain to be opposed by all and sundry who have a dime's worth of vested interest in the monetary mistakes of the past.

Gunnar