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Edwin M. Truman

Edwin M. ruman

Edwin M. Truman, nonresident senior fellow since July 2013, joined the Peterson Institute for International Economics as senior fellow in 2001. Previously he served as assistant secretary of the US Treasury for International Affairs from December 1998 to January 2001 and returned as counselor to the secretary March–May 2009. He directed the Division of International Finance of the Board of Governors of the Federal Reserve System from 1977 to 1998.

Articles by Edwin M. ruman

The G20 missed an opportunity to expand financial resources for vulnerable countries

April 16, 2020

Despite the urgent need to help vulnerable countries cope with the COVID-19 pandemic, the G20 finance ministers and central bank governors issued a document on April 15, 2020, that contained many words and little new substance. They emphasized the importance of health response, aiding helpless countries, promoting recovery and financial stability, and mobilizing the International Monetary Fund (IMF), World Bank Group, and regional development banks. The only new element was conditional support for a “time-bound” suspension of debt service payments of the poorest countries.
On the financial side, the G20 avoided commitments of new resources for the international financial institutions, instead calling for a rearrangement of existing resources like the proverbial chairs on the Titanic. They

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The IMF will need more resources to fight the COVID-19 pandemic

March 29, 2020

The coronavirus pandemic is threatening to deliver its most lethal blows to the emerging market and developing economies, which are getting hit by large foreign financial outflows as well as health crises. Kristalina Georgieva, managing director of the International Monetary Fund (IMF), has pledged to mobilize its $1 trillion lending capacity to assist members if necessary. But in truth, the Fund’s capacity for new lending at maximum is $787 billion (table 1). The United States and other members will have to augment IMF resources for it to play a central role in this crisis. Curiously, the G-20 leaders’ summit statement on COVID-19 issued on March 26 failed to recognize this issue.
Only half of total IMF resources are available for lending—and continued availability not certain
Total IMF

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The G-20 must wake up to the COVID-19 crisis

March 24, 2020

As nations across the globe scramble to combat the coronavirus pandemic, they have overlooked a major tool that would help greatly: international coordination of their economic policy responses to the crisis. Concerted action within the Group of Seven (G-7) leading industrial democracies has been minuscule, and the larger Group of Twenty (G-20), which played a crucial role in rescuing the global economy in 2008–09, has been an afterthought.[1] This neglect finally may be changing.
On March 16, the G-7 leaders pledged in nonspecific terms to coordinate public health and economic measures while encouraging science, research, and technology cooperation. But faced with the European Union’s self-defeating emergency restrictions on exports of hospital supplies outside the trade bloc, G-7 leaders

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How Jacques de Larosière and Paul Volcker contained the 1982–89 global debt crisis

January 30, 2020

The most serious global financial crisis in post–World War II history, up to that point, flared up over the summer of 1982. Mexico found it was unable to service its external debts and turned to the United States and the International Monetary Fund (IMF) for help.
The leaders of the IMF and the Federal Reserve acted to prevent the collapse of Mexico’s finances from precipitating a potentially catastrophic global financial crisis: Jacques de Larosière, then managing director of the IMF, who celebrated his 90th birthday on November 12, 2019, and then Fed chair Paul A. Volcker, who died a month later at 92. Together they worked tirelessly to contain the crisis by devising new tools and approaches. Had they not acted decisively, the crisis would have caused a global recession on the scale of

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A Composite Digital Currency Is a Non-Starter

October 15, 2019

The prospect of digital money replacing cash, checks, and credit cards around the world is both tantalizing and scary to many experts and policymakers. Law enforcement authorities worry about money laundering. Monetary policymakers worry about losing control of the tools to steer their economies. Some would be concerned, and some would applaud, if a digital alternative overthrew the dollar as the world’s dominant currency. For these reasons, Facebook’s Libra project to create a global cryptocurrency is embraced by some but also faces challenges from regulators and possible boycotts by potential partners.
At least some of these concerns seem overblown, however. A nondollar cryptocurrency, for all the hype, is unlikely to replace the dollar in its central role in the international financial

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Trump Says China Is Manipulating Its Currency. What Can He Do About It?

August 19, 2019

No stranger to empty threats, President Donald Trump designated China as a “currency manipulator” earlier this month and has complained about the strong US dollar despite having few tools to deal with it even if action were justified, which is not the case.
Nevertheless, if the administration must act, the Treasury could sell dollars to try to drive down the dollar. But the Federal Reserve, which traditionally has coordinated with Treasury on foreign exchange purchases, is not likely to join in the selling.  The Fed could, however, bolster Treasury’s capacity to act alone. But dumping dollars would signal that the United States itself was manipulating its currency, further weakening America’s reputation around the world.
Simply put, the facts do not support US intervention under current

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Lagarde’s IMF Legacy: A Stronger but Still Vulnerable Fund

July 16, 2019

After eight years as managing director of the International Monetary Fund (IMF), Christine Lagarde will become the president of the European Central Bank on November 1. Her tenure at the Fund was not without mishap, but she served the institution and became a consummate diplomat, skillful communicator, and substantive innovator. Nevertheless, the IMF remains vulnerable to the centrifugal forces affecting the global economy and imperiling financial cooperation.
Lagarde was a unique IMF leader: its first female head, a former French finance minister who had not spent decades engaged in international finance diplomacy, replacing a disgraced Dominque Strauss-Kahn from her home country.
Early on, Lagarde separated herself from her previous position as France’s finance minister, by focusing on

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Paul A. Volcker’s “Keeping at It:” Messages for Country and World

