The IMF, what is it?

Just a short one today amidst preparation for my A-levels....


Recently, the alleged sexual assault of Dominique Strauss-Khan on a hotel maid has hit the headlines across the world. Strauss-Khan was formerly the head of the IMF, which is the International Monetary Fund and up until the recent events i had seldom heard of the IMF. So i decided to look into it further...


The IMF describes itself as an "organisation which works to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty". What this really means is it tries to prevent recessions from occuring and resolving them once they occur.


Comprising of the 187 members the IMF provides advise to its member's government based on global economic trends or forecasts as well as training to help countries manage their economies efficiently. However, over the last few years the IMF has been mainly seen as a provider of credit to countries to help deal with the global financial crisis. This works via the process by which the member countries pay into effectively a pot of money which can be drawn upon should the country encounter economic difficulties. The overall aim is to therefore act as a safety net for the individual nations.


The IMF is sometimes mistaken for the World Bank and although they are similar, they are actually different institutions. The World Bank focuses primarily on poverty reduction whilst the IMF, as the name would suggest, focuses on monetary issues. However, their work often complements the other, for example, if the IMF tries to reform part of an economy to reduce structural unemployment, this will inevitably reduce relative poverty within that same economy, thus accomplishing an aim of the World Bank. The IMF also works closely with the World Trade Organisation (WTO) in order to promote free trade which is essential to satisfying many macroeconomic objectives. 


I have only skimmed the surface of what the IMF is and what it does. From my research i have found that the role of the IMF is much deeper and more important than i first thought. If anyone out there is interested to learn more about the IMF than their website is quite a good place to start

Eurozone growth

Earlier this year i wrote on essay in which i ferociously condemned any pleas for the UK to join the Eurozone. The basis of my argument was formed on the idea that we would lose control of our monetary policy and this would lead to longer recessions, slower growth and periods of high inflation. However, it appears that i may have been a little too quick to banish the euro. Figures released recently show that the eurozone grew by 0.8% in the first quarter of this year, up from 0.3% on the last 3 months of last year. Even debt-ridden Greece experienced growth of 0.8%. Not only was this growth unexpected but it comes at a time when the UK economy has had its own growth forecasts downgraded as inflation is set to rise close to 5%, 3 percentage points above the target level. The growth of the eurozone was for the most part, due to the economies of Germany and France prospering, with respective growths of 1.5% and 1%. Obviously, the efficiency of these two economies has led to an increase in their competitiveness which has increased the volume of exported goods and services. I am still not for the UK to join the Euro, i feel that losing our sovereignty and the various menu costs of converting would harm our economy. However, it does beg the question, if we are not using our monetary policy to control inflation, then why not join the euro and at least benefit from this accelerated growth?

The rich list.

Inside today's Sunday Times was the annual "Rich list" which is exactly what it says on the tin. Philip Beresford writes an interesting piece which describes how because the rich have got wealthier over the last year, this might provide the boost that the economy needs. Now any A2 economist will tell you that governments often try and reduce the inequalities in income distribution by progressive taxation and a series of benefits etc. However, Beresford argues that amidst the government spending cuts and squeeze on middle class families, the £60 billion rise in fortunes of the super-rich will help fill the gaps left in domestic demand. After all, when people feel richer they often spend more so when the super-rich feel wealthier, they are most likely to spend a heck of alot more. After a bit of rambling on, Beresford ends with a really interesting and valid point. As the coalition has promised to cut red tape and stimulate private enterprise this may be the best time for the super rich to spend on businesses that would generate future wealth. If they hold on to their wealth, the possibility of a labour government in 4 years would surely cost them through the use of "vengeful policies".