United for Peace of Pierce County, WA - We nonviolently oppose the reliance on unilateral military actions rather than cooperative diplomacy.

Rising food prices constitute a major global crisis, IMF director Dominique Strauss-Kahn warned Saturday, saying that "if they go on like they are doing today . . . [h]undreds of thousands of people will be starving," AFP reported.[1] -- The spring meeting of the Intenational Monetary Fund in Washington, D.C., was marked by discussions of "rising food costs [that] have lead to social unrest in several countries such as Haiti and Egypt. Thirty-seven countries currently face food crises, according to the Food and Agriculture Organization." -- But the IMF is increasingly the object of criticism. -- Heather Stewart of the London Observer said Sunday that despite its claims to the contrary, "it failed to grasp the threat posed by a decade-long credit binge."[2] -- Business columnist Bill Jamieson, writing in the Scotsman (Edinburgh, Scotland), was more blunt, asking: "What is the point of the International Monetary Fund?"[3] -- Both quoted a damning July 2006 document published by the IMF stating that "staff and officials agreed that a range of indicators suggested that systemic risks were at a low ebb." -- Jamieson ironized about the solution that is likely to be proposed: "tax revenues being diverted to support a financial sector characterized by breathtaking levels of reward for the growth and leveraging of sub-prime debt." -- It is more than five years since French sociologist Emmanuel Todd called the IMF and its twin institution, the World Bank, "two institutions that are largely discredited today in the eyes of many" (Après l'empire: Essai sur la décomposition du système américain [Paris: Gallimard, 2002], p. 283; translated by C. Jon Delogu as After the Empire: The Breakdown of the American Order [New York: Columbia University Press, 2003], p. 201)....

WASHINGTON -- Rising food prices could have terrible consequences for the world, including the risk of war, the IMF has said, calling for action to keep inflation in check.

"Food prices, if they go on like they are doing today . . . the consequences will be terrible," International Monetary Fund managing director Dominque Strauss-Kahn said.

"Hundreds of thousands of people will be starving ... (leading) to disruption of the economic environment," Strauss-Kahn told a news conference at the close of the IMF spring meeting here.

Development gains made in the past five or 10 years could be "totally destroyed," he said, warning that social unrest could even lead to war.

"As we know, learning from the past, those kind of questions sometimes end in war," he said. If the world wanted to avoid "these terrible consequences," then rising prices had to be tackled.

Skyrocketing prices on rice, wheat, corn and other staple foods like milk particularly hurt developing nations, where the bulk of income is spent on the bare necessities for survival.

Higher energy prices, too, are driving up the cost of food, as well as stoking broader inflation.

In recent months, rising food costs have lead to social unrest in several countries such as Haiti and Egypt. Thirty-seven countries currently face food crises, according to the Food and Agriculture Organization.

Escalating inflation is complicating the already complex challenges of a global financial crisis battering the world economy, Strauss-Kahn said.

The 185-nation IMF called for a strong front to put the reeling world economy back on track.

"The global crisis has to be addressed with a global view and by strengthening the role of multilateral institutions," Tommaso Padoa-Schioppa, chair of the the International Monetary and Financial Committee (IMFC), the IMF's top policy-making body, told reporters in a briefing.

In a statement, the IMF said that "policymakers should continue to respond to the challenge of dealing with the financial crisis and supporting activity, while making sure that inflation is kept under control."

The IMF stressed that "the challenges facing the world economy are of a global nature, requiring strong action and close cooperation among the membership."

Unlike the last IMF meeting in October, where internal reforms were high on the agenda, this time the multilateral institution faces a full-blown, and still unfolding, financial shock that began in August amid rising defaults on U.S. high-risk subprime home loans.

Tasked with maintaining global financial stability, the IMF, whose own finances are strained, insists its expertise and global range make it a key player in resolving what Strauss-Kahn earlier called the worst financial crisis since the Great Depression of the 1930s.

The IMF last week warned the global economy is slowing so rapidly it could slide effectively into recession this year and next.

IMF policymakers also welcomed moves by central banks to provide liquidity support to ease strains in the credit markets.

