Until now, the politicians' victories in this duel have been nothing but a triumph of words. "Never again will the American taxpayer be held hostage by a bank that is 'too big to fail,'", US President Barack Obama thundered.

"We can no longer accept a capitalist system without rules, without order and without norms," French President Nicolas Sarkozy fumed. "A system in which most of the money is earned through speculation instead of production -- that is not the kind of system in which I want to live."

These are grand words. But virtually nothing has happened to diminish the business of speculating in stocks and currencies, in the ups and downs of financial markets, the banks' practice of gambling with the minimum possible stake ...

The markets are growing and thriving as if the near-collapse of the global financial system had never happened.

In the first three months of this year alone, three major financial institutions, Goldman Sachs, JPMorgan Chase and Deutsche Bank, raked in $13.5 billion in profits ...

They continue to benefit from a financial system characterized by few rules and many loopholes. Hedge funds are subject to scant regulation, even though they are the ones that engage in particularly risky transactions.

Banks are not required to maintained sufficient capital reserves to cover the risks they are taking.

Finally, rating agencies continue to do business with banks whose products they then assign top marks to ...

The big wheel is still turning as if nothing had happened.

In fact, it is even being lubricated with the cheap money central banks pumped into the markets to minimize the consequences of the financial crisis.

As a result, those who helped create the crisis are now benefiting from government efforts to resolve it ...

Der Spiegel  2 June 2010    Banking Commission    Fractional Reserve Banking    

Capital Requirement

Reserve Requirement

Pakistan faces 'massive economic challenge'

Pakistan government officials will meet with the IMF on Monday to discuss the impact the three weeks of floods in the country, which has affected some 20 million people, has had on the economy.

The country's economy is already being kept afloat by billions in IMF loans, and the cost of rebuilding after the floods will likely run into the billions ...

C4  22 Aug 2010

Doctor sends £1m medical supplies to Pakistan

Action Aid

Sovereign debt work-out: reform needed

"Today, the people of Indonesia are repaying hundreds of millions of pounds in debts – in effect they are paying for their former repression."

The abstraction of benefits provided by the current debt work-out model, with indebted countries needing better cancellation of unpayable and unjust debt, requires a new system.

One that gives debtors: parity in the decision making process; the right to contest the legitimacy of certain debts being repaid; the power to hold creditors accountable for approving irresponsible loans; and the potential to declare themselves insolvent.

This new mechanism would be best served through a neutral decision-making body, one that is independent of any creditor-led institution.

It can explicitly, therefore, not be based in the creditor International Monetary Fund or World Bank; institutions that have proved themselves incapable of neutral decision-making.

Instead, arbitration, based on principles of transparency and inclusion,should be concluded either in a permanent body situated in, for example, the UN or the Permanent Court of Arbitration in The Hague or by means of an ad-hoc arrangement ...

It is essential that creditors take responsibility for odious debts and repudiate loans that have failed because of inadequate due diligence, failure meet intended objectives or produced harmful environmental, social, governmental and/or human impacts ...

openDemocracy  13 Aug 2010        

In Ireland, a Picture of the High Cost of Austerity

Whisper it softly: Was Brown right after all?

Nearly two years ago, an economic collapse forced Ireland to cut public spending and raise taxes, the type of austerity measures that financial markets are now pressing on most advanced industrial nations ...

Rather than being rewarded for its actions, though, Ireland is being penalized.

Its downturn has certainly been sharper than if the government had spent more to keep people working. Lacking stimulus money, the Irish economy shrank 7.1 percent last year and remains in recession.

Joblessness in this country of 4.5 million is above 13 percent, and the ranks of the long-term unemployed — those out of work for a year or more — have more than doubled, to 5.3 percent ...

Despite its strenuous efforts, Ireland has been thrust into the same ignominious category as Portugal, Italy, Greece and Spain.

It now pays a hefty three percentage points more than Germany on its benchmark bonds, in part because investors fear that the austerity program, by retarding growth and so far failing to reduce borrowing, will make it harder for Dublin to pay its bills rather than easier ...

