On Fri, 9 Apr 1999, Doug Henwood wrote:
>
> I've been reading stuff lately, mostly in the FT, suggesting that the Asian
> crisis countries have been showing signs of economic recovery and, not
> coincidentally, disobeying the IMF. Malaysia, of course, was the star
> rebel, but the FT reported the other day that Thailand has pretty much torn
> up the IMF agreement and has loosened monetary & fiscal policy
> substantially.
I was wondering about this myself. My impression from the Economist's article on Thailand in the Mar 27-Apr. 2nd issue was that the IMF has at least tacitly accepted these changes since they keep accepting new letter agreements:
"What happens next? One answer is contained in Thailand's latest letter to the IMF, which was released on March 23rd. Although it lists the usual prescriptions for maintaining a stable currency, its main thrust is clear: the government will attempt a sharp fiscal stimulus to get the economy going again. The letter -- the seventh since the IMF arranged a $17 billion rescue package in August 1997 -- calls for Thailand to run a budget deficit of 6% of GDP, one percentage point higher than the last revision and a far cry from the budget-tightening zeal that the IMF demanded in its original letter of intent. As a result, the government says, the economy will grow by 1% this year, after shrinking by 8% in 1998. The change in emphasis -- from legislating and negotiating to spending and cutteing taxes -- also pleases businessmen and investors."
I got the impression that the IMF largely accepted the criticism that Asia needed stimulus and that they had gone too far. I thought Stanley Fischer tried to put a brave face on it when he defended IMF policies back in November or so. He said that IMF policies had been the right ones for the moment of crisis, and now that they had had their salutory effect by stopping the run and stabilizing currencies, of course these economies needed stimulus; the IMF didn't dispute that, they just thought sadomonetarist foreplay was necessary to do it safely . . . fudge and nonsense, of course, but fudge and nonsense heading the right direction, I thought.
On the other hand, it has been fun to see the Economist truthfully report week after week that Malaysia is doing just fine on the capital markets and then struggle mightily to find some reason why we shouldn't draw the obvious conclusion, that capital controls are a better short term drastic crisis measure than sadomonetarism.
Michael
__________________________________________________________________________ Michael Pollak................New York City..............mpollak at panix.com
What are we doing tonight, Brain? Same thing we do every night. TRY TO TAKE OVER THE WORLD! Ohh right I forgot. Zort. __________________________________________________________________________