I had a talk two years ago with Kenneth Rogoff, the Harvard professor and former IMF chief economist, about the future of the IMF. The IMF in its present form, he argued, made no sense.
“If you look today at the IMF’s total lendable resources, they’re $150 to $200 billion,” he said. “China has more than $1 trillion in reserves, Taiwan and Korea have $200 billion.” That is, the IMF was simply too small and weak to make much of a difference in global capital markets. It either had to get much bigger, Rogoff said, or get out of the lending business and focus on information and financial “plumbing.”
Rogoff favored the latter course to expanding the IMF’s lending resources, and at the time it was pretty much inconceivable that a big IMF expansion would be politically possible anyway. Well, times have changed, huh? One thing that the G20 summitteers have been able to agree on today is a $750 billion increase in IMF resources.
That’s still not enough to make the IMF a truly credible central bank to the world, as a lot of people in global financial circles seem now to want. But it’s a clear step in that direction.