Politicians here have raised taxes and cut salaries for nurses, professors and other public workers by up to 20 percent.

About 30 billion euros ($37 billion) is being poured into zombie banks like Anglo Irish, which was nationalized after lavishing loans on developers.

The budget went from surpluses in 2006 and 2007 to a staggering deficit of 14.3 percent of gross domestic product last year — worse than Greece.

It continues to deteriorate. Drained of cash after an American-style housing boom went bust, Ireland has had to borrow billions; its once ultralow debt could rise to 77 percent of G.D.P. this year.

“Everybody’s feeling quite sick at what happened because things were going so well for Ireland,” said Patrick Honohan, the Irish central bank governor. “But we don’t have the flexibility to do a spending stimulus now. There’s no one who is even arguing for it.” ...

NYT  28 June 2010    The Euro    'Reserve Army'

Force banks to bolster capital, says BIS

Central bank's bank insists that industry revamp is urgent as campaigners voice anger that G20 failed to take harder line ...

Banks should be forced to bolster their capital cushions to aid economic recovery, a powerful group of central banks said today in an apparent contradiction of the G20's move to delay industry reforms.

As the Bank for International Settlements, known as the central bankers' bank, set out the case for a rise in historically low interest rates around in the developed world, it also argued that making changes to the financial system had "acquired even greater urgency".

"[The reforms] can provide the most immediate protection to the financial system in the event of a new crisis. Moreover, acting now to improve the capital base and the liquidity of bank balance sheets will not jeopardise the recovery. Rather – by making financial institutions sounder – those actions will promote a sustainable recovery," it said.

The comments in the BIS annual report came amid complaints from pressure groups that banks were being "let off the hook" by the G20 after intense lobbying by the financial sector led to a delay in introducing rules requiring them to hold more capital ...

Guardian  28 June 2010    Banking Commission

Banks win battle to tone down Basel III

The Third Depression

We are now, I fear, in the early stages of a third depression ...

... the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.

And this third depression will be primarily a failure of policy.

Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.

In 2008 and 2009, it seemed as if we might have learned from history.

Unlike their predecessors ... today’s governments allowed deficits to rise. And better policies helped the world avoid complete collapse: the recession brought on by the financial crisis arguably ended last summer ...

... unemployment — especially long-term unemployment — remains at levels that would have been considered catastrophic not long ago, and shows no sign of coming down rapidly. And both the United States and Europe are well on their way toward Japan-style deflationary traps.

In the face of this grim picture, you might have expected policy makers to realize that they haven’t yet done enough to promote recovery. But no: over the last few months there has been a stunning resurgence of hard-money and balanced-budget orthodoxy.

... the revival of the old-time religion is most evident in Europe, where officials seem to be getting their talking points from the collected speeches of Herbert Hoover, up to and including the claim that raising taxes and cutting spending will actually expand the economy, by improving business confidence ...

... there is no evidence that short-run fiscal austerity in the face of a depressed economy reassures investors.

On the contrary: Greece has agreed to harsh austerity, only to find its risk spreads growing ever wider; Ireland has imposed savage cuts in public spending, only to be treated by the markets as a worse risk than Spain ...

It’s almost as if the financial markets understand what policy makers seemingly don’t: that while long-term fiscal responsibility is important, slashing spending in the midst of a depression, which deepens that depression and paves the way for deflation, is actually self-defeating.

So I don’t think this is really about Greece, or indeed about any realistic appreciation of the tradeoffs between deficits and jobs.

It is, instead, the victory of an orthodoxy that has little to do with rational analysis, whose main tenet is that imposing suffering on other people is how you show leadership in tough times.

And who will pay the price for this triumph of orthodoxy?

The answer is, tens of millions of unemployed workers, many of whom will go jobless for years, and some of whom will never work again.

NYT  27 June 2010    Crackdown on Welfare    'Negflation'    'Reserve Army'

It's 'negflation' that Britain really needs to worry about

G20 banking reform agreed

Under a plan to be finalised for the next G20 meeting banks will have to improve both the quantity and quality of the capital they hold ...

