BRICS Nations Plan New Bank to Bypass World Bank, IMF

Mike Cohen & Ilya Arkhipov - Mar 26, 2013
http://www.bloomberg.com/news/2013-03-25/brics-nations-plan-new-bank-to-bypass-world-bank-imf.html

The biggest emerging markets are uniting to tackle under-development and currency volatility with plans to set up institutions that encroach on the roles of the World Bank and International Monetary Fund.

The leaders of the so-called BRICS nations -- Brazil, Russia, India, China and South Africa -- are set to approve the establishment of a new development bank during an annual summit that began today in the eastern South African city of Durban, officials from all five nations say. They will also discuss pooling foreign-currency reserves to ward off balance of payments or currency crises.

“The deepest rationale for the BRICS is almost certainly the creation of new Bretton Woods-type institutions that are inclined toward the developing world,” Martyn Davies, chief executive officer of Johannesburg-based Frontier Advisory, which provides research on emerging markets, said in a phone interview. “There’s a shift in power from the traditional to the emerging world. There is a lot of geo-political concern about this shift in the western world.”

The BRICS nations, which have combined foreign-currency reserves of $4.4 trillion and account for 43 percent of the world’s population, are seeking greater sway in global finance to match their rising economic power. They have called for an overhaul of management of the World Bank and IMF, which were created in Bretton Woods, New Hampshire, in 1944, and oppose the practice of their respective presidents being drawn from the U.S. and Europe.

Reform Needed

“We need to change the way business is conducted in the international financial institutions,” South African International Relations Minister Maite Nkoana-Mashabane said in a March 15 speech in Johannesburg. “They need to be reformed.”

The U.S. has failed to ratify a 2010 agreement to give more sway to emerging markets at the IMF, while it secured Jim Yong Kim, an American, as head of the World Bank last year over candidates from Nigeria and Colombia.

Finance ministers and central bank governors from the BRICS nations, who met in Durban today, agreed to set up currency crisis fund of about $100 billion, Brazilian Finance Minister Guido Mantega told reporters today. He didn’t give details of proposed funding for the new bank, which Brazil wants established by 2014. The nation’s leaders are due to sign a final accord tomorrow.

FDI Inflows

Goldman Sachs Asset Management Chairman Jim O’Neill coined the BRIC term in 2001 to describe the four emerging powers he estimated would equal the U.S. in joint economic output by 2020. Brazil, Russia, India and China held their first summit four years ago and invited South Africa to join their ranks in December 2010.

Trade within the group surged to $282 billion last year from $27 billion in 2002 and may reach $500 billion by 2015, according to data from Brazil’s government. Foreign direct invesment into BRICS nations reached $263 billion last year, accounting for 20 percent of global FDI flows, up from 6 percent in 2000, the United Nations Conference on Trade and Development said on its website yesterday.

“If they announce a BRICS bank it will be quite something,” O’Neill said in an e-mailed reply to questions on March 15. “At a minimum it symbolizes they can achieve something as political group and means lots of other things could follow in the future. It also means that they will have their own kind of special World Bank, which may aid infrastructure and trade projects.”

Currency Pool

While BRICS leaders may approve the creation of a development bank in principle at the summit, details on funding and operations may take longer to finalize.

Russia favors capping each side’s initial contribution at $10 billion, Mikhail Margelov, President Vladimir Putin’s envoy to Africa he said in a March 15 interview in Moscow.

“It will be some time before it will be feasible for this bank to start financing say, a railway project,” Simon Freemantle, an analyst at Standard Bank Group Ltd., Africa’s biggest lender, told reporters in Durban yesterday. “That is some way out.”

Interest rates near zero in the U.S., Japan and Europe have fueled foreign investors’ appetite for higher-yielding assets, driving up currencies from Brazil to Turkey. Brazil has warned of a global currency war as nations take reciprocal action to weaken their currencies and protect export industries.

African Leaders

Brazil’s real has gained 1.9 percent against the dollar since the beginning of the year, while South Africa’s rand has dropped 8.7 percent in the period.

For South Africa, which makes up just 2.5 percent of total gross domestic product in BRICS, the summit is a way to showcase its role as an investment gateway to Africa. President Jacob Zuma has invited 15 African heads of state, including Egypt’s Mohamed Mursi and Ethiopia’s Hailemariam Desalegn, for talks with the BRICS leaders at the summit. For most of the BRICS leaders, it’s also the first opportunity to meet Chinese President Xi Jinping after his appointment on March 17.

“We will discuss ways to revive global growth and ensure macroeconomic stability, as well as mechanisms and measures to promote investment in infrastructure and sustainable development,” Indian Prime Minister Manmohan Singh said in a statement yesterday.

To contact the reporters on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net; Ilya Arkhipov in Moscow at iarkhipov@bloomberg.net

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net

Austerity is much worse for the economy

IMF: Austerity is much worse for the economy than we thought
Brad Plumer on October 12, 2012
http://www.washingtonpost.com/blogs/ezra-klein/wp/2012/10/12/imf-austerity-is-much-worse-for-the-economy-than-we-thought/

Earlier this week, the International Monetary Fund made a striking admission in its new World Economic Outlook. The IMF’s chief economist, Olivier Blanchard, explained that recent efforts among wealthy countries to shrink their deficits — through tax hikes and spending cuts — have been causing far more economic damage than experts had assumed.

How did the IMF figure this? That was the tricky part. Blanchard could have just plotted a simple graph showing that countries undertaking heavy austerity measures, such as Greece and Portugal, are faring more poorly than their peers. But that doesn’t actually prove anything—perhaps those countries are undertaking austerity because they’d run into economic trouble.

So, instead, Blanchard did something more subtle. He studied the IMF’s previous economic forecasts. If a country is already struggling for other reasons, the forecasters are likely to have taken that into account. And what Blanchard found was surprising: IMF forecasts have been consistently too optimistic for countries that pursued large austerity programs. This suggests that tax hikes and spending cuts have been doing more damage to those economies than policymakers expected. (Conversely, countries that engaged in stimulus, such as Germany and Austria, did better than expected.)

This all comes down to a long-standing debate over what’s known as the “fiscal multiplier.” Economists tend to agree that tax increases and spending cuts hurt growth. The question is how much they hurt growth—a variable that usually changes at different points in time.
This matters a lot for policy. If tax hikes and spending cuts only hurt growth a little bit, then a government with debt problems will want to enact some austerity measures. If a tax increase, on average, raises $10 in revenue but reduces output by $6, that might be painful, but it will ultimately shrink the deficit. (Indeed, those are basically the numbers that policymakers in Britain and elsewhere had been using.)

But if tax hikes and spending cuts hamper growth significantly, then austerity could be ill-advised. Indeed, if the fiscal multiplier is really, really high in certain situations—such as during a downturn—then austerity could prove counterproductive. Those higher taxes and severe spending cuts will cripple growth so much that the nation will end up with an even bigger deficit than it started out with.
Blanchard is now arguing that the fiscal multiplier appears to have been much higher over the past few years than policymakers, including the IMF, had assumed. It’s not 0.6. It’s somewhere between 0.9 or 1.7. If true, then countries in Europe and the United States should have been pursuing stimulus measures to boost growth—and not insisting on budget cuts. (Not surprisingly, Paul Krugman is claiming vindication, since this was his view all along.)

Yet it’s worth noting that not everyone is convinced by the IMF’s results. Over at the Financial Times, Chris Giles tried to replicate Blanchard’s calculations and found that the analysis was heavily skewed by Greece and Germany. That is, austerity appears to have kneecapped Greece much more forcefully than anyone expected over the past few years. And Germany seemed to get an exceptional boost from its stimulus programs. But if you remove those two countries from the equation, the results are murkier:

For the countries where the full data is available on the IMF website, the results lose statistical significance if Greece and Germany are excluded.

Moreover, the IMF results are presented as general but are limited to the specific time period chosen. The 2010 forecasts of deficits are not good predictors of errors in growth forecasts for 2010 or 2011 when the years are analysed individually. Its 2011 forecasts are not good predictors of anything.

So there are some caveats here. Fiscal multipliers can change over time. Keynesians have often said as much: Stimulus is a good idea when the economy is weak, but the returns diminish when the nation is at full employment. Similarly, as Blanchard notes, economists still need a much better understanding of when, exactly, stimulus is effective and when austerity can help shrink the deficit. How does monetary policy factor in? Does the price of oil and other commodities matter? And so on.

For now, though, as both Kate McKenzie and Matt Yglesias point out, it’s quite significant that the IMF has shifted its stance on austerity so dramatically. In the 1990s, the fund was famous (or infamous, if you prefer) for ordering countries with debt troubles to tighten their belts. But now the IMF is urging countries in the euro zone, such as Netherlands and France, to loosen up a bit. True, those countries do have high debts. But with Europe still facing weak growth, budget-cutting might not be the answer just yet. For the IMF, that’s a big change in attitude.

What Really Happened to Strauss-Kahn?

December 22, 2011
Edward Jay Epstein
http://media.nybooks.com/strauss.html

May 14, 2011, was a horrendous day for Dominique Strauss-Kahn, then head of the International Monetary Fund and leading contender to unseat Nicolas Sarkozy as president of France in the April 2012 elections. Waking up in the presidential suite of the Sofitel New York hotel that morning, he was supposed to be soon enroute to Paris and then to Berlin where he had a meeting the following day with German Chancellor Angela Merkel. He could not have known that by late afternoon he would, instead, be imprisoned in New York on a charge of sexual assault. He would then be indicted by a grand jury on seven counts of attempted rape, sexual assault, and unlawful imprisonment, placed under house arrest for over a month, and, two weeks before all the charges were dismissed by the prosecutor on August 23, 2011, sued for sexual abuse by the alleged victim.

