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POL201Y1 (221)
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University of Toronto St. George
Political Science
C Jung

POL201Y1-Y Tuesday November 27, 2012 Discussion on IMF and Global Value Chains  Movie made by the IMF-describing what the IMF does; the global crisis has put the IMF back in the lime lights. Three main functions; regualar economic checks-suvalence, training, and takes out the fire like a fire fighter.  Countries can turn to the IMF for loans that will put out their fire. Sometimes countries like people are short of money-both internal and external factors leading to a crisis; for example bying more expensive than selling or cannot keep up with mounting debpts – this can lead to foreign investors taking there money elsewhere. Tax revenues are insuffiencent or too many subcides or over employing. The most common crisis is balance of payment crisis  A really severe crisis could lead to a recession or default- the IMF can help by loaning large amounts of money. Any country-rich or poor can ring the bell for help. When a country requests a loan- the IMF will work with the country to develop a reform for the country-ie. Policies  Once the program is underway the country is able to consume more and begin to pay back the loan. Foreing exchange reserves will be present again  Who owns the IMF- the 188 countries-the people – the people of the government “Disaster in the Making – IMF recipe leads Greeks to starvation” – CLIP – google the clip (did not work during class) Greece  Interesting things happening in Greece right now; most compelling problem the IMF is facing is the finanical crisis in Greece  Today they reached an agreement to cut the greece debt by 40 million Euros- the attempt to cut the debt was in negoations for four month- so it’s a good thing for them  They owe 240percent of what they make every years- obviously this is not sustainable so they borrowed money from the EU and IMF  Starting in 2008 IMF and EU put greece in an Austerity program  What the IMF has discovered is that the impact of the austerity measures (the reason to solve the balance of payment problem) they actually slow down the economy- because economies are driven by demand – wealthy countries and producers of big products (US CHINA) – these countries need to find markets for their products- (Jamica- they are not interest in buying potatoes from them but selling) then you dimish demand because nobodys got any money  When demand shrinks- economy shrinks  Unfortunately its taken the IMF 30 years to figure out that out. So the IMF since 2008 has had two big moments in its life. 1) Obviously at birth (after WWII to stablize the world financial problem- need for international institutions to stablize the world finances)  2) 1970s is the second great moment – world wide recession because of OPEC- the IMF goes into a lot of countries  2008 – really transforms the IMF – because up until now the IMF has been going to countries like Bangladesh and only now it is going into the European countries. The most interesting one is in Greece  Greece; colaberation between IMF and EuroZone to bail out Greece. The reason for this is that the Ezone does not want the Greece to collapse because it will impact the entire Euro Zone. Effects germany aswell- that’s why germany is no active in this discussion to keep the Eurozone intact and strong- that’s why they are bailing out other countries in problem in the Eurozone Biggest problem is the austerity measures- greece responds well according to the IMF and EU – but quite. they are now responding to these problem. They want to make money so they can increase demand and make a stronger economy. Even though they are balacning their budgest their economy is still bad  How are they cutting greek debt by 40 miilion Euroes – well they arent forgiving Greece. The IMF is arguing for forgiving greek debt – germany argues differently – they are having an election in 2013 and most germans say for not forgiving the greek debt. Germany matters because they are the biggest and that they are providing the most money for the EU and thus, greece. Germany will do it only because it is in the interest of the Euro zone – so they can sustain their own economy.  Nevertheless everyone aruges that something needs to be done- they cut the interest rate so their debt goes down. Plus a ten year interest rate deffereal – wont have to pay interest for ten year. Plus they 15 instead of 30 years to pay back which means they pay less back  Everyone agrees that there is something else they are not saying- that after the german election they are probably going to forgive Greece- the IMF is pushing for loan forgiveness in 2016 but right now germans are not  Whats happen today is also an admission that the austerity measures arent working- important moment- its an admission that the measures don’t work. Remember the former PM of jamica – IMF only focused on short term and never cared for countries in Long term  IMF in the last 30 years has gone through numerous critism  With this 40 million euro its debt is now 124 percent GDP before it was 240 percent of GDP Bottom line; in December Greece gets first installement of money from EU – 47 million to pay wages and pay their suppliers – people who supply things to the governemnt- they havent been payed in months Global Value Chains  Reading about food consuption; argument; most of the greed house gass admission of food production comes from transportation of food- destructive to the environment so we should buy locally procuded food- but these authors argue that we shouldn’t buy locally produced food in Canada – get from serena  Argument in the movie last week – jamicans- we desperately need our own domestic market – own domestic consumers who are buying foreign goods. And we also need foreign markets to sell our goods  Argument against locally produced food 100 miles from where we leave is just another form of argucaultural protectionism – protest from buying foreign food. Another form of econonmic protectionism Global Value Chains Today  (When Gap has a sale they sell their kids clothes very cheap- that means that you can buy a pair of pants for 4dollars and its because those pants are connected to the global value change )  1) Raw material supply 2) Porvision of components 3) porduction of networks of garment factories 4) export channels estliablished by trade intermediates 5) marketing networks at the ret
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