IMF Considers 'New Tool Kit' to Head Off Market Meltdowns and Hoarding |
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July 2, 2010
The world's top economic powers and the International Monetary Fund are studying creation of a global financial safety net that would give countries quick access to large amounts of cash as a way to stave off crises and discourage emerging-market nations from hoarding foreign reserves.
The world's top economic powers and the International Monetary Fund are studying creation of a global financial safety net that would give countries quick access to large amounts of cash as a way to stave off crises and discourage emerging-market nations from hoarding foreign reserves.
In what would be a significant reordering of IMF operations, the proposals would change the agency from a solely reactive one -- waiting for countries in trouble to ask for help -- to a more activist organization that tries to anticipate where a crisis will spread and move in with enough money to calm markets and prevent broader problems.
The idea may require a substantial increase in the amount of money that countries pledge to the IMF and a significant liberalization of its lending rules, potentially controversial changes. Advocates, however, say it would not only temper future crises but also alleviate a core imbalance in the world economy by reassuring China and other emerging markets that they do not need to sock away trillions of dollars in reserves to protect themselves from global shocks.
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