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Johannesburg - The International Monetary Fund (IMF) this week announced a new investigation by its in-house watchdog into whether it underplayed the global problems caused by so-called unconventional monetary policy, including quantitative easing in the US, the EU, the UK and Japan.
Many economists blame these monetary policies for asset price bubbles, exacerbating inequality and making the developing world’s financial systems more vulnerable.
The Independent Evaluation Office has previously laid into its mother body for its European political bias and under-appreciation of the risks that led to the global financial crisis almost a decade ago. The new evaluation announced this week will look into the IMF’s role in keeping the rich world on its course of pumping enormous amounts of liquidity into their financial systems since the crisis in 2008.
This includes looking at whether the IMF really appreciated the effect this would have on the rest of the world through “spillovers”, and whether it really considered alternative ways the most advanced economies could fight the post-crisis recession – such as government spending.
The money being put into the US financial system by the Federal Reserve has flowed all over the world and artificially buoyed markets everywhere, including South Africa.
Now the largest danger facing currencies such as the rand is what will happen when the stimulus stops.
One of the Independent Evaluation Office’s missions is to see how much the IMF cared about the future “exit risks” when advising rich countries.
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