Ahead of the vote on Brexit, IMF head Christine Lagarde warned of a prolonged period of uncertainty.
After the vote, Largarde said Brexit provided the EU a better opportunity for reform.
Today Largard is certain of disastrous consequences if another large county turns protectionist. In doing so, she pointed her finger at Donald Trump.
Lagarde Points Finger at Trump
Please consider Lagarde Warns Trump-Style Protectionism Would Hit World Economy.
Britain’s vote to leave the EU is already casting a shadow over international growth, the International Monetary Fund chief said in an interview, adding that the imposition of new trade barriers in another large economy could have ruinous effects.
“I think it would be quite disastrous, actually. Well I don’t think I should say disastrous because that is an excessive word and I should refrain from excessive words. But it would certainly have a negative impact on global growth,” she told the Financial Times.
[Mish Comment: So is it quite disastrous or simply negative? Her meaning is uncertain]
Any uncertainty surrounding a Trump presidency would probably yield more instability in financial markets, similar to the upheaval in the wake of last month’s UK referendum, she said in response to a question. But the IMF chief took care to avoid singling out any politician or referring to Mr Trump by name.
[Mish comment: Lagarde took care to avoid singling out Trump, while singling out Trump]
Ms Lagarde said “waves of protectionism” in the past had “preceded many wars” and that protectionism “hurts growth, hurts inclusion and hurts people”.
Ms Lagarde said she did not want to get involved in the political debate in the US, the IMF’s biggest shareholder. But she made clear her dim view of the policies of Mr Trump, who has proposed punitive tariffs on goods from China and Mexico and ripping up US trade pacts such as the North American Free Trade Agreement.
[Mish comment: Lagarde does not want to get into the political debate in the US, but hands Hillary campaign talking points on a silver platter]
The IMF’s assessment of the impact of the Brexit vote on the UK economy depends heavily on what sort of trade relationship with the EU a new government would be able to negotiate, she said.
Should a deal preserve access to the single market — such as Norway now enjoys — then the UK economy would be only 1.5 per cent smaller by 2019 than would be the case if Britain remained part of the EU. Were a deal to lead to the UK’s access to the EU’s 27 other economies being subject to tariffs under World Trade Organisation rules, it would cost the UK 4.5 per cent growth.
The IMF had not modelled the economic impact of a scenario in which the UK’s exit from the EU drags on and uncertainty continues for a year or more, Ms Lagarde said, but the political crisis set off by the vote could make such events likely.
[Mish comment: The IMF warned of a prolonged period of uncertainty but did not model the result even though the “political crisis set off by the vote could make such events likely”. How likely? The following paragraph provides the answer]
“Do we have a forecast and scenario with prolonged uncertainty, total lack of clarity, no triggering of Article 50 [the official notification required to leave the EU], things staying in limbo for a long period of time? No. We don’t have that. We doubt that it would be sustainable politically, geopolitically,” she said.
[Mish comment: Prolonged uncertainty is both likely and unlikely]
For the July 19 update of the IMF’s World Economic Outlook, Ms Lagarde said the organisation was looking at presenting a variety of possible scenarios for the global economy depending on the outcome of Brexit discussions — a departure from its usual format.
[Mish comment: I can hardly wait. Until then, the uncertainty is nearly killing me]
Waves of Protectionism
If Lagarde wanted to make a positive contribution she should have embraced free trade, totally and completely.
She is correct on one thing. And it’s a very big thing: “Waves of protectionism in the past had preceded many wars. Protectionism hurts growth, hurts inclusion and hurts people“.
The solution is so simple it’s beyond Lagarde’s comprehension.
The EU, US, and Asia ought to work out a genuine free trade agreement not a mind-numbing set of rules and regulations that encompass the EU, nor secret agreements like Obama’s proposed Trans Pacific Partnership (TPP) that has little to do with free trade.
A genuine free trade agreement would consist of a single statement: “Effective immediately, all tariffs and subsidies, on all goods and services, are removed.”
For more on TPP, Tariffs, the WTO, and free trade, please see …
- April 7, 2015: Obama’s Trans-Pacific Partnership Fiasco vs. Mish’s Proposed Free Trade Alternative; How Will TPP Function in Practice?
- April 11, 2015: Legacy Skills and Capital; Sugar and Steel; Turning TPP to TP
- May 30, 2016: Stacked Deck: US Bullies WTO, TPP Revisited
Lagarde finally issued a statement on trade that made sense. But it was buried in a series of flip-flops and conflicting ideas that makes it clear she really does not understand what free trade means.