He knew he had a serious problem with one of his BlackBerry cell phones—which he called his IMF BlackBerry. This was the phone he used to send and receive texts and e-mails—including for both personal and IMF business. According to several sources who are close to DSK, he had received a text message that morning from Paris from a woman friend temporarily working as a researcher at the Paris offices of the UMP, Sarkozy’s center-right political party. She warned DSK, who was then pulling ahead of Sarkozy in the polls, that at least one private e-mail he had recently sent from his BlackBerry to his wife, Anne Sinclair, had been read at the UMP offices in Paris.1 It is unclear how the UMP offices might have received this e-mail, but if it had come from his IMF BlackBerry, he had reason to suspect he might be under electronic surveillance in New York. He had already been warned by a friend in the French diplomatic corps that an effort would be made to embarrass him with a scandal. The warning that his BlackBerry might have been hacked was therefore all the more alarming.

At 10:07 AM he called his wife in Paris on his IMF BlackBerry, and in a conversation that lasted about six minutes told her he had a big problem. He asked her to contact a friend, Stéphane Fouks, who could come to his home on the Place des Vosges and who could arrange to have both his BlackBerry and iPad examined by an expert in such matters. He had no time to do anything about it that morning. He had scheduled an early lunch with his twenty-six-year-old daughter Camille, a graduate student at Columbia, who wanted to introduce him to her new boyfriend. After that, he had to get to JFK Airport in time to catch his 4:40 PM flight to Paris.

He had finished packing his suitcase just before noon, according to his own account, and then took a shower in the bathroom, which is connected to the bed in the suite by an interior corridor. According to the hotel’s electronic key records, which were provided to DSK’s lawyers, Nafissatou Diallo, a maid, had entered the presidential suite (room 2806) between 12:06 and 12:07 PM (such records are only accurate to the nearest minute).2 Ordinarily, cleaning personnel do not enter a room to clean when a guest is still in it. According to DSK’s account, his bags were visible in the foyer when he emerged naked from the bathroom into the interior corridor. At this point, according to his account, he encountered the maid in the corridor by the bathroom. (The maid, for her part, says she encountered him coming out of the bedroom.) Phone records show that by 12:13 PM he was speaking to his daughter Camille on his BlackBerry. The call lasted for forty seconds.

What took place between DSK and the maid in those six to seven intervening minutes is a matter of dispute. DNA evidence found outside the bathroom door showed her saliva mixed with his semen. The New York prosecutor concluded that a “hurried sexual encounter” took place and DSK’s lawyers have admitted as much, while claiming that what happened was consensual. The maid has brought a civil suit claiming he used force. It is not clear when she left the room since key card records do not show times of exit. What is known is that DSK called his daughter on his IMF BlackBerry at 12:13 to tell her he would be late.

After DSK completed his call, he dressed and put on his light black topcoat. He carried with him only one small overnight bag and a briefcase (which contained his iPad and several spare phones) and took the elevator to the lobby. At 12:28 PM the hotel security cameras show him departing. He had to go eight blocks to the McCormick & Schmick’s restaurant on Sixth Avenue between 51st and 52nd Street. He was delayed by heavy traffic on Sixth Avenue. The restaurant camera shows that he arrived at 12:54.

Camille was with her new boyfriend. They had a quick meal, and at 2:15 PM, according to the restaurant’s surveillance cameras, DSK got in another taxi to go to the airport. Almost immediately, he discovered that his IMF BlackBerry was missing. It was the phone he had arranged to have examined for bugs in Paris and it was the phone that contained the earlier text message warning him about the interception of his messages. At 2:16 PM he called Camille, who had also just left the restaurant, on his spare BlackBerry and had her go back to the restaurant to search for it. Camera footage at the restaurant shows her crawling under the table. At 2:28 PM she sent him a text message saying that she could not find it. So DSK continued on to the airport.

Back at the Sofitel, meanwhile, Nafissatou Diallo, the maid he had encountered in the presidential suite, had told hotel security that she had been sexually assaulted by a client in that suite. A thirty-two-year-old immigrant from Guinea, she had been working at the Sofitel for three years. At 2:30 PM she was shown a photograph of DSK by the hotel’s security people. According to the official bill of particulars—the statement of the basic facts of the case filed by the prosecutors—the police had apparently not yet fully taken over the case, even though the encounter between DSK and Diallo had occurred over two hours earlier.

Part of the delay in bringing in the police may have been the result of Diallo’s not immediately voicing her complaint. After she had left DSK in the presidential suite around 12:13 PM—the time of his call to Camille—she remained on the VIP floor. The hotel’s electronic key records indicate that at 12:26 PM she entered 2820, another VIP suite on the same floor that she had already entered several times earlier that morning. Then, one to two minutes later, she went back to the now empty presidential suite. A few minutes after that, she encountered another housekeeper, her supervisor, in the corridor. In the course of their conversation, Diallo asked the supervisor what would happen if a hotel guest took advantage of a hotel employee. Initially, Diallo told her that this was only a hypothetical question; but then, when pressed further, she said that she had been assaulted by the guest in the presidential suite. The supervisor then brought her to the head of housekeeping, Renata Markozani, who reentered the presidential suite with Diallo at 12:42, according to the key records, and notified the hotel’s security and management personnel. At 12:52 PM, Diallo is seen arriving at the hotel’s security office on the ground floor, located near the 45th Street entrance. She is wearing a beige uniform, and is accompanied by Renata Markozani, whom she towers over. (She is five feet ten inches tall.)

Shortly thereafter the hotel’s own security team was augmented by John Sheehan, a security expert who is identified on LinkedIn as “director of safety and security” at Accor, a part of the French-based Accor Group, which owns the Sofitel. Sheehan, who was at home in Washingtonville, New York, that morning, received a call from the Sofitel at 1:03 PM. He then rushed to the hotel. While en route, according to his cell phone records, he called a number with a 646 prefix in the United States. But from these records neither the name nor the location of the person he called can be determined. When I called the number a man with a heavy French accent answered and asked whom I wanted to speak with at Accor.3

The man I asked to talk to—and to whom I was not put through—was René-Georges Querry, Sheehan’s ultimate superior at Accor and a well-connected former chief of the French anti-gang brigades, who was now head of security for the Accor Group. Before joining Accor Group in 2003, he had worked closely in the police with Ange Mancini, who is now coordinator for intelligence for President Sarkozy. Querry, at the time that Sheehan was making his call to the 646 number, was arriving at a soccer match in Paris where he would be seated in the box of President Sarkozy. Querry denies receiving any information about the unfolding drama at the Sofitel until after DSK was taken into custody about four hours later.

Another person at the Accor Group whom Sheehan might have alerted was Xavier Graff, the duty officer at the Accor Group in Paris. Graff was responsible that weekend for handling emergencies at Accor Group hotels, including the Sofitel in New York. His name only emerged five weeks later when he sent a bizarre e-mail to his friend Colonel Thierry Bourret, the head of an environment and public health agency, claiming credit for “bringing down” DSK. After the e-mail was leaked to Le Figaro, Graff described it as a joke (it resulted, however, in his suspension as director of emergencies by the Accor Group). Even jokes can have a basis. In this case the joke was made by the person who was directly responsible for passing on information to his superiors, including the head of security at Accor, René-Georges Querry—information that, if acted on by informing the American authorities, could have helped destroy DSK’s career. But like Querry, Graff denied receiving any calls or messages from New York until later that evening, telling a French newspaper that the failure to inform him was an “incredible miss” (“loupé”).

By the time Sheehan was called by the hotel at 1:03 PM, Diallo was seated on a bench in the hotel’s ground floor service area, just off the service entrance on 45th Street. Behind her was a “Dutch door,” with the upper half opened, that led to the hotel’s security office. Surveillance camera footage shows her entering the area with a tall unidentified man at 12:52 PM. She remains there until 2:05 PM. At 12:56, she is joined there by Brian Yearwood, the large, heavy-set man who is the hotel’s chief engineer. Yearwood had just come down from the presidential suite on the twenty-eighth floor, which he had entered at 12:51, according to the key records. Yearwood remained close to Diallo as she spoke to Adrian Branch, the security chief for the hotel, who remained behind the half-shut door of the security office. She can be seen gesturing with her hands for about four minutes, pointing to different parts of her body over and over again, suggesting she was telling and retelling her story.

At 1:28, Sheehan, still on the way to the hotel, sent a text message to Yearwood. And then another text message to an unidentified recipient at 1:30. At 1:31—one hour after Diallo had first told a supervisor that she had been assaulted by the client in the presidential suite—Adrian Branch placed a 911 call to the police. Less than two minutes later, the footage from the two surveillance cameras shows Yearwood and an unidentified man walking from the security office to an adjacent area. This is the same unidentified man who had accompanied Diallo to the security office at 12:52 PM. There, the two men high-five each other, clap their hands, and do what looks like an extraordinary dance of celebration that lasts for three minutes. They are then shown standing by the service door leading to 45th Street—apparently waiting for the police to arrive—where they are joined at 2:04 PM by Florian Schutz, the hotel manager.

A minute later, at 2:05 PM, the footage shows two uniformed police officers arriving and then accompanying Diallo to an adjoining office. It is unclear if the police officially took over the case at this time or later. There is so far no explanation for why the security staff had delayed the call to the NYPD that would lead to a scandal involving the possible future president of France. What is clear is that they did so just three minutes after receiving a message from Sheehan. Nor is it clear why the two men were celebrating.

The police arrived, according to the hotel’s security camera footage, at 2:05 PM. They then can be seen escorting Diallo to a room across from the security office. There is an unexplained discrepancy here concerning the information in the bill of particulars, which says that at approximately 2:30 PM, “a photograph of the defendant was shown to the witness [i.e., Diallo] by hotel security without police involvement.” If so, even after leaving the bench (and video surveillance) and going to a room with the police, she remained in the custody of Sofitel security. I asked both Deputy Commissioner Paul Browne and Deputy Inspector Kim Royster why, according to the bill of particulars, the police were not officially involved at this point, but they declined to comment.