Guardian  27 June 2010    Banking Commission

Leaders divided over tackling national deficits

Signs of deep rifts over how quickly to cut national deficits were emerging as world leaders gathered in Toronto for summits of the G8 and G20 groups of rich nations today ...

The US, led by Treasury secretary Tim Geithner, is resisting moves to cut deficits early, with Geithner warning that growth and confidence are paramount.

There are increasing fears of the risk of a double-dip recession in the US ...

At a news conference in Toronto, Barroso said Europe could no longer afford to borrow and spend and must repair its budgets ...

" ... there is no more room for deficit spending," he said.

The European central bank president, Jean-Claude Trichet, also dismissed the idea that budget cuts could undo the fragile economic recovery.

"The idea that austerity measures could trigger stagnation is incorrect," he told the Italian La Repubblica newspaper, describing the German budget plans as "good" ...

The British deficit reduction plan is one of the most intense inside the G20 group of countries.

Guardian  25 June 2010

Cameron defends cuts despite US warning

Germany Warns US Not to Become 'Addicted to Borrowing'

China Signals a Gradual Rise in Value of Its Currency

The statement, by China’s central bank, was the clearest sign yet that the country would allow its currency to appreciate gradually against the dollar ...

... it remains to be seen whether the move will significantly rebalance the global trade picture.

The People’s Bank of China was cautious in its statement about how far its currency, the renminbi, might fluctuate, warning explicitly that “the basis for large-scale appreciation of the RMB exchange rate does not exist.”

Chinese officials said the renminbi would move in relation to an unspecified basket of currencies, not just the dollar ...

For China, a stronger renminbi will increase the buying power of its consumers and could make gasoline and other imported commodities seem less expensive.

Faced with spreading labor unrest, particularly in the auto industry, the government has started to make an energetic effort to improve the standard of living of industrial workers ...

NYT  19 June 2010    China

IMF says Spain taking right steps towards stability

'Liberalise'? It sounds so positive. Who would want to be deliberalised?

However, the question should read: who wants to receive lower wages?

But in a world governed by the third face of power, that would give the game away.

NB: Mr Strauss Kahn carries more weight than any elected politician.

Mr Strauss-Kahn said all the measures being put in place by the Spanish government were "clearly being done for the benefit of the economy".

"I am really confident in the medium and long-term prospects for the Spanish economy, providing the efforts that have to be made will be made," he added.

He specifically praised continuing efforts to liberalise the Spanish labour market, saying they went in "the right direction".



BBC NEWS  18 June 2010    The Euro

Spanish borrowing costs at new high

'Communitarian Citizenship'

IMF: Brussels needs more power over euro nations' budgets

Democracy? Not on the IMF's watch!

The IMF today accused eurozone governments of relying on "crisis management" to get through their troubles and warned they needed to move quickly to centralise economic decision making or risk a double-dip recession.

A series of reforms allowing the eurozone to impose stricter discipline on government budgets by increasing power at the centre must be agreed along with plans to tackle the structural weaknesses in the European economic system, including labour reforms, it said.

Without taking action, and moving quickly to harmonise monetary and fiscal policies, growth will stall and public finances will worsen again, possibly dragging down the world economy ...

Guardian  07 June 2010    The Euro

Eurozone banks face £165bn in toxic loan losses

The European Central Bank warned today that eurozone banks face a "second wave" of up to €195bn (£165bn) in potential loan losses this year and next and that the financial sector is facing "hazardous contagion" from the sovereign debt crisis.

The ECB said eurozone banks would need to make provisions for further losses this year of €90bn, and €105bn in 2011, on top of some €238bn in bad debts written off by the end of 2009.

"We are experiencing now a second wave of writedowns, which relate to the performance of loans," ECB vice president Lucas Papademos said ...

Spanish unions have threatened to call a general strike over changes to rigid labour laws which economists regard as a barrier to job creation, exacerbating an unemployment rate which has hit 20% and is the highest in the 16-nation eurozone.