Nonetheless, her warning about trade is correct. A global trade war could indeed have disastrous consequences. And it’s not just Trump who could start one.
Clinton, Trump and Sanders have all made similar statements on trade. For details, please see Today’s Quiz: Donald Trump, Bernie Sanders, Hillary Clinton – Who Said It?.
Mike “Mish” Shedlock
Politicians would be better served not saying anything. Dithering is the result of indecision. They are unhappy with the status quo and scared to death of any type change. It will take a strong leader to move the existing paradigm even if the existing system has to come crashing down in the near term.
Yeah. Lagarde is a Hillary wannabe, EU moron.
“Brexit” was defeated before it was even voted on.
‘Ms Lagarde said she did not want to get involved in the political debate in the US, the IMF’s biggest shareholder.’ Can the US just demand its money back (‘sell’) and disown the IMF?
It would be an excellent decision for the US to disown both the IMF and NATO
Yes, definitely the U.S. should pull out of the International Monetary Fund.
Leave it with nothing a but a big sink hole and a loud sucking sound.
And Gary Johnson’s stance on free trade is?
I think you’re making a mistake in dismissing Johnson’s chances this year.
Isn’t he running for something this year?
Oh yes, up for the part of Mickey Mouse in Euro-Disney World……
When you’re dealing with an electorate so balls-to-the-wall illiterate it passed on two in-their-face opportunities of electing Ron Paul in a row, despite him getting genuine airtime; the chances of the same dittoheads figuring Johnson is not a dirty word after 8 further years of progressive indoctrination, is miniscule indeed.
America, like all failed experiments in pathetic faith in government and bowing down to “rulers”, will be liberated from without, rather than from within. From what it currently looks like, by dudes whose military strategy involves shooting up homos in nightclubs. And who still, and this is the really sad part, will still represent an improvement over what poor America is currently stuck with.
Cheers for a better tomorrow!
“Ms Lagarde said she did not want to get involved in the political debate in the US, the IMF’s biggest shareholder. But she made clear her dim view of the policies of Mr Trump, who has proposed punitive tariffs on goods from China and Mexico and ripping up US trade pacts such as the North American Free Trade Agreement.
[Mish comment: Lagarde does not want to get into the political debate in the US, but hands Hillary campaign talking points on a silver platter]”
Cuts both ways.
Owners of capital would love to see status quo on current trade deals, but the workers that Trump courts will look favorably on ending them.
La donna è mobile, qual piùma al vento,
Woman is fickle (movable), like a feather in the wind,
muta d’accento, e di pensiero.
she changes the tone of her voice (i.e., her accents), and her thoughts
Sempre un amabile, leggiadro viso,
Always a sweet, pretty face,
in pianto o in riso, è menzognero.
in tears or in laughter, (she) is (always) lying
La donna è mobile, qual piùma al vento,
Woman is fickle, like a feather in the wind,
muta d’accento, e di pensier
she changes her accents, and her thoughts
e di pensier, e di pensier
and her thoughts, and her thoughts
È sempre misero, chi a lei s’affida,
It is always miserable, he that trusts in her
(He is always miserable who trusts in her)
Mish, would appreciate your take on the following.
We are embarrassingly unaware of how divided our societies are, and Brexit grew out of a deep, unexamined divide between those that fear globalization and those that embrace it, says social scientist Alexander Betts. How do we now address that fear as well as growing disillusionment with the political establishment, while refusing to give in to xenophobia and nationalism? Join Betts as he discusses four post-Brexit steps toward a more inclusive world. http://www.ted.com/talks/alexander_betts_why_brexit_happened_and_what_to_do_next?utm_source=newsletter_daily&utm_campaign=daily&utm_medium=email&utm_content=button__2016-07-06#t-1029407
Thanks, David
I’ll address that personally and economically. Personally you contemplate the concept and experience of Grace. If you’re religious do it within your religious faith, if not religious or atheist simply do the same within the natural psychological and linguistic definition of it. Personal graciousness and flow are the secrets to healthiness and happiness no matter what occurs in Life.
Economically and monetarily, fully flesh out the concept and aspects of Grace and make sure that you fight to align systemic policies with that same concept and you will have systemic economic and monetary free flowingness. It’s really that simple.
Clear, congruous and courteous. Would be grateful if you would post this comment and other observations at https://workplace100.com/2016/07/08/law-of-unintended-consequences/ Thanks
Protect from what? Competition? God forbid!!!!