More than an hour later, at 3:28 PM, the police took her to St. Luke’s Hospital, where she was medically examined and they then formally interviewed her. She described to them a brutal and sustained sexual attack in which DSK locked the suite door, dragged her into the bedroom, and then dragged her down the inner corridor to a spot close to the bathroom door—a distance of about forty feet—and, after attempting to assault her both anally and vaginally, forced her twice to perform fellatio. After that, she fled the suite. As has been seen, according to the electronic key information, and to the record of DSK’s call to his daughter showing him speaking to her at 12:13, we can reasonably conclude that any such actions could have taken place only within a period of six or seven minutes, between 12:06–07 and 12:13, when he called his daughter.

At 3:01 PM, as DSK was approaching the airport, he was still attempting to find his missing phone. He attempted to call it from his spare but received no answer. What he did not know was that at 12:51, according to the records of the BlackBerry company, it had been somehow disabled. At 3:29 PM, evidently unaware of what was happening at the Sofitel, he called the hotel from the taxi, saying, according to the police transcript, “I am Dominique Strauss-Kahn, I was a guest. I left my phone behind.” He then said he was in room “2806.” He was asked to give a phone number, so that he could be called back, after 2806 was searched for his phone.

When he was called back thirteen minutes later, he spoke to a hotel employee who was in the presence of police detective John Mongiello. The hotel employee falsely told him that his phone had been found and asked where it could be delivered. DSK told him that he was at JFK Airport and that “I have a problem because my flight leaves at 4:26 PM.” He was reassured that someone could bring it to the airport in time. “OK, I am at the Air France Terminal, Gate 4, Flight 23,” DSK responded. So the police rushed to the airport. At 4:45 PM, police called DSK off the plane and took him into custody.

DSK was then jailed and indicted by a grand jury on seven counts, including attempted rape, sexual abuse, and unlawful imprisonment. The court eventually dropped all the charges against him because the prosecutors found that the complainant, Diallo, had proven to be an untruthful witness. They wrote in the motion for dismissal that “the nature and number of the complainant’s falsehoods leave us unable to credit her version of events beyond a reasonable doubt.” They said that she “has given irreconcilable accounts of what happened,” and had lied not only to the prosecutors but under oath to the grand jury about her whereabouts after the encounter. She stated that she had hid in the hall after leaving the presidential suite, and entered no other room on the twenty-eighth floor until she told another maid about the attack (which was approximately fifteen minutes later).

When asked why she had not used her pass key to go into another room, she said they all had “Do Not Disturb” signs on the door. After her grand jury testimony, prosecutors discovered that this was false when the hotel belatedly provided them with the electronic key records showing that Diallo had entered room 2820 at 12:26 PM, after her encounter with DSK. The same record also showed that she had also entered room 2820 prior to her encounter with DSK at a time when the occupant had not checked out and may have been in the room. Why she concealed visiting 2820 was “inexplicable” to the prosecutors, who noted in their motion for dismissal that if she had mentioned her visits to 2820, it would have been declared part of the crime scene and searched by the police. But she did not do so.

Nor were DSK’s lawyers able to find an explanation. When they attempted to learn the identity of the occupant of 2820, Sofitel refused to release it on grounds of privacy. Given Diallo’s conflicting accounts, all that we really know about what happened in the nearby room 2820 is that Diallo went there both before and after her encounter with DSK and then omitted the latter visit from her sworn testimony to the grand jury. We still do not know if there was anyone in 2820 when she entered it again following the encounter with DSK or if, prior to the police arriving, anyone influenced her to omit mention of room 2820.

The Sofitel electronic key record, which the hotel did not turn over to the prosecutors until the next week, contained another unexplained anomaly. Two individuals, not one, entered DSK’s suite between 12:05 and 12:06 PM while he was showering. Each used a different key card entry. The key card used at 12:06 belonged to Diallo; the key card used at 12:05 belonged to Syed Haque, a room service employee who, according to his account, came to pick up the breakfast dishes. If he did so, he would have turned left and gone to the dining room. But Haque has refused to be interviewed by DSK’s lawyers, so his precise movements have not been made public. Since the key cards do not register the time of exit, it cannot be determined from them if both parties were in the room at the same time or, for that matter, at the time of Diallo’s encounter with DSK.

DSK’s BlackBerry, with its messages, is still missing. Investigations by both the police and private investigators retained by DSK’s lawyers failed to find it. While DSK believed he had left it in the Sofitel, the records obtained from BlackBerry show that the missing phone’s GPS circuitry was disabled at 12:51. This stopped the phone from sending out signals identifying its location. Apart from the possibility of an accident, for a phone to be disabled in this way, according to a forensic expert, required technical knowledge about how the BlackBerry worked.

From electronic information that became available to investigators in November 2011, it appears the phone never left the Sofitel. If it was innocently lost, whoever found it never used it, raising the question of by whom and why it was disabled at 12:51. In any case, its absence made it impossible for DSK to check—as he had planned to do—to see if it had been compromised. Nor was it possible to verify from the phone itself the report he received on May 14 that his messages were being intercepted. So we cannot confirm the warning to DSK that he was under surveillance on that disastrous day.

One vexing mystery concerns the one-hour time gap in reporting the alleged attack on Diallo. After she said that she had been the victim of a brutal and sustained sexual assault, it is hard to understand how the security staff would have ruled out that she might require immediate medical attention. But as has been seen, until 1:31, several minutes after receiving a message from Sheehan, the security staff did not make the 911 call. She did not arrive at St. Luke’s Hospital until 3:57 PM, nearly four hours after the alleged attack. We do not know what decisions were made during that one-hour interval or how they influenced what was to later unfold with such dramatic impact.

By the time the 911 call was finally made, the hotel’s management was presumably aware of the political explosion and scandal DSK’s arrest would cause. DSK could no longer be a challenger to Sarkozy. Such considerations, and the opportunities they presented, may have had no part whatever in the hotel’s handling of the situation, but without knowing the content of any messages between the hotel managers in New York and the security staffs in New York or Paris, among others, we cannot be sure. Meanwhile, several mysteries remain. Was there anyone in room 2820 besides Diallo during and after the encounter with DSK? If so, who were they and what were they doing there; and why, in any case, did Diallo deny that she’d gone to the room? Because she denied it, the police, according to the prosecutor’s recommendation for dismissal, did not search 2820 or declare it a crime scene. And where, if it still exists, is the BlackBerry that DSK lost and feared was hacked?

All we know for sure is that someone, or possibly an accident, abruptly disabled it from signaling its location at 12:51 PM. DSK himself has not explained why he was so concerned about the possible interception of his messages on this BlackBerry and its disappearance. According to stories in Libération and other French journals on November 11, 2011, DSK sent text messages on a borrowed cell phone to at least one person named in the still-unfolding affair involving the Carlton Hotel in Lille, a scandal in which corporations allegedly provided high-class escort women to government officials. (DSK denies that he was connected to the prostitution ring.) If DSK sent these messages, may he also have received embarrassing messages back on his own BlackBerry that could have been damaging to his reputation and political ambitions? Or his concern could also have proceeded from other matters, such as the sensitive negotiations he was conducting for the IMF to stave off the euro crises. Whatever happened to his phone, and the content on it, his political prospects were effectively ended by the events of that day.

1 These statements, along with others in this article, were confirmed by sources who prefer to remain anonymous but are known to the author, who has shared his information with the editors.

2 For this article, along with court and other legal documents, I had access to Sofitel electronic key swipe records, time-stamped security camera videotapes, and records for a cell phone used on the day of May 14 by John Sheehan, a security employee of Accor, the company that owns the Sofitel hotel.

3 I had access to the record of only one cell phone used by the Accor Group's security man, John Sheehan. Neither Sheehan nor the hotel's security director, Adrian Branch, returned my calls. Through an assistant Brian Yearwood, the hotel's chief engineer, said he had no comment.

Strauss-Kahn Saga Exposes Flaws in Euro Debt-Crisis Management

July 11 (Bloomberg) -- Greece’s budget was unraveling, Germany and the European Central Bank were at odds over the fix, revelations of secret meetings and cover-ups were sapping confidence in Europe’s crisis management -- and then came the encounter between Dominique Strauss-Kahn and the maid.
Strauss-Kahn’s May 14 arrest on charges of sexual assault left a void atop the International Monetary Fund, busting the one thing that had gone consistently right in the handling of the euro-area debt crisis: cooperation between European leaders and the Washington-based IMF. The fund’s contribution to Greece’s next loan was no longer a sure thing, said two European officials with direct knowledge of the talks who declined to be identified because the deliberations were private.

Confusion over the IMF share was part of a catalogue of missteps and miscommunication by Europe’s political elite that has scarred their effort to prevent Greece from slipping into the financial abyss. With Athens clinging to a lifeline opposed by taxpayers in Germany and Finland, the margin of error is narrowing and the crisis shows no sign of ebbing as it heads toward year three.

“It’s now not just a Greek, Irish or Portuguese problem: it’s a euroland problem,” said William Rhodes, a senior adviser to Citigroup Inc. whose new book “Banker to the World” recounts three decades of work on debt restructurings. “What’s happening in Europe has been hit and miss from one day to the next and the real danger down the road is contagion. All this squabbling spooked the markets, which now move in nanoseconds.”

IMF Payment

The IMF’s approval July 8 to release a 3.2 billion-euro ($4.6 billion) installment for Greece plugged one hole in the rescue strategy just as others are opening up: talks with bondholders over rolling over Greek debt have prompted credit-rating companies to threaten default. Portugal was downgraded to junk by Moody’s Investors Service last week, leading bonds to slump in Ireland, Spain and Italy.

Work on a new Greek package to follow last year’s 110 billion-euro pledge continues at a meeting of finance ministers in Brussels today, with final decisions put off until September.

“No more short-term gimmicks,” Jeffrey Sachs, a Columbia University professor, told Bloomberg Television’s Tom Keene on July 5. European leaders “are treating this as a very short- term set of operations -- get through the next three months, get through the next six months. That won’t work. We need a bigger structure.”

