But now, says Bloomberg's Asian columnist, William Pesek, cited by Harrison, the new bailout fund based on Chinese, Japanese, and South Korean capital "takes things to another level...The pool, to be ready by year-end, largely neuters the IMF in Asia..there is little a crisis-plagued U.S. can do to stop it...its implications will travel far and wide in the fastest-growing economic region."
http://www.creditwritedowns.com/2009/05/pesek-asia-is-de-coupling.html
http://www.bloomberg.com/apps/news?pid=20601039&sid=aaKSNypxRYfQ&refer=home
Harrison also reproduces a long previous contribution on his blog by mutual fund manager and commentator Marshall Auerback, concerning the origins of the ADB and competing American and Asian financial interests, which is especially worth reading. Excerpts:
[...]
"Even prior to the Asian financial crisis of 1997, the Japanese had begun to sell the idea of creating an Asian monetary fund to provide regional liquidity. Almost as soon as the trial balloon was launched, Washington shot it down with great force, sending Lawrence Summers, then Deputy Secretary of the Treasury to the region to make sure the message was not misunderstood. In spite of the subsequent travails experienced by the region, the idea apparently died a quick death.
"Or did it? When Haruhiko Kuroda, former Japanese Deputy Minister of Finance for International Affairs, took over the helm of the ADB on February 1st of this year, he quietly began to promote the idea again. Kuroda has long been a strong advocate of an Asian Monetary Fund, an idea whose time may have come, given the increasingly low esteem with which the International Monetary Fund is held, particularly in emerging Asia, which has long been the world’s major savings repository.
"It’s worthwhile looking again at the history of this venture: in the spring of 1997, before the onset of the Asian financial crisis, Japan and Taiwan had offered to put up $100 billion to help their fellow Asians cope with any potential fallout which might arise in the event of a precipitous withdrawal of short-term portfolio capital from their respective economies. The idea was killed by then-Treasury Secretary Robert Rubin and Deputy Secretary Summers, both of whom saw the idea as a threat to the monopoly of the IMF over international financial crises. The US Treasury in particular did not want Japan taking the lead in this area because Japan would not have imposed the IMF’s conditions on the Asian recipients, and as a policy objective for Washington, this almost superseded the importance of restoring the region to full economic health.
"We all know what happened subsequently. Instead of forestalling global economic instability, the Treasury/IMF proposals helped make further instability inevitable.
"By killing off the idea of a competing Asian Monetary Fund, Rubin/Summers enabled the IMF to continue in its guise as an ostensibly “neutral” agency, thereby facilitating the implementation of the Treasury’s agenda whenever a financial crisis which required the IMF’s intervention arose. Of course, the “medicine” the IMF proffered had the ultimate effect of weakening pre-existing financial structures by imposing Western measures of financial restructuring, thereby giving Wall Street a huge stake in the subsequent “reform” agenda introduced: Basle capital adequacy ratios were to be applied. Highly indebted banks and firms were to be closed. Labour laws were to be changed to make it easier to fire workers, facilitating the closures. Regulations on foreign ownership were to be lifted in order to allow foreign banks and firms to buy domestic banks and firms, injecting needed capital and skills. All of which required lots of western style restructuring and “reform”, and who better to offer this than America’s finest investment bankers?
[...]
"It is understandable why Washington would continue to resist the notion of an Asian Monetary Fund.
"As things stand right now, in spite of the significant contraction in bond yields since the late 1990s, western investors continue to extract huge risk premiums from the entire emerging markets universe as a quid pro quo for the provision of their capital. This is manifestly perverse, especially when one considers that the ultimate source of much of that liquidity is Asia. All of the nations of Asia continue to run large current account surpluses, the proceeds of which are funnelled back into the US Treasury market, where the savers obtain a yield of less than 5 per cent, in a country which is now the world’s largest debtor nation, suffering the twin diseases of a declining currency and higher inflation (both of which are eroding the real value of the Asian creditors’ respective investments).
"By contrast, even leading Asian conglomerates (whose products are readily gobbled up by the American consumer) are forced to pay several hundred basis points above the yield of Treasuries. The Western investor or banker is extracting a wholly unmerited premium, whilst the US continues to trade on its reserve currency and safe haven status to subsidise its over-consumption and perpetuate the country’s growing financial imbalances.
"It’s a great deal for Washington and readily explains the Treasury’s violent opposition to an Asian Monetary Fund (or anything else that would disrupt the existing status quo, such as restrictions on capital account mobility). But must the world’s largest creditor bloc continue to act from such a position of weakness, which is more apparent than real? The aggregate net creditor position of Asia dwarfs its indebtedness. The domestic markets are rapidly maturing and will soon be in a position to replace the American consumer (who must surely retrench if the US is ultimately to come to grips with its own debt disease).
"The actions by Asia’s leading policy makers suggest an implicit (albeit belated) recognition that they have been getting a raw deal from the existing global financial architecture and are taking incremental steps to redress the current imbalance. To be sure, historic rivalries, notably between China and Japan (manifesting themselves most recently over Taiwan) may slow the development of an AMF. It is also probable that the Bush administration will likely go out of its way to exacerbate this rivalry and thereby frustrate the development of competing multilateral agencies, which would invariably weaken Washington’s influence in the region.
"But in spite of these periodic setbacks, the trend appears clear. The day is moving closer where an Asian Monetary Fund will become a reality. It is particularly noteworthy that the idea continues to be pushed by Japan, America’s staunchest ally in the region. Tokyo’s embrace of Washington only goes so far. Ironically, if...America ultimately repudiates existing obligations to its (largely) Asian foreign creditors, it will simply catalyse this process and likely ensure the AMF’s swift arrival, in spite of ongoing efforts to render this idea stillborn since 1997. The inexorable logic of current economic policy making may yet introduce outcomes – such as the introduction of an Asian Monetary Fund – completely at variance with Washington’s oft-expressed preferences to the contrary. In any event, time is definitely not on the side of the existing status quo."