Maybe Andy Mukherjee is just reading too much into the words of Larry Summers, but to the Bloomberg News columnist it sounds as if Summers is proposing that the International Monetary Fund should become a $500 billion hedge fund administrator – to help poor countries. That money, says Mukherjee, represents one-third of the $1.5 trillion kitty in surplus foreign exchange reserves within developing countries, and Summers says it shouldn’t be hard to scratch out a decent return that could benefit the poor of those nations. “If the wealth tied up in reserve were invested either domestically in infrastructure or in a fully diversified long-term way in global capital markets,” says Summers, the outgoing president of Harvard University, “6% would not be an ambitious estimate of what could be earned.” Right now, those reserves earn nothing, but Summers suggests that if the central bank could get over their need for “safe and liquid” investments in U.S. Treasuries, the money could be put to better use. Taking Summer’s words a step further, Mukherjee concludes that “With sound administration, [hedge funds] could thus become a useful – and safe— tool to serve the world’s poor.”