‘On Track’

Short-termism appeared to be working as late as Feb. 11, when the IMF and European authorities certified that Greece was “broadly on track” to rebuild its finances and started paving the way for the March loan installment. On April 1, with the yield on Greece’s 10-year government bond at 12.8 percent, then- Finance Minister George Papaconstantinou predicted a possible return to markets this year.

That went by the boards with the April 26 disclosure that Greece fell short of its deficit-cutting objectives in 2010, forcing it to look for more savings and pushing the 10-year yield to 16.2 percent. Simultaneous talks over a 78 billion-euro aid package for Portugal ate up more policymaking energy.

A private May 6 brainstorming session at Luxembourg’s secluded Senningen Castle captured the tension. A core group of finance ministers and ECB President Jean-Claude Trichet discussed Greece’s shortfall and German-driven talk of a debt restructuring, said Luxembourg Prime Minister Jean-Claude Juncker.

When German magazine Der Spiegel reported that the inner circle was discussing Greece’s exit from the euro, the currency tumbled the most against the dollar in a year. Juncker denied the meeting was taking place -- a line, he said a week later, that “immediately prevented further speculation on the markets.”

Solitary

Ten days after that, deficits, deceit and restructuring formed the backdrop for a euro finance meeting that unfolded with Strauss-Kahn in solitary confinement in New York’s Rikers Island jail. John Lipsky, the fund’s second-ranking official, stayed in Washington to organize the stopgap IMF management.

Off to Brussels went Nemat Shafik, a deputy managing director barely a month at her post -- a technocrat specializing in the Middle East and Africa instead of the politically connected Frenchman. She reminded the Europeans that the IMF needed a 12-month funding program before committing its own money.

Greece was caught in the middle as it became increasingly clear that a 12 billion-euro disbursement due for July was the only thing standing between the debt-stricken country and default.

‘Lack of Leadership’

The absence of Strauss-Kahn, 62, who as French finance minister from 1997 to 1999 had played a role in setting up the euro, made itself felt. On the heels of the Brussels meeting, European Union President Herman Van Rompuy urged the IMF to quickly appoint a new full-time chief, saying on May 19 there was “a lack of leadership in solving the Greek crisis -- even the last days it was very clear.”

Lipsky came to his interim position aware of market doubts about Greece and European political solidarity. Investors “want to see delivery,” he told Bloomberg Radio on April 15. “They’re skeptical, they’re worried and now it’s up to the Greek authorities to carry through the rest of their European partners to provide the support.”

A former JPMorgan Chase & Co. economist nearing the end of a five-year term as the IMF’s first deputy managing director, Lipsky, 64, said two days before the arrest that he wouldn’t seek reappointment after his term expires in August.

‘By the Book’

Lipsky “played it by the book: he was staff-led,” said Peter Ludlow, a Brussels-based historian and author of “The Making of the New Europe.” “Strauss-Kahn was much more of a political animal who felt himself, and indeed was, above the book.”

European policy makers had operated on the understanding that Strauss-Kahn would deliver the IMF’s share, said the two EU officials. It soon dawned on them that, in his caretaker role, Lipsky couldn’t steer the IMF board in the way Strauss-Kahn could, they said.

More miscalculations followed. Lipsky didn’t spell out the assurances the IMF required to release its share of the July loan, first saying Europe needed to come up with a new three- year program for Greece, then that it didn’t, the EU officials said.

The IMF rejects suggestions of inconsistency. “The fund’s position on Greece has not changed,” Conny Lotze, an IMF spokeswoman, said in an e-mailed response to questions. “The fund has worked closely with the Greek authorities and the European partners in supporting Greece’s economic program. The success of Greece’s program has always been and still is the primary objective.”

‘Reprofiling’ Talk

Europe, meanwhile, was manufacturing its own distractions. Fueled by Juncker’s May 16 proposal of a “reprofiling” or “soft restructuring,” speculation swirled that Germany would force an extension of Greece’s debt-repayment schedule, leading to a formal default.

Greek debt continued to get hammered, with the yield on 10- year bonds reaching 17 percent on May 23.

Debt-restructuring speculation contributed to the worsening market psychology, EU Economic and Monetary Commissioner Olli Rehn said. “There was some distortion of attention to a discussion on debt restructuring and too little focus on program implementation,” he said in a July 1 interview.

Germany, which as Europe’s biggest economy is the main underwriter of the bailouts, faced pressure from all sides. The French government and ECB pressed for a “voluntary” bond rollover. President Barack Obama told Chancellor Angela Merkel at the White House that it was her job to halt an “uncontrolled spiral of default.”

Merkel’s Retreat

While Merkel’s abandonment on June 17 of a forced restructuring bettered Greece’s long-term prospects, its chances of escaping default in July still hinged on the euro zone and IMF reading from the same script.

The two sides met again on June 19 in Luxembourg, with the EU’s Rehn forecasting an IMF green light after 10-year yields reached almost 18 percent. It didn’t happen. The European side was unable to commit to another Greek funding program until Greece passed a new, 78 billion-euro set of savings measures.

The IMF, in turn, wouldn’t move until Europe did. “The assurances that we need are typical,” Lipsky said June 21. The budget cuts squeaked through the Greek parliament a week later.

It took European government leaders, together tackling the crisis again after a three-month hiatus, to break out of the loop. Even then, they weren’t sure whether a June 24 pledge to set up the “main parameters of a new program” would bring the IMF on board.

‘Credibility Issues’

And on July 2, a day after Strauss-Kahn was released from home confinement and New York prosecutors told a judge the case had been hurt by “substantial credibility issues” with the accuser, euro-area finance ministers approved their share of the 12 billion-euro payment to Greece, providing a lifeline to September.

“We’re entering a more critical phase because now the important decisions have to be made how the debt will be financed over the next three or four years,” said Christopher Pissarides, a Nobel Prize-winning economist who teaches at the London School of Economics. “So there is a lot more uncertainty in the market.”

To contact the reporter on this story: James G. Neuger in Brussels at jneuger@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

Listen to the IMF, America

Even the International Monetary Fund now admits that total deregulation of financial markets was a mistake. The U.S. should take heed.
Joseph E. Stiglitz
Thursday, May 5, 2011
http://www.slate.com/id/2293114

Robalini's Note: Here's an article by economist Joseph Stiglitz before the framing of DSK which tells you the level of radical change he had begun to institute at the IMF...

The annual spring meeting of the International Monetary Fund was notable in marking the fund's effort to distance itself from its own long-standing tenets on capital controls and labor-market flexibility. It appears that a new IMF has gradually, and cautiously, emerged under the leadership of Dominique Strauss-Kahn.

Slightly more than 13 years ago, at the IMF's 1997 Hong Kong meeting, the fund had attempted to amend its charter in order to gain more leeway to push countries toward capital-market liberalization. The timing could not have been worse: The East Asia crisis was just brewing—a crisis that was largely the result of capital-market liberalization in a region that, given its high savings rate, had no need for it.

That 1997 push had been advocated by Western financial markets—and the Western finance ministries that serve them so loyally. Financial deregulation in the United States was a prime cause of the global crisis that erupted in 2008, and financial and capital-market liberalization elsewhere helped spread that "made in the USA" trauma around the world.

The crisis showed that free and unfettered markets are neither efficient nor stable. They also did not necessarily do a good job at setting prices (witness the real-estate bubble), including exchange rates (which are merely the price of one currency in terms of another).

Iceland showed that responding to the crisis by imposing capital controls could help small countries manage its impact. And the U.S. Federal Reserve's "quantitative easing" made the demise of the ideology of unfettered markets inevitable: Money goes to where markets think returns are highest. With emerging markets booming, and America and Europe in the doldrums, it was clear that much of the new liquidity being created would find its way to emerging markets. This was especially true given that America's credit pipeline remained clogged, with many community and regional banks still in a precarious position.

The resulting surge of money into emerging markets has meant that even finance ministers and central-bank governors who are ideologically opposed to intervening believe that they have no choice but to do so. Indeed, country after country has now chosen to intervene in one way or another to prevent their currencies from skyrocketing in value.

Now the IMF has blessed such interventions—but, as a sop to those who are still not convinced, it suggests that they should be used only as a last resort. On the contrary, we should have learned from the crisis that financial markets need regulation, and that cross-border capital flows are particularly dangerous. Such regulations should be a key part of any system to ensure financial stability; resorting to them only as a last resort is a recipe for continued instability.

There is a wide range of available capital-account management tools, and it is best if countries use a portfolio of them. Even if they are not fully effective, they are typically far better than nothing.

But an even more important change is the link that the IMF has finally drawn between inequality and instability. This crisis was largely a result of America's effort to bolster an economy weakened by vastly increased inequality, through low interest rates and lax regulation (both of which resulted in many people borrowing far beyond their means). The consequences of this excessive indebtedness will take years to undo. But, as another IMF study reminds us, this is not a new pattern.

The crisis has also put to the test long-standing dogmas that blame labor-market rigidity for unemployment, because countries with more flexible wages, such as the U.S., have fared worse than northern European economies, including Germany. Indeed, as wages weaken, workers will find it even more difficult to pay back what they owe, and problems in the housing market will become worse. Consumption will remain restrained, while strong and sustainable recovery cannot be based on another debt-fueled bubble.

As unequal as America was before the Great Recession, the crisis—and the way it has been managed—has led to even greater income inequality, making a recovery all the more difficult. America is setting itself up for its own version of a Japanese-style malaise.

But there are ways out of this dilemma: strengthening collective bargaining, restructuring mortgages, using carrots and sticks to get banks to resume lending, restructuring tax and spending policies to stimulate the economy now through long-term investments, and implementing social policies that ensure opportunity for all. As it is, with almost one-quarter of all income and 40 percent of U.S. wealth going to the top 1 percent of income earners, America is now less a "land of opportunity" than even "old" Europe.