Zapatero's cause was boosted by praise from Dominique Strauss-Kahn, the International Monetary Fund's managing director, who backed Spain's austerity budget package ... although he made clear more needed to be done ...

gazon
1 Jun 2010, 8:34AM

These economic authorities who forced President Zapatero to make cuts in the salaries of the public workers, pensions and benefits of mothers are the very same authorities who a year or two ago were telling Spain and all EU countries to spend, never mind the deficit.

Now they say that the budget must be balanced (in the UK too) no matter what even if it brings out an economic contraction.

It is passing strange that in view of the failure of capitalism the left is being punished by the voters.

Guardian  31 May 2010    The Euro

FTSE falls over 100 points on global recovery fears

European banks' exposure to indebted nations unsettles investors

Equity investors are panicked in part by the veil banks draw over their loans to sovereign nations.

Estimates put the total euro area exposure of foreign banks to Greek sovereign debt at €76bn (£65bn), with France accounting for about half and Germany a quarter of the total.

Estimates for Portugal, which may be vulnerable to a default, are €32bn.

German banks are estimated to account for half the loans to Spanish property developments, much of it on the Costas and now worthless.

So we have an unholy alliance between the French and German banks and the wider bond investment community. They want Greece, Portugal and Spain, along with Italy, Austria, Latvia and every "risky" nation to submit to austerity, to maintain their interest payments and cut their debt overhang.

It preserves the wealth of bondholders and in turn protects French and German banks.

But why should sovereign nations accept these demands. Surely bondholders, whether they are German banks or anybody else, should be punished for poor lending decisions. American and UK banks were punished for lending to sub-prime property owners; should German and French banks be protected from lending to sub-prime nations?

It is time bondholders took a severe haircut on their wealth, with the French and Germans taking the lead.

Guardian  25 May 2010

FTSE crashes through 5000 mark

• FTSE 100 loses 2.5% to nine-month low
• Bank shares hard hit by euro debt worries
• Market fears over North and South Korea

Guardian  25 May 2010    The Euro

UK and France reject EU bank plan

Coalition ministers and bankers to oppose pan-European resolution fund

EU unveils bank tax to prevent bailouts

EU plans upfront levy on lenders

IMF raises fresh concerns about the Spanish economy

The IMF - true to form - wants more 'precarity' for workers

The International Monetary Fund (IMF) has raised fresh concerns about Spain's economy, saying "far-reaching" reforms are needed to ensure its recovery ...

"It is not the first time that the IMF has said Spain needs economic reform, but the language has a much greater sense of urgency," said BBC economics correspondent Andrew Walker.

"The IMF says bluntly, the Spanish labour market is not working and needs reform of pay bargaining and lower payments for fired workers."

Last week, the Spanish government approved a 15bn euro austerity plan, including a 5% cut to public sector salaries, as it aims to reduce its deficit.

Spain is also having to cope with unemployment of more than 20% ...

BBC NEWS  24 May 2010    The Euro

'Communitarian Citizenship'

A future without the euro is a distinct possibility

The global recession changed everything, exposing three grave structural problems within the European economy.

One was that the countries that had enjoyed the greatest booms, thanks to soaring property prices, also experienced the greatest busts. It would, with hindsight, have been better had both Ireland and Spain been able to lean harder against their booms by increasing interest rates.

A second was that Germany was forced to restrict demand rather than help growth by buying other countries' goods.

And most seriously, the governments of some of the weaker countries were able to run large deficits, financed by cheap euro borrowing ...

And the Dollar?
arion444 wrote:

Friday, 21 May 2010 at 11:38 pm (UTC)

Hamish, you have a one-track mind...and it's got a few flaws.

Remember the dollar? Remember that it is now essentially worthless? What supports it? No visible means whatsoever, except everyone's belief in it.

With $19 TRILLION in U.S. public debt (and a ballooning trade and tax revenue deficit), the dollar is in far worse shape than the Euro.

There isn't a sovereign fiat currency on the planet that has any real worth any longer, with the possible exception of the Swiss Franc.

