Anyone But Brown

The BRICS group of the world's major emerging economies (Brazil, Russia, India, China and South Africa) are peeved that the search for a new head of the IMF, following the demise of DSK, is purely Euro focused.

BRICS claim, with some justification, that only having a European leading the fund somewhat undermines its "international" credentials and legitimacy.

I concur, if a suitable non European candidate can be found.

However, a few counterpoints need to be raised:

1 The World Bank is always headed by an American. As long as that is the case, the Europeans will insist that the IMF is headed by a European.

2 A suitable non European candidate needs to be found. A number of names have bubbled to the surface in the media, from various countries. However, in order for them to stand any realistic chance, the BRICS must first agree amongst themselves which one they will support.

3 The EU (an institution many loath) is in financial crisis, as a result of the debt problems of certain countries (eg Greece, Spain, Portugal, Ireland etc). There is no way that the EU will accept a non European, at this critical stage, to head the IMF. The EU needs a "friend at court".

Political reality is a harsh mistress.

However, there is one thing that the EU and BRICS can all agree on; no one wants Gordon Brown to head the IMF!

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Sex

It seems that successful men are driven by many demons, that would appear to be the conclusion to be drawn from the public downfalls of Sir Fred "the Shred" Goodwin (ex head of RBS) and Dominique Strausss-Kahn (ex head of the IMF).

Sir Fred had in place, until yesterday, a "super injunction" that forbade the mention of him even being a banker. However, following disclosures made in the House of Lords yesterday about his affair with a senior colleague, the terms of the injunction were varied. Mr Justice Tugendhat, sitting at the High Court, varied the injunction to allow reporting of Sir Fred's name, but not details of the alleged relationship or the name of the colleague said to be involved.

As to why the affair is so important rests not with the affair itself per se, but the fact that RBS has a code of conduct that would have required Sir Fred to tell the board of the affair, lest there be a conflict of interest.

It is not yet clear as to whether he told the board, or whether the affair itself may have distracted him during a critical time in the bank's operations.

The FSA has been asked to investigate. However, given the mess that they have made so far wrt their last investigation (yet to be reported) into the collapse of RBS, any FSA investigation is likely to produce nothing of any value.

In other news, quite by coincidence, the IMF has published its code of conduct (which cover "personal relationships").

Human beings, no matter how successful, all share one common characteristic; we are all very flawed.

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Ma Demission

Dominique Strauss-Kahn has tendered his resignation (in French) to the IMF.

John Lipsky, formerly Strauss-Kahn's deputy, is acting managing director.

A permanent successor will be chosen by the executive board later this year.

Let us trust that his replacement will not be Gordon Brown!

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Good Money After Bad

Despite the arrest of the CEO of the IMF, Dominique Strauss-Kahn, the IMF and EU have managed to come up with the eurozone's third bailout package.

This time Portugal is holding out the begging bowl, and will receive Euro78BN. Europe will provide Euro52BN at 5.5%, and the IMF will provide Euro26BN at 3.25%.

Needless to say this bailout is merely putting off the day of financial reckoning. No one seriously expects Portugal to be able to pay off this debt.

As for Mr Strauss-Kahn, it is rumoured that he/IMF may seek diplomatic immunity.

Were that to be true, that would produce one almighty diplomatic/political and financial bust up between Europe and the States.

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IMF Thrown Into Disarray

The IMF and quite likely the world economic system, has been thrown into disarray after the arrest in New York of the CEO of the IMF Dominique Strauss-Kahn.

Today's talks between German Chancellor Angela Merkel and Strauss-Kahn, about the Euro crisis, have been cancelled.

Well run organisations should have a secession plan in place, in the event of the "incapacity" of senior executives.

The IMF will now have to dust it off and implement it, assuming that it has one.

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Currency Wars

Dominique Strauss-Kahn, the head of the IMF, has warned that cuts in interest rates and quantitative easing (as recently announced by the central bank of Japan) could upset the global economy recovery and trigger "currency wars".

The Japanese central bank is reverting to a "zero interest rate" policy (which it abandoned in 2006).

Given that both the US and UK have cut rates and instituted quantitative easing, Mr Strauss-Kahn's comments seem a little "behind the curve".

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The Great Recession

It would appear to be official, the world is in the grip of a "great recession". That at least is the view of the IMF.

Dominique Strauss-Kahn, head of the IMF, said that the global economy could shrink for the first time since the Second World War.

He is quoted in The Times:

"The IMF expects global growth to slow below zero this year, the worst performance in most of our lifetimes.

Continued deleveraging by world financial institutions, combined with a collapse in consumer and business confidence, is depressing domestic demand across the globe, while world trade is falling at an alarming rate and commodity prices have tumbled."

He drove his points home by using the phrase a "great recession".

Warren Buffett, in the US, piled on the misery by referring to the situation as an "economic Pearl Harbor".

The next couple of years are going to be particularly bloody for many. Governments around the world would be well advised to start thinking outside of the box and coming up with genuine solutions, to help people weather this storm, that can be implemented in the short term without the need for the usual bureaucratic delays.

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