For progressives, these abysmal facts are part of the standard litany of frustration and justified outrage. What is new is that the IMF has joined the chorus. As Strauss-Kahn concluded in his speech to the Brookings Institution shortly before the fund's recent meeting: "Ultimately, employment and equity are building blocks of economic stability and prosperity, of political stability and peace. This goes to the heart of the IMF's mandate. It must be placed at the heart of the policy agenda."

Strauss-Kahn is proving himself a sagacious leader of the IMF. We can only hope that governments and financial markets heed his words.

2nd banker in hotel sex bust

Groped maid at superposh Pierre: cops LARRY CELONA, JAMIE SCHRAM and TIM PERONE
May 31, 2011
http://www.nypost.com/p/news/local/manhattan/nd_banker_in_hotel_sex_bust_5t8SbxVPtY026XJSdsJPJM

Another international moneyman has been busted for sexually assaulting a maid at a luxury Manhattan hotel, cops said last night.

Mahmoud Abdel-Salam Omar -- the 74-year-old former chairman of Egypt's Bank of Alexandria -- allegedly groped and "gyrated" against the maid in Room 1027 at The Pierre hotel on Fifth Avenue, a law-enforcement source told The Post.

He was wearing a bathrobe at the time, but it was not clear what, if anything, he had on under it.

The alleged attack came just two weeks after Dominique Strauss-Kahn, the disgraced former head of the International Monetary Fund, was charged with sexually assaulting a maid at the Sofitel hotel in Midtown.

Omar summoned the 44-year-old woman to his room to bring tissues at around 6 p.m. Sunday and quickly locked the door behind her, according to police.

Then, the elderly banker allegedly grabbed her breasts and began kissing her on the lips and neck.

She bravely stood up to him, the source said.

"I'm not up here for that," she told him.

Omar -- who is now the head of El.Mex Salinas, a Middle East-based salt-mining company -- then asked the woman for her phone number, according to the source.

The quick-thinking maid gave him a fake number.

At that point, Omar stepped back and she was able to unlock the door and flee, the source said.

She ran directly to a manager to report the alleged attack.

But the manager told her she had to tell her own supervisor, who wasn't working at the time, according to the source.

The woman reported the attack yesterday and cops were called at around 9:30 a.m., officials said.

"Experienced NYPD detectives found the complainant to be credible," police spokesman Paul Browne said.

Omar -- who lives in Alexandria -- was taken into custody at the hotel, across from Central Park at East 61st Street.

He was brought to the 19th Precinct station house and charged with sexual abuse, unlawful imprisonment, forcible touching and harassment.

Before Omar left the station house, three friends visited the precinct.

"We are friends of his and just wanted to check up on him," said one man in the group who did not identify himself. "We wanted to make sure he was alive. He's an old man but a good man, a family man. He's a grandfather. We just wanted to be sure he was alright."

News of the alleged attack surprised at least one hotel worker.

"People were saying nice things about [him]. They were saying good things about that man," said the worker, who asked not to be identified.

But another employee, who also did not want his name printed, was angry that a colleague had allegedly been attacked.

"Maybe we should have our staff trained to deal with that type of person," he said.

"You never know who you are going to run into."

A Pierre spokeswoman did not immediately return calls for comment.

Additional reporting by Rebecca Harshbarger, Frank Rosario and Wilson Dizard

larry.celona@nypost.com

A tale of two rape charges

May 23, 2011
Naomi Wolf
http://blogs.reuters.com/great-debate/2011/05/23/a-tale-of-two-rape-charges

With the arrest of Dominique Strauss-Kahn, then Managing Director of the International Monetary Fund, New York City has abruptly become the scene of two very different official approaches to investigating sex-crime cases, one traditional and one new. The new approach so far appears to be reserved for Strauss-Kahn alone.

Consider the first case: the ongoing trial of two police officers, Kenneth Moreno and Franklin Mata, charged in the rape of a 27-year-old Manhattan woman. She was drunk, and, after helping her to enter her apartment, Moreno and Mata allegedly made a false emergency call so that they could return to her. At that point, the woman says, she woke periodically out of her intoxicated state to find herself being raped, face down, by Moreno, as Mata stood guard.

The alleged rape of a citizen by a police officer — and the alleged collusion of another officer — is surely a serious matter. But the charges and trial have followed an often-seen pattern: the men’s supporters have vociferously defended their innocence (the presumption of which has been scrupulously upheld in the press); the victim’s pink bra has been the subject of salacious speculation, and her intoxication has been used to undermine her credibility. As the wheels of justice grind unglamorously forward, Mayor Michael Bloomberg has made no public statement supporting the victim’s side.

Moreover, Moreno and Mata have not been asked to strip naked for “evidence” photos, were not initially denied bail, and were not held in solitary confinement, and are not being strip-searched daily. Their entire case has followed the usual timetable of many months, as evidence was gathered, testimony compiled and arguments made.

Then there is the Strauss-Kahn approach. After a chambermaid reportedly told her supervisor at the elegant Sofitel hotel that she had been sexually assaulted, the suspect was immediately tracked down, escorted off a plane just before its departure, and arrested. High-ranking detectives, not lowly officers, were dispatched to the crime scene. The DNA evidence was sequenced within hours, not the normal eight or nine days. By the end of the day’s news cycle, New York City police spokespeople had made uncharacteristic and shockingly premature statements supporting the credibility of the victim’s narrative — before an investigation was complete.

The accused was handcuffed and escorted before television cameras — a New York tradition known as a “perp walk.” The suspect was photographed naked, which is also unusual, initially denied bail and held in solitary confinement. The Police Commissioner has boasted to the press that Strauss-Kahn is strip-searched now multiple times a day — also unheard-of.

By the end of the second day’s news cycle, senior public officials had weakened the presumption of innocence, a cornerstone of any civilized society’s justice system. Treasury Secretary Timothy Geithner was calling for Strauss-Kahn’s resignation from the IMF, and Bloomberg remarked, in response to objections to Straus-Kahn’s perp walk, “don’t do the crime.” Whatever happened in that hotel room, Strauss-Kahn’s career, and his presumption of innocence, was effectively over — before any legal process had even begun.

If Strauss-Kahn turns out, after a fair trial, to be a violent sex criminal, may his sentence be harsh indeed. But the way in which this case is being processed is profoundly worrisome. In 23 years of covering sex crime — and in a city where domestic workers are raped by the score every month, often by powerful men — I have never seen the New York Police Department snap into action like this on any victim’s behalf.

Harriet Lessel, executive director of the New York City Alliance Against Sexual Assault, agrees that this case has seen “a very quick and targeted response,” and points out that rape is “a grossly underreported crime” in New York. Worse, she says, many victims under other circumstances believe that the criminal justice system is unresponsive to their needs and more oriented toward ensuring that the innocent are not convicted.

While Lessel is quick to add that New York has “some great police officers and prosecutors who really care,” she says that the police do not normally issue public statements supportive of victims’ credibility, let alone early on, as they did with Strauss-Kahn’s accuser. Nor has she ever heard of someone being photographed naked as part of the evidence.

So what is happening here?

We now live in a world in which men like former New York Governor Eliot Spitzer, who was investigating financial wrongdoing by the insurance giant AIG, WikiLeaks founder Julian Assange and Strauss-Kahn — whose efforts to reform the IMF gained him powerful opponents — can be, and are, kept under constant surveillance. Indeed, Strauss-Kahn, who had been the odds-on favorite to defeat Nicolas Sarkozy in next year’s French presidential election, probably interested more than one intelligence service.

This does not mean that Strauss-Kahn is innocent or that he is guilty. It means that policy outcomes can be advanced nowadays, in a surveillance society, by exploiting or manipulating sex-crime charges, whether real or inflated.

In other words, ours is increasingly an age of geopolitics by blackmail. Why, after all, were U.S. operatives asked to secure the “biometrics” and DNA of subjects abroad, as some of the U.S. diplomatic cables released by WikiLeaks were revealed?

After Strauss-Kahn’s arrest, a caller to a New York radio talk show, who identified herself as a domestic worker in a New York luxury hotel, reported that “every week” a man in a towel accosts her, seeking sex. Another caller, a hotel manager, confirmed that this is a common way for male hotel guests to solicit sex. The New York Times flagged on its front page a report that hotel domestic workers are often targeted with clients’ requests for sex in exchange for money.

Are these men disgusting predators soliciting desperate, underpaid women? Yes. Is knowing about this economy relevant to the charges against Strauss-Kahn? Maybe.

Unfortunately, such questions may never be investigated, much less answered, for this is not being treated as a typical New York City sex-crime case. The authorities, perhaps with their own agenda, have publicly asserted a foregone conclusion; and that kind of intervention ultimately diminishes the chance of any one of us being able to rely on what used to be real American due process of law.

The Establishment Eliminates A Threat

Paul Craig Roberts
May 20, 2011

The police and the prostitute media have made it impossible for Dominique Strauss-Kahn to get a fair trial. From the moment of the announcement that he had been arrested on suspicion of sexually assaulting a hotel maid, and before he was ever indicted, the accounts given by the police were designed to create the impression that the director of the International Monetary Fund was guilty. For example, the police told the media, which duly regurgitated to the public, that Strauss-Kahn was in such a hurry to flee the scene of the crime that he left behind his cell phone. The police also put out the story that by calling airlines and demanding passenger lists, they managed to catch the fleeing rapist just as his plane was departing for France.

A New York judge denied Strauss-Kahn bail on the basis of police misrepresentation that he was apprehended fleeing the country.

Once he was imprisoned, the police announced that Strauss-Kahn was on suicide watch, which is a way of suggesting to the public that the accused rapist might take his own life in order to avoid the public humiliation of a guilty verdict from a jury.

But what really happened, assuming one can learn anything from press reports, is that Strauss-Kahn, upon arriving at JFK airport for his scheduled flight, discovered that he did not have his cell phone and telephoned the hotel, the scene of the alleged crime. It boggles the mind that anyone could possibly think that a person fleeing from his crime would call the scene of the crime, ask about his left behind cell phone, and tell them where he was.