At least the Swiss have a stable economy and financial sector, and moderate budget deficit, which is more than can be said of Greece, Portugal, Spain, Italy, perhaps Ireland (it, at least, started course corrections 24 months ago), and, yes, you guessed it: Britain.

So, just suppose the run on the Euro and the rumblings in the marketplace are merely a distraction from the real deal? Suppose that the real contagion is the U.S. fiscal system, public and private?

There may be noises about reigning in spending and ending the party on Wall Street, but with that many ex-Goldman Sachs execs in the Obama club, don't hold your freakin' breath ...

Independent  22 May 2010    The Euro

World markets shaky as European debt fears remain

Day of market turmoil as investors panic over eurozone crisis

IMF has one cure for debt crises – public spending cuts with tax rises

... while recent history suggests that the protesters in Athens have every reason to be wary of the strings attached to the fund's financial assistance, there are those who think that it is not the real villain in the crisis.

Stephen Lewis, of Monument Securities, says the culprits are the commission and the ECB, who baulked at the suggestion that Greece should have been allowed to restructure its debts, something that would have hurt banks in other euro area countries.

"The IMF should probably not be held wholly responsible for the conditionalities attaching to Greece's bailout. Over the years, IMF bailouts have typically included an insistence on exchange rate flexibility. The IMF has often also supervised a restructuring of the debtor country's liabilities. These elements in the IMF's standard approach make some economic sense."

Lewis adds that these conditions were absent from the Greek bailout, because devaluation would have been tantamount to the country leaving the eurozone, something that Brussels and Frankfurt could not stomach.

As a result, the only remedy available to Greece is prolonged and savage deflation – the precise opposite of what was deemed necessary everywhere else to prevent recession turning into depression.

Guardian  09 May 2010    The Euro

Debt Aid Package for Europe Took Nudge From Washington

Reform the euro or bin it

EU leaders announce €70bn plan to protect euro

Messrs Merkel and Sarkozy might do well to reflect on the time Britain took on the international speculators and lost.

The day George Soros made a killing shorting the pound; the day the Treasury spent £27 bn trying to prop up an overvalued currency.

Is this the, er, 'thinking' behind the empty sub-Churchillian rhetoric from the corporate lackey in charge in Brussels.

They should be taking their cue from John Palmer and Joseph Stiglitz, and go back to the drawing board: the anti-IMF/WTO drawing board.

The one that puts people before the likes of Goldman Sachs.    Black Wednesday

EU leaders have agreed a financial defence plan in an attempt to protect the eurozone countries from speculative attacks in the wake of the Greek debt crisis.

The German chancellor, Angela Merkel, and the French president, Nicolas Sarkozy, said today that an "intervention unit" designed to preserve financial stability in the 16 eurozone countries would be in place by Monday when the markets reopen.

The creation of the unit, which will have up to €70bn at its disposal to shield the euro against further market speculation ...

The European commission president, José Manuel Barroso, said: "We will defend the euro whatever it takes. We have several instruments at our disposal and we will use them."

Jean-Claude Juncker, who heads the Eurogroup of eurozone finance ministers, said: "We are talking about a global attack against the euro, and the eurozone must react as one."

Guardian  08 May 2010

It's time the EU had a new economic philosophy

The current system for running the euro structure is ... toothless ... that ... the Greeks are now paying a heavy price in social injustice for so-called Greek national sovereignty.

National governments are not obliged to work within a coordinated euro-area wide economic strategy. They pay no penalty for breaking the rules ...

There are other glaring deficiencies.

There is no adequate system for transfers of resources to compensate the less competitive EU regions and countries for the inevitable effects of economic integration such as exists in all other economic and monetary unions (such as the United States).

There is not even a symmetrical obligation on those euro-area countries that are strongest to stimulate consumption and growth and thus to balance measures by weaker economies obliged to curb consumption and employment because of excessive budget deficits and state debt ...

The EU leaders ... should unambiguously signal their intent to make European economic union a reality by give euro-area decision-making bodies real decision-making powers over fiscal policy, discipline and balanced economic growth ... the EU as a whole must accelerate plans for tough European wide regulation of financial markets, banks and speculators something which whoever forms the next British government would do well to support ...