The U.S. Federal Reserve, the European Central Bank, and others have pumped hundreds of billions of dollars into the money markets that seized up in the spreading subprime contagion.

The IMF also applauded Financial Stability Forum policy recommendations adopted Friday by the Group of Seven industrialized countries in the hope of improving transparency and resiliency in the financial markets within 100 days.

Regarding internal reforms, the IMF said it hoped governors would soon approve key voting and financial measures approved by the executive board.

It said it looked forward to approval of a reform of voting rights, long demanded by developing countries, by April 28, and a new income model that includes the sale of 403 tons of gold to raise cash, by May 5.

Finance ministers have handed the Washington-based International Monetary Fund a powerful new role as the guardian of global stability, despite evidence that it failed to grasp the threat posed by a decade-long credit binge.

In Washington, at the IMF's spring meetings, finance ministers backed radical plans by its managing director, Dominique Strauss-Kahn, to cut 15 per cent of its staff, increase the say of developing countries in its decisions, and focus on monitoring the health of the world economy, instead of making controversial loans to poor countries.

Strauss-Kahn said last week that the IMF had issued repeated warnings before the sub-prime crisis. Yet, as recently as July 2006, an IMF check of the U.S. economy found that, 'a range of indicators suggested that systemic risks were at a low ebb,' and 'financial sector risks related to household borrowing appeared relatively manageable.'

Alistair Darling has argued strongly for the IMF to be given greater powers of surveillance. But the IMF has also given the U.K.'s banking system a clean bill of health twice in recent years: once in 2003 and again in December 2006 when, in a report on the British economy less than 12 months before the Treasury was forced to bail out overstretched mortgage lender Northern Rock, it said 'the financial sector starts from a position of strength and the authorities continue to promote the system's resilience.'

What is the point of the International Monetary Fund? Why, if it so signally failed to give advance warning of the property and credit bubbles in the world's biggest economy, should its prescriptions be listened to now?

How does it reconcile its current advice to Western governments and central banks with almost the exact opposite advice given to the Asian economies a decade ago? And why should its calls for government intervention carry weight, when so many have misgivings?

The IMF was set up in 1944 to stabilize exchange rates and supervise the reconstruction of the world's international payment system. Countries contributed to a pool which could be borrowed from, on a temporary basis, by countries with payment imbalances. It now spans 185 countries, and works to foster global monetary cooperation, financial stability, international trade, high employment, sustainable economic growth, and poverty reduction.

This is all noble and high-minded and swathed in consensus. Unfortunately, the meeting this weekend of the Group of Seven major industrial nations and the IMF's governing body in Washington could hardly be less agreeable. Global food prices are soaring and the oil price has climbed to $110 a barrel, piling on the pressure both for advanced Western economies and low-income economies with a billion people still living on less than $1 a day.

Now, on top of this, has come unprecedented turbulence in financial markets, a global credit crisis, and massive losses sustained by the world's biggest banks. Wholesale money markets in America and Europe have seen a drying up of liquidity as banks fear to lend to each other.

Where there should be consensus on the role and credibility of the IMF to help tackle these problems, there is little in evidence. The run-up to this year's spring conference has been marred by charge and counter-charge over the IMF's failure to recognize the severity of the crisis that has unfolded.

Only this week, after months of evident trauma in financial markets, has the IMF sonorously declared that the crisis "has developed into the largest financial shock since the Great Depression." It now admits to being "humbled" in failing to recognize how bad things are, but says there has been a "collective failure to appreciate the extent of the leverage taken on by a wide range of institutions and the associated risks of a disorderly unwinding."

And the IMF's managing director, Dominique Strauss-Kahn, has waded in, saying the United States refused to adopt its program to improve the stability of national economies. About two-thirds of IMF member countries chose to take part in a Financial Sector Assessment Program, a joint World Bank-IMF initiative set up in 1999 to help alert member countries to vulnerabilities in their financial systems.

"What is interesting," says Strauss-Kahn, "is that, until a few weeks ago, the U.S. has refused to have an FSAP. We can't be held responsible for lack of supervision . . . owing to the fact that our main instrument to make that kind of supervision was not used in this country."