Then in rapid succession, reeking of orchestration, a French woman steps forward and declares that a decade ago she was nearly raped by Strauss-Kahn. This was followed by Kristin Davis, the Manhattan Madam of the prostitute who did in Eliot Spitzer before he could get the banksters on Wall Street, stepping forward to announce that one of her call girls refused to service Strauss-Kahn a second time because he was too rough in the act.

With hunting season opened, any woman whose career would benefit from publicity, or whose bank account would bless a damage award, can now step forward and claim to have been a victim or near victim of Strauss-Kahn.

This is not to deny that Strauss-Kahn might have an inordinate appetite for sex that did him in. It is to say that long before a jury hears from the maid, or from a prosecutor speaking for the maid “who is too traumatized to appear in court,” the jury has been programmed with the verdict that he is guilty.

Why would he run away if he didn’t do it?

Look at all the women he has accosted!

You get the picture.

I have written about the anomalies of the case. One of the most striking is the confirmed reports in the French and British press that a political activist for French President Sarkozy, Jonathan Pinet, tweeted the news of Strauss-Kahn’s arrest to Arnaud Dassier, a spin doctor for Sarkozy, before the news was announced by the New York police.

Pinet’s explanation for how he was the first to know is that a “friend” in the Sofitel Hotel, where the alleged crime took place, told him. Is it merely a coincidence that the men assigned the task of removing the Strauss-Kahn threat to French President Sarkozy’s re-election had a clued-in friend in the Sofitel Hotel? Did the police clue-in the “friend” before they made the public announcement? If so, why?

What bothers me about the Strauss-Kahn affair is that if the police have evidence that supports their insistence on his guilt, it is pointless for the police to set Strauss-Kahn up in the media. Generally, set-ups like this occur only when there is no evidence or when the evidence has to be fabricated and cannot withstand examination.

As a person who had a Washington career, I find other aspects of the case disturbing. Strauss-Kahn had emerged as a threat to the establishment. Polls showed that as the socialist candidate, he was the odds-on favorite to defeat the American candidate, Sarkozy, in the upcoming French presidential election. Perhaps it was only electoral posturing to help defeat Sarkozy, but Strauss-Kahn indicated that he intended to move the International Monetary Fund away from its past policy of making the poor pay for the mistakes of the rich. He spoke of strengthening collective bargaining, and of restructuring mortgages, tax and spending policies in order that the economy would serve ordinary people in addition to the banksters. Strauss-Kahn said that regulation needed to be restored to financial markets and implied that a more even distribution of income was required.

These remarks, together with a likely win over Sarkozy in the French election, made Strauss-Kahn a double-barreled challenge to the establishment. The third strike against him was the recent IMF report that said China would surpass the US as the world’s first economy within five years.

People who haven’t spent their professional life in Washington may not understand the threat to Washington that is in the IMF report. Whether deserved or not, the IMF has a lot of credibility. By placing China as the number one economic power by the end of the next US presidential term, the IMF thrust a dagger through the heart of American hegemony. Washington’s power is based on America’s economic supremacy. The IMF report said that this supremacy was at its end.

This kind of announcement tells the political world that, as the headline read, “the age of America is over.” For the first time in decades, other countries can see the prospect of escaping from US domination. They don’t have to be puppet states, part of the hegemonic empire. They see the prospect of serving their own people and their own interests instead of those of Washington. European countries, for example, forced to fight for Washington in Afghanistan and Libya, see light at the end of the tunnel. They can now think about refusing.

Although rich and a member of the establishment, and independently of his behavior toward women, Strauss-Kahn made the mistake of revealing that he might have a social conscience. Either this social conscience or the hubris of power led him to challenge American supremacy. This is an unforgivable crime for which he is being punished.

My friend, Alexander Cockburn, an intelligent and civilized person who is derided by right-wingers as a communist, lacks my experience of Washington. Consequently, he thinks that the facts will come out, although he seems to prefer that they come out on the side of the maid and not Strauss-Kahn.

If Alex were the Bolshevik he is said to be, he would know that no high-ranking figure who was serving the establishment would be destroyed on the basis of the word of an immigrant maid living in a sub-let apartment in a building for aids victims. The very notion that the US establishment craves justice to this extent is a total absurdity. Americans are so indifferent to injustice that the American public shrugs off the hundreds of thousands and millions of women, children, and village elders who are murdered, maimed, dispossessed, and displaced by the US military in Iraq, Afghanistan, Pakistan, Yemen, Libya, Somalia, and wherever Washington and the military/security complex, while feeding on power and profit, can claim to be protecting Americans from “terrorists” or bringing democracy to the heathen.

The American criminal justice system is riddled with wrongful convictions and stinks of injustice. The US has a much higher rate of incarceration than alleged authoritarian regimes, such as China, and routinely destroys the lives of young people, and even mothers of small children, for using drugs.

Strauss-Kahn’s indictment serves emotional needs of conservatives, left-wingers, and feminists as well as establishment agendas. Conservatives don’t like the French, because they did not support the US invasion of Iraq. The left-wing doesn’t like rich white guys and IMF officials, and feminists don’t like womanizers. But even if the government’s case falls apart in the courtroom, Strauss-Kahn has been removed from the French presidential race and from the IMF. This, not justice for an immigrant, is what the case is about.

Many Americans are unable to comprehend that authorities would remove a threat with a frame-up. But far worst has occurred. Francesco Cossiga, a former President of Italy, revealed that many of the bombings in Europe during the 1960s, 70s, and 80s, which were blamed on communists, were in fact “false flag” operations carried out by the CIA and Italian intelligence in order to scare voters away from the communist party. Cossiga’s revelations resulted in a parliamentary investigation in which intelligence operative Vincenzo Vinciguerra stated: “You had to attack civilians, the people, women, children, innocent people, unknown people far removed from any political game. The reason was quite simple: to force the public to turn to the state to ask for greater security.”

If democratic governments will murder innocents for political reasons, why wouldn’t they frame someone? Whether innocent or guilty, Strauss-Kahn has been framed in advance of his trial.

Dr. Paul Craig Roberts is the father of Reaganomics and the former head of policy at the Department of Treasury. He is a columnist and was previously an editor for the Wall Street Journal. His latest book, “How the Economy Was Lost: The War of the Worlds,” details why America is disintegrating.

Was Dominique Strauss-Kahn Trying to Torpedo the Dollar?

Mike Whitney
Global Research, May 19, 2011
http://www.globalresearch.ca/index.php?context=va&aid=24867

It's all about perception management. The media is trying to dig up as much dirt as they can on Dominique Strauss-Kahn so they can hang the man before he ever sees the inside of a courthouse. It reminds me of the Terry Schiavo case, where devoted-husband Michael was pegged as an insensitive slimeball for carrying out the explicit wishes of his brain-dead wife. Do you remember how the media conducted their disgraceful 24 hour-a-day Blitzkrieg with the endless coverage of weepy Christian fanatics on the front lawn of the hospital while Hannity, Limbaugh and O' Reilly fired away with their sanctimonious claptrap?

And now you're telling me that that same media is just "doing their job?"

Give me a break.

Whoever wants to nail IMF chief Dominique Strauss-Kahn has really pulled out all the stops. Their agents have been rummaging through diaries, hotel registries, phone records, yearbooks, yada, yada, yada. The UK Telegraph even paid a visit to a high-priced DC knocking shop to get a little dirt from Madame Botox; whatever it takes to make a randy banker look like the South Hill rapist. And they're doing a pretty good job, too. The cops have made sure that the "Great Seducer" always appears handcuffed and dressed in a "pervie" raincoat with 3-days stubble before they parade him in front of the media. On Wednesday--more grist for the mill--they released his mug-shot, an unflattering, deadpan photo that makes him look like Jack-the-Ripper. Was that the intention?

And, that's not the half of it. The Big Money is exhuming every woman he's ever had contact with for the last 30 years hoping they can glean some damning tidbit of information that will convince the doubters that beneath that sophisticated manner and $25,000 suit lurks a closet Bluebeard ready to snap up your daughters and defile your wives. Next thing you know, they'll be trotting out Paula Jones and Tanya Harding claiming they spent a torrid night with the Marquis de Kahn in a trailerpark outside Winamucca.

Where does it stop? Or does it stop? Are we in for another year-long Clinton-Lewinski feeding frenzy where everyday we hear more lurid details about the sexploits of people who don't really interest us at all?

Aren't you at all curious about who's behind this "lynching by media" scam? This is an all-out, no-holds-barred, steel-cage, take-down. The big boys save that kind of action for the worst offenders, that is, for the insiders who have broken "Omerta" or wandered off the reservation. I mean, they locked him up on Riker's Island without bail, for Chrissake. What does that tell you? Even Bernie Madoff was allowed to stay in his $7 million Park Avenue penthouse while he waited for trial, but not Straus-Kahn. Oh, no. He get's the royal treatment, even though he has no criminal record and nothing but the sketchy accusations of a chambermaid against him, he's carted off to the state slammer where he can mingle with hardened criminals while dining on corn flakes and Wonder Bread.

You call that justice?

Can I tell you what this is all about? It's about the dollar. That's right. Strauss-Kahn was mounting an attack against the dollar and now the wrath of the Empire has descended on him like ton-of-bricks. Here's the scoop from the UK Telegraph:

"Dominique Strauss-Kahn, managing director of the International Monetary Fund, has called for a new world currency that would challenge the dominance of the dollar and protect against future financial instability.....

