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New IMF Thinking on Capital Controls Is a Good Start
The International Monetary Fund has rethought its doctrine on capital controls. The IMF, which previously favored unfettered flows of money across borders, now accepts that controls are sometimes necessary.
This is a real improvement, yet it’s incomplete because it lacks a mechanism for supervision and enforcement. The fund can’t rectify that omission by itself. Member governments can and should.
The previous orthodoxy said that restricting international flows of capital is almost always wrong: The benefits of liberalized capital markets exceed the costs. Even before the global recession that started in 2008, successive financial crises had challenged this idea. Surging capital flows are capable of destabilizing and even overwhelming the financial systems of developing countries.
The new thinking is that capital controls are sometimes the lesser evil. In adopting this as its new official position, the IMF has tried to spell out the conditions under which resorting to controls makes sense. The aim is to give members consistent advice.
There’s still a presumption in favor of open capital markets — and rightly so — yet on a milder scale. When other policies are available to restore financial stability, the IMF says, they will usually be preferable. But sometimes capital controls are the only effective response.
Governor weighs options on venture capital plan
With a venture capital bill failing last legislative session, Governor Scott Walker has his sights set on another go around. With the idea to fund start-up companies, the governor indicated last week a number of details still need to be worked out, while reinforcing the need for such a resource.
Walker told employees at Virent in Madison that most of Wisconsin’s new jobs will be coming from start-ups and growing small businesses rather than established corporations. He lauded the state’s current angel investor tax credit but said it only goes so far with companies that are struggling to make a profit.
“Getting a tax credit that doesn’t pay off for a few years doesn’t satisfy the landlord at your office who needs a payment now, not three years from now.”
The governor said the question remains if a venture capital plan will be best proposed as part of his state budget proposal or separate legislation. He mentioned among the ideas of handling the money is a fund-of-funds which the state would partner with private investment managers.
Venture capital deals
Naurex Inc., an Evanston, Ill.-based developer psychiatry and neurology drugs, has raised $38 million in Series B funding. Baxter Ventures led the round, and was joined by Savitr Capital and return backers Adams Street Partners, Latterell Venture Partners, Genesys Capital, PathoCapital, Druid Bioventures, Northwestern University, Lundbeck, Takeda Ventures and Shire. www.anurex.com
Allakos Inc., a San Mateo, Calif.-based developer of antibody therapeutics for allergic and inflammatory diseases, has raised $32 million in Series A funding. Novo Ventures led the round, and was joined by Alta Partners, RiverVest Venture Partners and the Roche Venture Fund. www.allakos.com
Angel Medical Systems Inc., a Shrewsbury, N.J.-based developer of devices for continuous intracardiac ischemia monitoring and alerting, has raised $27.5 million in new VC funding from groups that included SOAM Angel Partners. www.angel-med.com
Duetto Research, a San Francisco-based big data startup focused on the travel and hospitality markets, has raised $10 million in Series A funding. Battery Ventures and Altimeter Capital co-led the round, and were joined by Thayer Ventures, Trinity Ventures and Marc Benioff. The company had raised $2.1 million in seed funding earlier this year from Battery, Trinity, Thayer, Benioff and Benchmark Capital.www.duettoresearch.com