The clear inference is that if the IMF had been called upon to comment on U.S. credit markets, it would have identified the problems and demanded action.

Is this a credible defense? According to Stephen Lewis, economist at Isinger de Beaufort, Strauss-Kahn's case gains no credibility at all when considering the IMF's approach to the U.K., a longstanding participant in the FSAP. The last published assessment was in March 2003, long before the global explosion in structured financial products. It concluded, "the quality and effectiveness of financial sector supervision in the U.K. is strong in the banking area." Another, more recent IMF consultation under Article IV on aspects of economic and financial policy suggested no cause for concern. In December 2006, in the last Article IV consultation with the U.K. before the market turmoil erupted, the IMF's view was: "The financial sector starts from a position of strength and the authorities continue to promote the system's resilience."

The text added that the U.K. was "appropriately, aiming to balance the costs and benefits of regulation" -- sentiments that would have been warmly welcomed by the then chancellor, Gordon Brown, even though the balance proved hardly up to the job. Perhaps, says Lewis, this explains why Brown and Alistair Darling now strongly support giving the IMF the lead role in dealing with global market woes: "They subscribe with IMF officials to a common fund of presuppositions and bathe in the same pool of complacency."

The IMF also conducted Article IV reviews of U.S. policy in the run-up to the credit market troubles. The most pertinent of these was published in July 2006. At that time, there had already been a massive build-up in credit transfer instruments and the U.S. housing market had peaked out. This was the very latest moment when the IMF could usefully have sounded the alarm. But after consultations with Fed officials, the IMF noted, "staff and officials agreed that a range of indicators suggested that systemic risks were at a low ebb."

This was after the officials had drawn attention to how "banks had been remarkably adept in responding to changing market conditions . . . even small and regional banks had traded parts of their loan book against mortgage-backed securities, reducing their vulnerability to regional shocks." What is more, "financial sector risks related to household borrowing appeared relatively manageable . . . Stress tests indicated that borrowers at risk of significant mortgage payment increases remained a small minority, concentrated mostly among higher-income households that were aware of the attendant risks."

Nor has the IMF's conduct found much favor with Paul Niven, head of asset management at F&C Investments. He recalls that, back in the 1990s, the IMF "encouraged" predominantly Asian authorities to hike local interest rates and cut government spending in order to boost confidence from investors and regain access to overseas lending. While there are numerous differences between the Asian crisis of the 1990s and the current credit crisis, both, Niven notes, were born out of reckless lending leading to a collapsing asset bubble (and currencies). But the U.S. has been adopting a rather different set of solutions to domestic problems through aggressive rate cuts, provision of liquidity and fiscal expansion.

"Not," says Niven, "the IMF prescribed medicine of a decade ago . . . The IMF, and policymakers, learned many lessons from the Asian crisis and many would now argue that the measures used a decade ago to 'solve' the crisis in developing countries were, in reality, in real danger of 'killing the patient.' The real irony, however, is that the current crisis arguably has at least part of its roots in the IMF policies of a decade ago which led to many developing economies swearing that they would never again go cap in hand to the Fund and be beholden to external parties in the time of a crisis. This determination to build huge foreign reserves in Asian economies led, in part, to depressed interest rates in the U.S. and fuelled reckless mortgage lending there. The seeds for the next bubble, boom and subsequent bust," he warns, "may well be being sown amidst the current gloom."

This weekend will see both Chancellor Darling and Dominique Strauss-Kahn calling for government intervention to bring an end to the market turmoil. But the suggestion that the taxpayer should bear some of the cost of the market meltdown is unlikely to find much favor among taxpayers either in the U.S. or the U.K. Voters recoil from tax revenues being diverted to support a financial sector characterized by breathtaking levels of reward for the growth and leveraging of sub-prime debt. The pay-off for Northern Rock's departing chief executive strongly undermines taxpayer support for further interventions of this kind. In the US, ideological objections will be greater than reported so far. That leaves member governments with a problem. But at the heart of the IMF, a supranational authority charged with providing financial supervision and stability, there is clearly some sorting out to do.