He suggested adding emerging market countries' currencies, such as the yuan, to a basket of currencies that the IMF administers could add stability to the global system....Strauss-Kahn saw a greater role for the IMF's Special Drawing Rights, (SDRs) which is currently composed of the dollar, sterling, euro and yen, over time but said it will take a great deal of international cooperation to make that work." ("International Monetary Fund director Dominique Strauss-Kahn calls for new world currency", UK Telegraph)

So, Strauss-Kahn finds himself in the same crowd as Saddam Hussein and Libyan leader Muammar Gaddafi, right? You may recall that Saddam switched from dollars to euros about a year before the war. 12 months later Iraq was invaded, Saddam was hanged, and the dollar was restored to power. Gaddafi made a similar mistake when "he initiated a movement to refuse the dollar and the euro, and called on Arab and African nations to use a new currency instead, the gold dinar." ("Libya: All About Oil, or All About Central Banking?" Ellen Brown, Op-Ed News) Libya has since come under attack by US and NATO forces which have armed a motley group of dissidents, malcontents and terrorists to depose Gaddafi and reimpose dollar hegemony.

And now it's Strauss-Kahn's turn to get torn to shreds. And for good reason. After all, DSK actually poses a much greater threat to the dollar than either Saddam or Gaddafi because he's in the perfect position to shape policy and to persuade foreign heads of state that replacing the dollar is in their best interests. And that is precisely what he was doing; badmouthing the buck. Only he was too dense to figure out that the dollar is the US Mafia's mealticket, the main way that shifty banksters and corporate scalawags extort tribute from the poorest people on earth. Strauss-Kahn was rocking the boat, and now he's going to pay.

Here's a clip from CNN Money:

"The International Monetary Fund issued a report Thursday on a possible replacement for the dollar as the world's reserve currency.

The IMF said Special Drawing Rights, or SDRs, could help stabilize the global financial system....SDRs represent potential claims on the currencies of IMF members.....The IMF typically lends countries funds denominated in SDRs. While they are not a tangible currency, some economists argue that SDRs could be used as a less volatile alternative to the U.S. dollar.

"Over time, there may also be a role for the SDR to contribute to a more stable international monetary system," he said.

The goal is to have a reserve asset for central banks that better reflects the global economy since the dollar is vulnerable to swings in the domestic economy and changes in U.S. policy.

In addition to serving as a reserve currency, the IMF also proposed creating SDR-denominated bonds, which could reduce central banks' dependence on U.S. Treasuries. The Fund also suggested that certain assets, such as oil and gold, which are traded in U.S. dollars, could be priced using SDRs." ("IMF discusses dollar alternative", CNN Money)

Wow. So DSK was zeroing in on US Treasuries as well as the dollar? That's the whole shooting match.

So, what type of progress was he making in converting USDs to SDRs? According to Reuters: "The IMF general resources credit outstanding increased to 65.5 billion Special Drawing Rights, or SDRs, ($104 billion) on May 12 from 6.0 billion SDRs at December 2007. The so-called new arrangement to borrow, which came into effect on April 1, increased the IMF's available lending resources to 269 billion SDRs on May 12 from 120 billion SDRs on March 31." (http://in.reuters.com/article/2011/05/17/idINIndia-57083920110517?type=economicNews)

Not a bad start for such an ambitious project. It looks like DSK's dream of dethroning the dollar as the de facto "international currency" was beginning to gain momentum. But didn't he know that his actions would anger some very powerful and well-connected people?

Well, if he did; he never let on. In fact, he started mucking around in other stuff, too, like when he intervened on behalf of Irish taxpayers, trying to protect them at the expense of foreign bondholders. That's a big "No no" in banker's world. They keep a list of "people who count", and taxpayers are not on that list. Here's an excerpt from the Irish Times:

"Ireland’s Last Stand began less shambolically than you might expect. The IMF, which believes that lenders should pay for their stupidity before it has to reach into its pocket, presented the Irish with a plan to haircut €30 billion of unguaranteed bonds by two-thirds on average. (Irish finance minister) Lenihan was overjoyed, according to a source who was there, telling the IMF team: “You are Ireland’s salvation.”

The deal was torpedoed from an unexpected direction. At a conference call with the G7 finance ministers, the haircut was vetoed by US Treasury Secretary Timothy Geithner who, as his payment of $13 billion from government-owned AIG to Goldman Sachs showed, believes that bankers take priority over taxpayers. The only one to speak up for the Irish was UK chancellor George Osborne, but Geithner, as always, got his way. An instructive, if painful, lesson in the extent of US soft power, and in who our friends really are.

The negotiations went downhill from there. On one side was the European Central Bank, unabashedly representing Ireland’s creditors and insisting on full repayment of bank bonds. On the other was the IMF, arguing that Irish taxpayers would be doing well to balance their government’s books, let alone repay the losses of private banks." ("Ireland's future depends on breaking free from bailout", Morgan Kelly, Irish Times)

So, Strauss-Kahn stuck up for Irish taxpayers over the banks, the bondholders, the ECB, and the US Treasury. Naturally, that made him persona non grata among the ruling throng.

And, there's more, too, because Strauss-Kahn's vision was not limited to currency alone, but involved broad structural changes to the IMF itself that would have reversed decades of neoliberal policies. DSK had settled on a new approach to policymaking; one that would abandon the worst elements of globalization and put greater emphasis on social cohesion, cooperation and multilateralism. Here's an excerpt from the speech titled "Human Development and Wealth Distribution" he gave in November 2010:

"....Adam Smith—one of the founders of modern economics—recognized clearly that a poor distribution of wealth could undermine the free market system, noting that: “The disposition to admire, and almost to worship, the rich and the powerful and…neglect persons of poor and mean condition…is the great and most universal cause of the corruption of our moral sentiments.”

This was over 250 years ago. In today’s world, these problems are magnified under the lens of globalization....globalization also had a dark side. Lurking behind it was a large and growing chasm between rich and poor—especially within countries. An inequitable distribution of wealth can wear down the social fabric. More unequal countries have worse social indicators, a poorer human development record, and higher degrees of economic insecurity and anxiety. In too many countries, inequality increased and real wages stagnated—failing to keep up with productivity—over the past few decades. Ominously, inequality in the United States was back at its pre-Great Depression levels on the eve of the crisis....

An immediate task is to end the scourge of unemployment....Progressive taxation can also promote equity through redistribution, and this should be encouraged....“Inequality is corrosive” ....“it rots societies from within…it illustrates and exacerbates the loss of social cohesion…the pathology of the age and the greatest threat to the health of any democracy.” ("Human Development and Wealth Distribution", Dominique Strauss-Kahn, IMF)

Can you believe it? DSK is lecturing bankers about redistribution? That's not what they want to hear. What they want to hear is why ripping off poor people actually makes the world a better place. DSK's speech just shows that he wasn't drinking the Koolaid anymore. He was becoming a nuisance and they needed to get rid of him.

Does that mean he didn't rape the woman who was in his hotel room?

Of course not. In fact, he could be guilty. But he deserves a fair trial, and someone's making damn sure he doesn't get one.

IMF chief feared political opponent would pay a woman more than $1m

IMF chief 'feared political opponent would pay a woman more than $1m to allege rape'
Peter Allen
16th May 2011
http://www.dailymail.co.uk/news/article-1387625/IMF-chief-Dominique-Strauss-Kahn-feared-political-enemy-pay-woman-allege-rape.html

Dominique Strauss-Kahn feared that one of his political opponents would pay a woman more than $1million to say he raped her, it emerged today.

The extraordinary revelation emerged in Paris as the International Monetary Fund head remained in a New York police cell accused of launching a sex attack on a hotel maid.

A writer in the French capital has also come forward to say that the 62-year-old attempted to rape her a decade ago.

But as Strauss-Kahn faced a 15-year prison sentence - which would signify the end of his ambition to become French president next year - conspiracy theories abounded.

Liberation, the left-wing daily newspaper, published details on off-the-record comments made by Strauss-Kahn as recently as April 28th.

Discussing his plans to challenge Nicolas Sarkozy as Socialist candidate for the presidency in 2012, he said he imagined ‘a woman who had been raped in a car park and who was offered between €500,000 and €1,000,000 to make up such a story.’

Because he was the clear favourite to beat Mr Sarkozy, Strauss-Kahn feared he would be subjected to a smear campaign by the President and his Interior Minister, Glaude Gueant.

Such theories were bolstered by the fact that the first person to break the news of Strauss-Kahn’s arrest was an activist in Mr Sarkozy’s UMP party – who apparently knew about the scandal before it happened.

Jonathan Pinet, a politics student, tweeted the news just before the New York Police Department made it public, although he said that he simply had a ‘friend’ working at the Sofitel where the attack was said to have happened.

The first person to re-tweet Mr Pinet was Arnaud Dassier, a spin doctor who had previously publicised details of multi-millionaire Strauss-Kahn’s luxurious lifestyle in a bid to dent his left wing credentials.

Strauss-Kahn could just as easily been set up by rivals inside the IMF, as well as by rivals within the French political establishment.

Michelle Sabban, a senior councillor for the greater Paris region and a Strauss-Kahn loyalist said: ‘I am convinced it is an international conspiracy.’

She added: ‘It's the IMF they wanted to decapitate, not so much the Socialist primary candidate.

‘It's not like him. Everyone knows that his weakness is seduction, women. That's how they got him.’

Even some of Strauss-Kahn’s rivals said they could not believe the news. ‘It is totally hallucinatory,’ said centrist Dominique Paille.

‘If it is true, this would be a historic moment, but in the negative sense, for French political life. I hope that everyone respects the presumption of innocence. I cannot manage to believe this affair.’

And Henri de Raincourt, minister for overseas co-operation in President Nicolas Sarkozy's government, added: ‘We cannot rule out the thought of a trap.’

Referring to recent allegations that Strauss-Kahn was chauffered around Paris in a Porsche and wore 20,000 plus suits, Mr De Raincourt added: ‘I note that this has happened just after the affair of the car and the suit in a short space of time.

‘I am not ruling anything out. If this turns out to have been a trap, let me tell you that it would not be to the credit of those who set it.’

