Posts Tagged ‘IMF’

IMF: Global Economy Threatened

Monday, December 26th, 2011

Another Day, Another Euro

This has to be one of the most ridiculous pronouncements made by a governmental body in some time, not because it is inaccurate, but because they’ve apparently just now taken notice.  YahooNews is reporting that the IMF’s worried about the global economy, and it’s new head, Christine Lagarde is pointing out the problem as a “crisis in confidence in public debt.”  No, really, she said this.  (For her next trick, Lagarde will likely tell you the sky is blue and that the sun rises in the East, while she’s giving out revolutionary information.) What Lagarde doesn’t mention is the IMF’s role in all of this, and the fact that the grotesque amounts of public debt have been augmented by loans from the IMF itself, in propping up all of these nations.  This is much in keeping with the failed policies that have threatened the world economy, but rather than re-think the strategy that has only deepened our troubles, Lagarde criticized nations that seek to shore up their own economies and financial markets, and while she didn’t name names, it’s clear that she’s talking primarily about the British.  She offered this:

Part of the problem, she said, has been national calls for protectionism, making it “difficult to put in place international coalition strategies against it.”

Lagarde added: “National parliaments grumble at using public money or the guarantee of their state to support other countries. Protectionism is in the debate, and everyone for themselves is winning ground.”

Let me translated Lagarde’s lament:  Politicians in much of the world (excepting perhaps only the US) are beginning to heed the voices of their people, who are beginning to demand that their politicians begin to look out for their own nations first, before worrying about the sovereign debt crises of others.  So Britain, for instance, that is doing the smart thing and walking back its relations with the European Union and its failing currency is a bad country, while we in the US who continue to shovel dollars into the IMF via the Federal Reserve are “smart” and “thoughtful,” and the rest of that patronizing tripe that only works on liberals and statists.  Meanwhile, those of us who live in Realityville, USA, are beginning to understand that this crisis is largely the result of bad ideas promulgated by statists the likes of Christine Lagarde.

This announcement is an insult to every thinking person on the globe, and it show just how far these people will go in order to prop up a lousy idea, or a whole play-book full of them.  As if this wasn’t bad enough on its face, Lagarde offers still worse advice by way of a warning:

Emerging countries, which had been growth engines for the world economy before the crisis, have also been affected, said Lagarde, citing China, Brazil and Russia.

“These countries, which were the engines, will suffer from instability factors,” she told the newspaper.

In other words, these countries that have all seen burgeoning exports are now beginning to contract because general consumer demand is down in the importing nations, including the US and the EU. In short, Lagarde doesn’t want you to notice that she’s making an admission about the future prospect of the EU, with its currency in turmoil, and the US, where currency in large amounts has been sent to prop up this entire mess.  What she doesn’t say directly, and dares not admit, is that the coming collapse is already beginning in a more serious way, measured in the GDP of what had been the leading growth engines prior to the onset of the financial crisis.

In short, Lagarde is asking, or even chiding countries to continue a policy that is nothing short of suicidal, all on the basis of the proposal that the IMF be provided more money to loan to nations already deeply indebted. This is both the financial and moral equivalent of urging the family with twice their annual income in short term debt to apply for another credit card or two.  What she is pretending is that the situation can be repaired by some notion of restored confidence among investors and consumers who now [rightly] fear that nothing but collapse lays along this road.

They’re right to doubt, and the people of Britain and every other nation are right to worry as what Lagarde seems to be suggesting to European politicians, but indeed politicians everywhere, is that they should take one for the team, not as politicians, but as sovereign nations.  Britain would be right to reject her words as the ravings of a con artist, selling the same old Ponzi scheme again and again.  We in the US could only improve our position by following the British lead away from the EU, and the Euro, but our current financial and political leadership is instead tying us more closely to it.

It’s time to face reality:  The Euro was a doomed currency from the outset, and inviting in those nations with questionable currency and dishonest fiscal policies was never going to make anything but a disaster, but the people of Europe were suckered into it, and now the US is going along.  Their shrill warnings of dire collapses if we don’t go along are merely a postponement of a greater crisis with each subsequent delay.  It’s time to face the music, and as the old saying goes, we must refuse to put even more good money after bad.  So bad is it now that it would be more accurate to say that we are putting bad money after even worse.

The only way to prevent a global collapse is to cut our losses now. Stern fiscal policies must prevail, and money must grow tighter.  At this very moment, at the US Treasury and the Federal Reserve, they’re concocting plans to export your future wealth to Europe in order to buttress a currency that won’t be saved, and each dollar they pour into the effort only devalues the ones in your pockets.  It’s time to put a stop to all of this, and if we’re to save our country, we must start here, and we must start now, and short-run extensions of payroll tax-cuts won’t get it done.  We need real, drastic spending cuts that sharply curtail our budget deficit, something on the order of what Ron Paul is proposing, in the realm of one trillion dollars or more in spending cuts immediately.  If you want sound currency, it has to start at home, and whatever else you may think of Ron Paul, he’s right about this.

 

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Britain Isolated From Europe

Monday, December 12th, 2011

Should Britain Feel Left Out?

