The head of the International Monetary Fund says the world needs to prepare for the next economic crisis, even as it begins to recover from the worst recession since the Great Depression. IMF Managing Director Dominique Strauss-Kahn, speaking to business students at a Johannesburg university on Tuesday, expressed concern that recovery could mean leaders will feel less pressure to pursue such reforms as tightening regulation and supervision of financial markets.
Strauss-Kahn says he cannot not predict the timing or the nature of the next crisis, but that he is sure it will come. Strauss-Kahn is on an African tour that started in Kenya and will take him to Zambia from South Africa.
GREEN FUND IMF chief defended plans to create a 100 billion dollar fund to help countries mitigate the effects of climate change. "The problem of climate change itself is not really in the mandate of the IMF," Strauss-Kahn said. "What is in the mandate of the IMF is to help financing, in a sustainable way, what has to be done - especially in the developing countries - to deal with it."
Climate change "has a lot of macro-economic consequences", he said, including "consequences on the social security, a threat to democracy and sometimes a threat to peace." "This is why the Fund has undertaken a mechanism sophisticated enough and innovative enough to allow the unblocking of the considerable sums necessary to deal with questions of climate change," he said.
CHINA MOVED TO MORE TRADITIONAL GROWTH MODEL Dominique Strauss-Kahn said that China's yuan is still "very much undervalued", the head of the International Monetary Fund said on Tuesday, although he added that a focus on domestic growth could lead to changes "in the coming months".
"The crisis has been the trigger for the Chinese economy to move to a more traditional model of growth." "What goes with this kind of policy is a revaluation of the Chinese currency," he said. "We may get changes in the coming months." Strauss-Kahn also described increased savings rates by American households since the financial crisis as a "huge change in the global economy" that would start to address the structural imbalances between Asia and the United States.
However, he said the Chinese and other emerging market consumers were still a long way off being the engine of world growth to replace the United States. "You are not going to replace the American consumer with the Asian consumer just in a few weeks," he said. "You don't change the route of a big ship like this one overnight." As a result, the world economy was now in uncharted territory, he said. "We're not going back to business as usual," he said. "The growth model of the global economy is basically unknown."-