Strauss-Kahn Screws Africa

Greg Palast
New York, Friday, May 20, 2011

Now that I've dispensed with the obvious and obnoxious teaser headline, let's drop the towel and expose Dominique Strauss-Kahn's history of arrogant abuse. The truth is, the grandee of the IMF has molested Africans for years.

On Wednesday, the New York Times ran five - count'em, FIVE - stories on Strauss-Kahn, Director-General of the International Monetary Fund. According to the Paper of Record, the charges against "DSK," as he's known in France, are in "contradiction" to his "charm" and "accomplishments" at the IMF.

Au contraire, mes chers lecteurs.

Director-General DSK's cruelty, arrogance and impunity toward African and other nations as generalissimo of the IMF is right in line with the story told by the poor, African hotel housekeeper in New York City.

Let's consider how the housekeeper from Guinea ended up here in New York. In 2002, this single mother was granted asylum. What drove her here?

It began with the IMF rape of Guinea.

In 2002, the International Monetary Fund cut off capital inflows to this West African nation. Without the blessing of the International Monetary Fund, Guinea, which has up to half the world's raw material for aluminum, plus oil, uranium, diamonds and gold, could not borrow a dime to develop these resources.

The IMF's cut-off was, in effect, a foreclosure, and the nation choked and starved while sitting on its astonishing mineral wealth. As in the sub-prime mortgage foreclosures we see today, the IMF moved quickly to seize Guinea's property.

But the IMF did not seize this nation's riches for itself. Rather, it forced Guinea to sell off its resources to foreign corporations at prices much like the sale of furniture on the lawn of a foreclosed house.

The French, Americans, Canadians, Swiss (and lately, the Chinese) came in with spoons out and napkins tucked in under their chins, swallowing the nation's bauxite, gold and more. In the meantime, the IMF ordered the end of trade barriers and thereby ruined local small holders.

As a result of the IMF attack, Guineans who could, fled for freedom and food. This week, then, marked the second time this poor African was molested by the IMF.

Now we have the context of how these two, the randy geezer of globalization and the refugee ended up, in quite different positions, in that New York hotel room.

Since taking over the IMF in 2007, erstwhile "Socialist" Strauss-Kahn has tightened the screws in an attempt to maintain the free-market finance mania that ruined this planet in the first place. [That's worth a story in itself - and that's coming. Our team has a stack of inside documents from the IMF that we will be releasing in my new book in the Fall.]

DSK's lawyers say the relationship with the housekeeper was "consensual." But DSK says that about all IMF agreements with nations over whom it holds life and death powers. That's like saying a bank robbery is consensual so long as you don't consider the gun.

Whether it was agreed-upon sex or brutal rape, it could only have been "consensual" in the same way that the people of Guinea consented to IMF-ordered financial rapine.

The Times article quotes an IMF crony of Strauss-Kahn saying DSK gets his way by "persuasion" not "bullying." Tell that to the Greeks.

It was DSK who, last year, personally insisted on brutal terms for the so-called bail-out of Greece. "Strong conditionality" is the IMF term. Strauss-Kahn demanded not just a devastating cut in pensions and a deliberate increase in unemployment to 14%, but also the sell-off of 4,000 of 6,000 state-owned services. The DSK IMF plan allowed the financiers who set the financial fires of Greece to pick up the nation's assets at a fire-sale price.

The Strauss-Kahn demands were not "tough love" for Greece: The love was reserved solely for the vulture bankers who received the IMF funds but were not required to accept one euro in lost profit in return. DSK, despite the advice of many, refused to ask the banks and speculators to reduce their usurious interest charges that were at the root of Greece's woes.

Requiring Greece to sell assets, drop trade barriers, and even end the rule that Greek ships use Greek sailors has nothing to do with saving Greece, but everything to do with DSK's continuing the right-wing free-market mania that got this planet into trouble in the first place.

I do not consider it a stretch to say that a predator in the bank boardroom suite assumes his impunity applies to the hotel suite.

Forensic economist and journalist Greg Palast, author of the New York Times bestsellers, Armed Madhouse and The Best Democracy Money Can Buy, has broadcast investigative reports on the IMF and World Bank for BBC Television Newsnight (London) and Democracy Now (New York).

GregPalast.com

IMF calls for dollar alternative

Ben Rooney
February 10, 2011
http://money.cnn.com/2011/02/10/markets/dollar/index.htm

NEW YORK (CNNMoney) -- The International Monetary Fund issued a report Thursday on a possible replacement for the dollar as the world's reserve currency.

The IMF said Special Drawing Rights, or SDRs, could help stabilize the global financial system.

SDRs represent potential claims on the currencies of IMF members. They were created by the IMF in 1969 and can be converted into whatever currency a borrower requires at exchange rates based on a weighted basket of international currencies. The IMF typically lends countries funds denominated in SDRs

While they are not a tangible currency, some economists argue that SDRs could be used as a less volatile alternative to the U.S. dollar.

Dominique Strauss-Kahn, managing director of the IMF, acknowledged there are some "technical hurdles" involved with SDRs, but he believes they could help correct global imbalances and shore up the global financial system.

"Over time, there may also be a role for the SDR to contribute to a more stable international monetary system," he said.

The goal is to have a reserve asset for central banks that better reflects the global economy since the dollar is vulnerable to swings in the domestic economy and changes in U.S. policy.

In addition to serving as a reserve currency, the IMF also proposed creating SDR-denominated bonds, which could reduce central banks' dependence on U.S. Treasuries. The Fund also suggested that certain assets, such as oil and gold, which are traded in U.S. dollars, could be priced using SDRs.

Oil prices usually go up when the dollar depreciates. Supporters say using SDRs to price oil on the global market could help prevent spikes in energy prices that often occur when the dollar weakens significantly.

The dollar alternatives

Fred Bergsten, director of the Peterson Institute for International Economics, said at a conference in Washington that IMF member nations should agree to create $2 trillion worth of SDRs over the next few years.

SDRs, he said, "will further diversify the system."

Dollar firms after starting 2011 weak

The dollar has been drifting lower so far this year as the global economy improves and investors regain their appetite for more risky assets such as stocks and commodities.

After rising above 81 in early January, the dollar index, which measures the U.S. currency against a basket of other international currencies, eased below 77 earlier this week.

However, the dollar was higher Thursday against the euro, pound and yen as disappointing corporate results weighed on stock prices following several days of gains on Wall Street. The rally in the commodities market also cooled, with the price of oil and metals backing off recent highs.

In addition, renewed concerns about the debt problems facing troubled European economies put pressure on the euro and supported the dollar. The yield on Portugal's benchmark bond rose to a record high Wednesday, and borrowing costs for Ireland, Spain and Greece remain elevated.

"The market is shedding risk, with equities and commodities weakening and the U.S. dollar broadly stronger" said Camilla Sutton, currency strategist at Scotia Capital.

Traders were also digesting comments from Federal Reserve chairman Ben Bernanke, who told Congress Wednesday that despite a strengthening economic recovery, the unemployment rate remains high while inflation is "still quite low."

Those remarks reaffirmed the view that "the Fed would be very slow to tighten policy given its dual mandate of price stability and employment," analysts at Sucden Financial wrote in a research report.

Bernanke also urged lawmakers to come up with a "credible plan" to bring down "unsustainable" federal budget deficits.

"We expect that the outlook for the U.S. fiscal position will weigh heavily on the U.S. dollar in the quarters ahead," said Sutton. In the near-term, however, she said "a strengthening growth profile" could help provide "a temporary period of dollar strength."

IMF director Dominique Strauss-Kahn calls for new world currency

International Monetary Fund director Dominique Strauss-Kahn calls for new world currency

Dominique Strauss-Kahn, managing director of the International Monetary Fund, has called for a new world currency that would challenge the dominance of the dollar and protect against future financial instability.
Dominique Strauss-Kahn saw a greater role for the IMF's Special Drawing Rights, which is currently composed of the dollar, sterling, euro and yen
Andrew Trotman
10 Feb 2011
http://www.telegraph.co.uk/finance/currency/8316834/International-Monetary-Fund-director-Dominique-Strauss-Kahn-calls-for-new-world-currency.html

“Global imbalances are back, with issues that worried us before the crisis - large and volatile capital flows, exchange rate pressures, rapidly growing excess reserves - on the front burner once again,” Dominique Strauss-Kahn said. “Left unresolved, these problems could even sow the seeds of the next crisis.”

“When we worry about the deficiencies of the international monetary system, we are mostly worrying about volatility,” he added. There is “a sense that money sometimes flows around the globe in too-volatile a fashion and that countries need a more stable, more predictable external environment in order to prosper”, he said.

He suggested adding emerging market countries' currencies, such as the yuan, to a basket of currencies that the IMF administers could add stability to the global system.

China, which holds much of its $2.85 trillion mountain of reserves in US Treasury bonds, has repeatedly expressed unease about the value of the dollar, while American politicians have complained that Beijing gains an unfair advantage by keeping its own currency cheap.

Strauss-Kahn saw a greater role for the IMF's Special Drawing Rights, which is currently composed of the dollar, sterling, euro and yen, over time but said it will take a great deal of international cooperation to make that work.

"Using the SDR to price global trade and denominate financial assets would provide a buffer from exchange rate volatility," Strauss-Kahn said, while "issuing SDR-denominated bonds could create a potentially new class of reserve assets".

Russian President Dmitry Medvedev last month said the currencies of Brazil, Russia, India and China should be included in the SDR valuation basket. The same month, Sarkozy said that the yuan should be included, and US President Barack Obama’s administration said it supports such a transition “over time”.

However, among the yuan's drawbacks is that it is not freely traded and China's capital markets are largely closed.

Strauss-Kahn said: "Increasing the role of the SDR would clearly require a major leap in international policy coordination. For this reason, I expect the global reserve asset system to evolve only gradually, and along with changes in the global economy."

Strauss-Kahn's views come a week before finance ministers from the Group of 20 developed and developing nations meet in Paris to discuss proposals by French president Nicolas Sarkozy for changes to global economic governance.