Well that’s just it. This article misses the point of the Brexit issue…though at least it’s topical. Great Britain is a not insignificant energy producer (coal, oil, natural gas), not insignificant steel producer, not insignificant final goods producer, not insignificant market and obviously outside of Wall Street the largest money center financial complex in the World. And of course the British Pound is still an albeit small but not insignificant reserve currency. So Brexit has crushed Pound Sterling…thus making all the goods produced in Pounds a lot cheaper. This sell off in oil, natural gas, gasoline, steel, etc is not an accident. It doesn’t take much energy to run the English economy so the rest of the world now has to compete with that much lower price. This is obviously a major problem for Japan and Italy which don’t have the financial firepower to stay independent of ChiMerica as Great Britain’s Commonwealth still in theory.
Hence the IMF and NATO will matter more now than ever as a: NATO is a demand driver for its members but b: all of Europe and Japan look broke to me save Great Britain right now so that says to me the IMF will have to start entering the fray if suddenly every State in the EU decides that all the Banks need a bailout.
In other words the ECB cannot bailout even the Italian Banks let alone the German ones…so the States themselves a la South Korea in the early 90’s are going to be forced to turn to an IMF(ed) “work off.”
Naturally these filthy, corrupted, foreign political hacks love to dabble in our ‘pay to play’ political system so that more US jobs are sent overseas while more foreign workers are allowed to come to America (via TPP) and steal US jobs from our middle class. And, of course, a blind eye gets turned to all the currency manipulation in foreign markets which paves the way for more international economic inequality.
Trump has promised to put an end to all this nonsense so the foreign elite hate him and have turned him into the enemy.
Not only to they want us to send more US companies overseas and send more of their citizens to America to steal our jobs – they want us to pay the majority of costs for their homeland defense and security too.
And any American who has the intestinal fortitude to stand up for his fellow citizens – be damned.
I’ve never seen this country backslide into the flusher faster than what I’ve witnessed in the last 10 years.
Now even the FBI is giving free get out of jail cards to criminals.
A retail discount all of which would be rebated back to merchants for their discounts to consumers would solve any trade problem for any country, would reduce taxation for welfare, unemployment insurance etc. and in turn reduce those bureaucracies. And what company/country wouldn’t like to sell their merchandise for 40% less than their best competitive price….and still get their total price anyway. It’s the perfect win-win for the individual and businesses.
The EU enjoys an annual trade surplus with the UK of £ 85 Billion yet those morons threaten to cut them out of the single market. Right! Sure they will. Just like the financial genius in the White House will relegate the US’ biggest source of foreign direct investment to the back of his queue. And now to the point of the story: who but an idiot would listen to the babble from a left wing french lawyer? “Dispute not with her: she is lunatic.” William Shakespeare, Richard III
Like
“Waves of protectionism in the past had preceded many wars. Protectionism hurts growth, hurts inclusion and hurts people“.
1.) First growth slows (generally from over indebtedness), THEN protectionism takes place.
2.) Protectionism gave US manufacturing a chance to grow so that it could have the strength to compete with the rest of the world.
3.) People are already in a sour mood. They display that mood by excluding and hurting other people.
She understands free trade, but how can bureaucrats get rich if the dont have favors to sell. Everything makes sense when you start from the premise that what ever is being negotiated is first and foremost in the best interest of the career politician. That is a fact that is being increasingly exposed the more desperate govts become.
I agree that a free trade agreement should only take a sentence. When you have 2000 pages, then you have 2000 pages of restrictions on free trade.
antitrade policies could be “disastrous.” FOR WHOM or for what ? ? ?
Yes, international investors need investment protection BUT so does the environment!
A bit of irony, to fix the economy we need growth ie a bigger foot print?
Christine has been less accurate than the worst weather-persons!
Her policies have destroyed Greece, and lately, she admitted she was totally wrong!
WHY DO WE LISTEN TO THESE CRYSTAL BALL GAZERS that have bad track records?
A bit of irony, the drive for Globalism is fostering waves of protectionism!
Frexit next and then Nexit, Oexit, Gerexit, … etc ?
check out
Economic Collapse – Brexit – Euro collapse – America 2016 – Financial Crisis
She is best ignored, since her post is now political . The only people worth listening to nowadays on global financial matters are the BIS.
Ms Lagarde said “waves of protectionism” in the past had “preceded many wars” and that protectionism “hurts growth, hurts inclusion and hurts people”.
What Lagarde leaves out is that under Globalism, growth is hurting and the “99%” are not currently being included, which is hurting people.
Lagarde’s words are very EMPTY.
“[Mish Comment: So is it quite disastrous or simply negative? Her meaning is uncertain]”
That is because she doesn’t mean what she says.