Reuters is reporting that the EU has effectively isolated Britain, and they way they tell it, it’s a disaster for Britain.  From my point of view, it may lead to that country’s salvation.  Insofar as I can determine, what happened  may look like a British set-back according to Reuters, but for the life of me, I cannot see how.  If British Prime Minister David Cameron were smart, he’d play this up, and seek to withdraw entirely from the Union.  As the Reuters article makes clear, Britain has never been fully accepted by other EU members because they’ve neither joined the common currency nor accepted the Schengen Treaty that provides open borders between signatory nations.   The assessment is that Cameron had been “constrained by domestic politics,” but I view that as a victory for the people of Britain.  Rather than getting drawn even deeper into the quagmire of the EU, Britain may yet find itself able to maintain its sovereignty.

This is part of the problem the US faces with its Euro-entanglements.  Also mentioned in the Reuters piece is the fact that US Treasury Secretary Tim Geithner was making his presence known during the flurry of meetings and negotiations happening across Europe throughout the week:

U.S. Treasury Secretary Timothy Geithner had spent several days in Europe before the summit. The United States, like all of Europe’s trade partners, had been watching the accelerating debt crisis with profound concern, worried for their own economies and banks.

No! This is the thing about which I have been warning you for some time, with the Euro currency teetering on the brink of total collapse: The United States has extended itself to cover Eurozone banks to an extent that is reckless and dangerous.  Geithner was on hand to try to lend his assistance in shepherding the process along.  In the end, what came out of it was what Sarkozy had wanted all along.  There will be a new intergovernmental agreement among nations of the Eurozone as a sidebar to the main EU treaty.  This effectively cuts Britain out, but it also gives Britain every justification in breaking all bonds with Brussels.

What is at stake is the notion of tying the budgets of EU nations to some sort of formal, centralized process, by means of which they hope to get control of the staggering debt.  They have extended and leveraged and borrowed in every conceivable fashion, and yet they still look to do more.  The single currency has been a problem even before its official beginning, since the manner in which it was created was based on some rather generous calculations of the value of the original members’ currencies, and because no budget discipline was installed at the time.  Think of this as an incremental approach to a single central government for the entire zone.

In meetings with the head of the ECB, Mario Draghi, and euro zone finance ministers the conversation was all about the two-year-old debt crisis and how to resolve it. The issues: the role of the ECB, how far should or would it stand behind countries to buy them breathing space, the scale of the euro zone’s rescue fund, the part to be played by the IMF, and should the EU let private bondholders off the hook.

This should cause further concerns for Americans, because the IMF will get much of its funding from the US Federal Reserve, drawing the US even further into the Euro-debacle.

On Monday, Nicolas Sarkozy insisted that Britain is needed as part of the Eurozone trading bloc, but it’s hard to imagine how this remains that case, and Sarkozy admits as much, in stating:

“We did everything, the chancellor and I, to allow the British to take part in the agreement. But there are now clearly two Europes,” Sarkozy said in an interview with the French daily Le Monde.

This is a typically continental view of the issue, but it’s clear to me that Angela Merkel and Germany will bear the brunt of the strain.  Nevertheless, it’s my view that as dire as some would like to make this out to be for Britain’s sake, I’m unmoved by their insistence that Prime Minister Cameron has made a mistake:

“I think that’s a shame because we need our British friends in Europe,” he said, arguing that Cameron’s centre-left predecessors Tony Blair and Gordon Brown would not have made “the same mistake”.

I think it was a terrible mistake for Britain to tie their nation to this mess in the first place, and I think that was true of Germany as well, but while the British have maintained some independence, the Germans have not, and now they will pay.  If this all goes as badly as it seems that it may, Merkel and Sarkozy may be looking for non-extradition countries to which they can flee.

Apparently, I’m not alone in my dim view of the Euro, as one Telegraph writer points out the real reason for the Europeans’ anger toward Britain:

No, they aren’t really angry with us for opposing the new Treaty for Fiscal Union. The reason our brother and sister Europeans are so chronically enraged with the British is that we have been proved completely right about the euro. For more than 20 years, British ministers have been coming out to Brussels and saying that they just love all this single-market stuff, but that they doubt the wisdom of trying to create a monetary union. And for more than 20 years, some of us have been saying that the reason a monetary union won’t work is that you can’t do it without a political union – and that a political union is not democratically possible.

We warned that you would need a kind of central Euro-government to control national budgets and taxation, and that the peoples of Europe wouldn’t wear it. Now look. It wasn’t the Anglo-Saxon bankers who caused the trouble in the eurozone, Sarkozy mon ami. It was the utter failure of the eurozone countries – starting with France, incidentally – to observe the Maastricht rules. It was the refusal of the Greeks to control their spending or to reform their social security systems. In Greece and Italy, the democratic leaders have been effectively deposed in the hope of appeasing the markets and saving the euro; and what makes the leaders of the eurozone countries even more furious is that it doesn’t seem to be working.

Boris Johnson is absolutely right about this.  It’s damned-well time somebody said it.  Britain shouldn’t fear being cut out of Europe at this point.  They should call it “Independence Day” and celebrate.  In my view, the sooner they can dis-entangle themselves from the entire fiasco, the greater their chances of avoiding at least some of the calamity that will ruin the continent.  I only wish our own leaders here in the US would do the same.

Note: In the US, by mid-afternoon Monday, the Dow was off more than 200 points, or roughly 1.7%, on fears about the continuing European crisis.