February 8, 2019

Why would Paul Volcker, who tamed inflation as chairman of the Fed in the 1980s, write a memoir in his 91st year rather than go fishing? Because he is deeply concerned and has a message about the direction of the country and the world. The message proclaims three verities drawn from his career of service in the public and private sectors: stable prices, sound finance, and good government.
I first met Volcker in the early 1970s when he was undersecretary of the US Treasury and I was a staff economist at the Federal Reserve Board focusing on issues of international monetary reform. When he became chair of the Federal Reserve in 1979, I worked with him on a range of international financial issues. Our most recent collaboration was in 2010–11 on the Palais Royal Initiative of Michel

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China, the United States, and Damage to the IMF

September 4, 2018

A little-noticed but ominous new front has opened in the rivalry between the United States and China for dominance at the International Monetary Fund (IMF). On August 3, 16 US Senators wrote to Secretary Steven Mnuchin, Secretary of State Mike Pompeo, and Defense Secretary James Mattis expressing concerns about potential requests for financial assistance from the International Monetary Fund (IMF) by countries that have become overly indebted in connection with China’s sprawling infrastructure program known as the Belt and Road Initiative (BRI). The letter, signed by two Democrats and 14 Republicans, cautioned against supporting IMF programs for countries that have gotten into financial troubles while taking advantage of what they called China’s “predatory” lending through the BRI. Fallout

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Lagarde, Trump, and the IMF: Waning US Leadership Role in International Financial Institutions?

December 20, 2016

The conviction of Christine Lagarde by a French court on charges of  negligence and misuse of public funds while she was finance minister of France has refocused attention on her current role as managing director of the International Monetary Fund (IMF). That attention comes at a time of myriad questions  about the attitude of the incoming Trump administration toward the Fund and similar institutions of international economic and financial cooperation.
A  Trump administration, in its stated policy of "America First," may well  be inclined to be skeptical over whether these institutions can help to achieve its aims, as many leading Republicans have been in the past.  Nevertheless, it is likely that when the first financial crisis erupts in a country of interest to the United States, think Venezuela, the United States will be forced to turn to existing tools of international cooperation, such as the Fund. The new administration will likely find that it is inefficient and ineffective to try to cobble together a coalition of the willing to address every international economic problem into which it is drawn, in particular where the problem takes the form of a financial crisis and financial assistance requires an act of the US Congress.

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Chasing Dirty Money: We Have Lost Sight of Our Objective

July 5, 2016

Over the past 30 years, international financial authorities have made progress in developing a consistent and comprehensive global regime to combat money laundering and the financing of terrorism.1 But they have lost sight of the ultimate objective in developing a robust global anti-money laundering (AML) regime: It is principally a means to the end of reducing the incidence of the underlying crimes by identifying the perpetrators and bringing them to justice.
A case in point is the renewed attention to the beneficial owners of secret offshore accounts following the leaked documents known as the Panama Papers, which hit the news in early April. Such accounts, which need not be offshore, are designed to conceal the beneficiaries. The purpose may be legal or illegal. The owners may pay taxes on the proceeds or may not, but it is impossible to know unless those dealing with the accounts know who the beneficiaries are.
The United States has been particularly lax on this aspect of the global AML regime. In 2006, the United States was found to be noncompliant with the Financial Action Task Force (FATF) recommendation to have rules requiring identification of beneficial owners and obtaining information on their activities, known as due diligence.

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Brexit Is an Existential Threat to the European Union

June 27, 2016

The importance of the Brexit vote is not about the future of the United Kingdom; the vote consigned that once great nation to increasing irrelevance on the world stage. The importance of Brexit vote is existential for Europe and the future of the European project that began with the European Coal and Steel Community 65 years ago. To survive as a coherent entity, the European Union must either strengthen the economic and monetary union or abandon economic and monetary union and step away from the prospect of political union.
It was a mistake to launch the euro area in 1999 with 11 initial members; politics triumphed over economics and now 19 of the 28 members of the European Union have been admitted.  It is now clear that the euro area is a flawed structure.  The core of the European project is rotten.  Therefore, if the European Union is to be saved from further disintegration, the euro area must be addressed first by (1) completing the banking union without de facto opt-outs, exclusions, or cross-border conditions on financing deposit insurance; (2) establishing a fiscal authority empowered to execute countercyclical fiscal policy for the area as a whole; and (3) nothing less than setting a course for political union based on mutual trust of other member states.

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The US Treasury Embraces Transparency

May 18, 2016

RealTime Economic Issues Watch

May 17, 2016 8:00 PM

After 40 years, the US Treasury has stopped protecting information on the holdings of claims on the United States by members of the Organization of Petroleum Exporting Countries (OPEC). Instead of reporting the aggregate claims by Middle Eastern and African oil exporters, the Treasury is now reporting claims of individual countries. In addition, claims of offshore financial centers will be individually reported. As I have argued in private and public to my former colleagues at the Treasury and Federal Reserve for more than a decade, this change is long overdue.
The principal impetus came from interest in the holdings by Saudi Arabia of US Treasury securities in the wake of pressures on Saudi reserves from lower oil prices. We now know that as of the end of March 2016 total Saudi holdings of US Treasury securities were $117 billion, presuming that most of these holdings were by the Saudi Arabian Monetary Agency. This total is much less than the $750 billion reported in some press stories. Credit for bringing about this change in policy should go to Andrea Wong of Bloomberg News, who raised this issue less than four months ago. Credit also goes to Treasury and Federal Reserve officials who were able to reconsider US policy in this area and change it in record time.

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