D.C. To IMF: 'Welcome To Crazy Town'
SCOTT SIMON, HOST:
This is WEEKEND EDITION from NPR News. I'm Scott Simon. The world's top financial officials are in Washington D.C. - what timing. They've gathered for the annual meetings of the International Monetary Fund and the World Bank. Now, in the past, the U.S. has used the gathering to try to present America's vision for global prosperity. But with the U.S. government shut down and the debt ceiling deadline looming, that case may be a bit challenging to make. NPR's Chris Arnold has been attending some meetings, and he's found Washington, D.C.'s dysfunction is a hot topic.
CHRIS ARNOLD, BYLINE: At the same time the Congress has been engaged in what many economists consider an embarrassing display of partisan brinksmanship, finance ministers from all over the world are here with a front row seat. And they've been watching as at least a few lawmakers even floated the peculiar notion that, well, maybe it wouldn't be so bad if the U.S. defaults.
AUSTAN GOOLSBEE: Welcome to crazy town.
ARNOLD: That's former White House Chief Economic Advisor Austan Goolsbee.
GOOLSBEE: Where we're living and people are saying, oh, well, we're going to, the U.S. government's going to not pay its bills and that's not going to have a negative impact on the economy is totally nuts.
ARNOLD: Goolsbee was speaking about the standoff on NPR's "On Point" show this week. Over at the IMF meetings themselves, the finance ministers and delegates are a bit more politique. But clearly they take this issue very seriously.
(SOUNDBITE OF CHATTER)
ARNOLD: One thing about these IMF meetings is that as you wander around the halls, you bump into some of the world's most important economic officials. Olli Rehn is in charge of economic and monetary affairs for the European Commission.
OLLI REHN: If there were to be a default of the U.S. government, that would certainly create great market turbulence and have very negative ramifications to the whole world economy.
ARNOLD: And what is the feeling among the finance ministers here? Is it surprise? Is it frustration?
REHN: There's ah concern and support for the U.S. policymakers to overcome this challenge and not to default.
ARNOLD: Of course, people who aren't senior government officials can be a bit less careful with their statements. Across the bustling atrium here at the IMF building, Rodrigo Valdes is coming out of one of the sessions. He's an economist for a Brazilian Investment Bank.
RODRIGO VALDES: It's unfortunate, really, because the U.S. has a huge responsibility with the world economy. Once you are so important you cannot toy with things.
ARNOLD: Valdes explains that the entire world has what he calls infinite faith in a green piece of paper that says $100 or $20. Same thing with bonds issued by the U.S. Treasury.
VALDES: Being the reserve currency of the world has huge privileges for the U.S.
ARNOLD: For one, the U.S. can borrow more cheaply than other countries.
VALDES: But that also has responsibilities. That privilege has responsibilities to keep the system functioning.
ARNOLD: Or, if you don't honor those responsibilities, the world might decide to start using a different currency. We're not there yet, but there is talk along those lines. But for now, as the most stable, strongest economy, the U.S. provides a bedrock currency that the rest of the world can rely on.
VALDES: And that's only the U.S. has that role in the world economy. In the past, other countries have had that - the Brits, in Egypt, someone in Egypt, I guess.
ARNOLD: A long time ago.
VALDES: Long time ago. And when that is under doubt, that's a big, big, big problem.
ARNOLD: In today's interconnected world, if investors panic over a U.S. default that likely means it's going to cost a lot more for Brazil to borrow money and Italy, and Greece, and Chile, and everybody else. U.S. Treasury Secretary Jack Lew spoke about this this week too. He was testifying before the Senate Finance Committee.
SECRETARY JACK LEW: The world actually counts on us being responsible and making the kinds of decisions that they can continue to look to Washington for that kind of stability.
ARNOLD: With Washington hosting the World Bank and IMF meetings this week, Lew has been back and forth to those meetings.
LEW: I met with finance ministers from Africa and finance ministers from Latin America. And it's challenging when they look at you and ask what's going on in Washington. It makes them nervous about their economies.
ARNOLD: In the past couple of days, as Congress appears to at least be moving closer to reopening the government and extending the debt ceiling deadline, many at the IMF meetings are taking that as a good sign and so are investors who are driving up the stock market. Chris Arnold, NPR News, Washington.