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Friday, October 8

IMF-World Bank meetings Day 1: Lords of the Craps Table rummage their toolboxes to avoid all-out currency war in the Casino

IMF Chief Plans to Unveil Currency Initiative Details on Saturday - Source
By Ian Talley
Of DOW JONES NEWSWIRES
OCtober 8, 4:28 PM ET

WASHINGTON -(Dow Jones)- International Monetary Fund Chief Dominique Strauss-Kahn plans to unveil details of a new fund strategy designed to help broker compromises on escalating currency tensions, a person familiar with the matter said Friday.

Strauss-Kahn Thursday said the IMF needed to launch a "systemic stability initiative" that would tackle concerns over undervalued currencies such as the yuan and the risk of currency wars.

The IMF managing director is currently in the process of trying to drum up support for the program, and is expected to unveil his strategy at a Saturday meeting of the IMF's International Monetary and Financial Committee, or IMFC, an advisory body. The timing of the unveiling depends on whether the managing director is able to garner the support he needs to make the initiative official.

"We have the different tools, analysis to do it, and I think that if the membership is willing to participate in this kind of discussion, we can make progress," Strauss-Kahn said, citing the hurdle of winning full IMF membership support.

The IMF chief said the initiative would build upon the IMF's current "spill-over" report program, which examines outward impacts "from countries whose policies or circumstances may significantly affect the stability of the system." The plan envisions examining China, the euro area, Japan, the U.K. and the U.S. initially.

Concepts for the initiative have already been considered by the IMF's executive board. According to IMF documents, the directors were "receptive to the idea of conducting multilateral consultations as needed to foster collaboration on specific topics that have systemic implications."

Some directors, however, "remained skeptical given the possible complication in the process of agreeing on a formal decision," the document said.

Potentially facing resistance from some membership, Strauss-Kahn is quietly trying to build consensus.

In an IMF video taped on the sidelines of the IMF's annual meetings, IMFC Chairman Youssef Boutros-Ghali said currency tension is an issue that "needs quiet discussions, quiet diplomacy to get things moving."

Strauss-Kahn may have already won support from the U.S. Treasury Secretary Timothy Geithner, who said in a Friday speech to IMF and Group of 20 officials that the fund needed to exercise stronger surveillance to avoid future crises.

"It is ultimately the responsibility of countries to act, but the IMF must speak out effectively about challenges and marshal support for action," Geithner said.
Reuters has four pages of highlights from the World Bank and IMF meetings; here's the first page. I love Pravin Gordhan's remarks.
Highlights: Policymakers' Comments at IMF, World Bank Meetings
October 8, 2010

WASHINGTON (Reuters) - Following are key quotes from global financial leaders on Friday at the International Monetary Fund and World Bank fall meetings.

OLLI REHN, COMMISSIONER OF ECONOMIC AND MONETARY AFFAIRS FOR THE EUROPEAN COMMISSION, AT IIF CONFERENCE IN WASHINGTON ON CURRENCY TALKS IN BRUSSELS:

"In our discussions, we welcomed China's decision of the 19th of June to enhance exchange rate flexibility, although we noted, quite politely, that its potential has not been sufficiently exploited. The EU emphasized the importance of an orderly and broad-based appreciation of the renminbi in relation to China's main trading partners. That is not the only solution, but it is an essential part of the solution if we seriously want to rebalance global growth. It indeed should be our main objective" at the IMF meetings in Washington.

ECB PRESIDENT JEAN-CLAUDE TRICHET ON AVOIDING TRADE WARS:

"We must keep the spirit of cooperation that we had during the crisis... we must avoid the beggar thy neighbor policies that I see looming."

GERMAN DEPUTY FINANCE MINISTER JOERG ASMUSSEN AT A DISCUSSION AT THE PETERSON INSTITUTE IN WASHINGTON ON IMF REFORM:

"We strike for a comprehensive reform-package."

"I thing we are making progress, but we will probably need some more time."

"We of course fully support what we have agreed in Pittsburgh, a shift of quota let's say by five to six percent."

"We would say 24 seats strike the right balance between effectiveness and exclusivity."

SOUTH AFRICAN FINANCE MINISTER PRAVIN GORDHAN ON CURRENCY EFFECTS OF U.S. QUANTITATIVE EASING:

"Quantitative easing is about boosting the American economy. But what's happening is that money is finding its way to South Africa and other countries. It's massively appreciating our currency. That, then, forces us to do fiscal consolidation even faster in order to bring interest rates down. And so if you watch that cycle, it can have lots of undesired consequences." ...

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