BRICS set up bank to counter Western hold on global finances

[Admiral Yi]

You sure about that?  My understanding is an IMF program requires 2/3 approval of the board, so 1/3 + 1% constitutes a blocking vote.  Last time I checked the US share was c. 24%, and only got to a block because of reliable board allies like the UK and Canada.

[The Minsky Moment]

USA is currently at 16.75% voting shares, according to the IMF website.
the supermajority voting hurdle for major actions is 85% of voting power + 2/3 of all members.

[Admiral Yi]

Kay.

[Admiral Yi]

The reason the BRIS are rallying around China is in part because of the failure to reorganize voting rights at the IMF to reflect present economic realities.

The reason for that failure is . . . no surprise, blockage from the Tea Party crowd.

Yes their antics are amusing to sheilbh, but the fact is that the United States simply cannot afford the luxury of having a Stupid Party around.

Now that I know we're talking about a proposal to change the US share from 16.75 to 15%, this characterization seems...a bit overcooked Joan.

[Jacob]

Now that I know we're talking about a proposal to change the US share from 16.75 to 15%, this characterization seems...a bit overcooked Joan.

Which part do you think is overcooking it? That the change is important, or that the Tea Party types are the ones who are blocking it?

[Admiral Yi]

Which part do you think is overcooking it? That the change is important, or that the Tea Party types are the ones who are blocking it?

That changing the US share to 15% would have any noticeable impact on Chinese behavior.

[Jacob]

Which part do you think is overcooking it? That the change is important, or that the Tea Party types are the ones who are blocking it?

That changing the US share to 15% would have any noticeable impact on Chinese behavior.

What makes you say that?

[Admiral Yi]

What makes you say that?

The magnitude of the proposed change.

[Jacob]

What makes you say that?

The magnitude of the proposed change.

So purely a numbers thing, with no insight into what the Chinese might actually be thinking?

[Admiral Yi]

So purely a numbers thing, with no insight into what the Chinese might actually be thinking?

I don't understand your question.

The Chinese have stated they would like increased representation in international financial institutions, to reflect their new economic heft.  I have no reason to doubt this.  To me, this proposed change is too small to satisfy Chinese desires.  It seems more like a token gesture than a meaningful rearranging of power relationships.

[The Minsky Moment]

Which part do you think is overcooking it? That the change is important, or that the Tea Party types are the ones who are blocking it?

That changing the US share to 15% would have any noticeable impact on Chinese behavior.

China probably doesn't care much about what happens to the US share (which I think is actually going to stay above 16%).
What they do care is that *their* share is going to increase quite a bit - so that they will move from being the 6th largest shareholder to the 3rd largest.

What it also of concern to China is what US action now says about the future because given the trajectory of Chinese growth, they probably expect to reach the #2 position in the next round.  Understandably, they are wary about being locked into an institution where every time they are due for a voting power increase they have to go cap and hand to the US and then get turned away at the door.

[Admiral Yi]

Maybe I didn't understand then.  Is the current bill part of a larger coordinated effort to readjust voting shares in China's favor?

[The Minsky Moment]

The IMF board periodically adjusts quotas and voting shares to reflect changes in relative economic weight of the member states.  The most recent one would have rebalanced primarily by reducing European shares and increasing developing world shares.  China being the largest gainer.  The US share would decline, but only slightly.

My understanding is the US (executive branch) agreed to the changes but of course Congress must ratify.  The admin and its allies in Congress keep attaching the ratification to various bills and the amendments keep failing. 

[Jacob]

So purely a numbers thing, with no insight into what the Chinese might actually be thinking?

I don't understand your question.

The Chinese have stated they would like increased representation in international financial institutions, to reflect their new economic heft.  I have no reason to doubt this.  To me, this proposed change is too small to satisfy Chinese desires.  It seems more like a token gesture than a meaningful rearranging of power relationships.

Basically, I wondered if your conclusion that it was "a token gesture" rather than "meaningful rearranging of power relationships" was based on any specific knowledge of the Chinese position (i.e. what have they said) or on your perception that a reduction of 1.75 percentage points in the US share seems small. You've clarified that your position is based on your evaluation of the number, rather than on the Chinese evaluation of the number or anything they have said or want. So that answers my question

Minsky, with excellent timing, pointed out that the Chinese apparently do not agree with you.

[grumbler]

Maybe I didn't understand then.  Is the current bill part of a larger coordinated effort to readjust voting shares in China's favor?

It's part of a coordinated effort to readjust voting (and contribution) share in favor of "historically underrepresented economies."  How much is to satisfy China, and how much to satisfy the other BRIs is not clear.