In truth, the very foundations of the global neo-liberal system ... is now discredited.

The EU as a whole also needs a new economic philosophy based on green and sustainable growth and which encourages social cohesion ... and which actively promotes greater social equality.

Guardian  07 May 2010    Blog    Economic Democracy    The Euro: A Question of Sovereignty

Eurozone crisis is 'postponed'

EU ministers offer 500bn-euro plan

Darling rules out British support for euro

Control the jackals

Greek Debt Woes Ripple Outward

Reform the euro or bin it

Britain's banks must tell us how much Greece owes them

Moody's warned yesterday that any additional perception that other governments might default on sovereign debt would hit the UK particularly hard, because our banking sector is disproportionately large ...

... Britain's banks have a problem. The Bank of International Settlements says UK institutions have lent $15bn to Greece, $24bn to Portugal, $77bn to Italy and $114bn to Spain. Defaults would therefore be very painful for some ...

In France ... individual institutions have begun to give details of what they are owed ...

Is it too much to expect that Britain's banks should begin making similar declarations, particularly as Europe's financial authorities are now publicly urging institutional investors not to dump their Greek bonds?

The Independent asked each of Britain's largest banks for details of their exposure to Greece last week – not a single one was prepared to even offer a ballpark figure ...

Independent  07 May 2010    The Euro

'Very real' threat that Greek contagion could spread to Britain

Pound dumped by investors over political uncertainty

Reform the euro or bin it

Joseph Stiglitz puts people before "a flawed economic model"

Germany (like China) views its high savings and export prowess as virtues. But ... Keynes pointed out that surpluses lead to weak global aggregate demand – countries running surpluses exert a "negative externality" on trading partners. Indeed, Keynes believed it was surplus countries, far more than those in deficit, that posed a threat to global prosperity; he went so far as to advocate a tax on surplus countries.

The social and economic consequences of the current arrangements should be unacceptable.

Those countries whose deficits have soared as a result of the global recession should not be forced into a death spiral – as Argentina was a decade ago.

One proposed solution is for these countries to engineer the equivalent of a devaluation – a uniform decrease in wages. This, I believe, is unachievable, and its distributive consequences are unacceptable …

There is a second solution: the exit of Germany from the eurozone or the division of the eurozone into two sub-regions. ...

There is a third solution, which Europe may come to realise is the most promising for all: implement the institutional reforms, including the necessary fiscal framework, that should have been made when the euro was launched.

It is not too late for Europe to implement these reforms and thus live up to the ideals, based on solidarity, that underlay the euro's creation.

But if Europe cannot do so, then perhaps it is better to admit failure and move on than to extract a high price in unemployment and human suffering in the name of a flawed economic model.

Guardian  05 May 2010

exiledlondoner
6 May 2010, 8:40PM

When Wall Street thinks rigid austerity measures are not the way forward, then it's time to try a new approach.

Will the Eurozone countries allow themselves to be sacrificed one by one to maintain Germany's position?

The problem is that Greece, Spain and Portugal desperately need a devaluation - something that to the Germans is akin to heresy.

This was always going to happen sooner or later, when they fudged the convergence criteria - the Eurozone is not one economy.

Guardian  06 May 2010

   The Euro

Wall Street panic as Dow plunges on fears for financial system

Greece and the single currency: Europe's existential crisis

Argentina to repay 2001 debt as Greece struggles to avoid default

Greece agrees painful cuts in return for bailout

Leigh Thomas, 12:42, Sunday 2 May 2010

The Greece government announced it would slash pensions, hike taxes and halt year-end bonuses on Sunday as it called for a national sacrifice to access a 120 billion euro bailout and beat bankruptcy.

Prime Minister George Papandreou announced Athens had reached a deal with the European Union and International Monetary Fund to secure loans in return for deeply unpopular austerity measures in a desperate bid to save the nation.

"With our decision today our citizens will have to make big sacrifices," he said in a televised address at the start of an extraordinary cabinet meeting, one day after police clashed with protesters angry at the austerity drive.

Greece has been under heavy pressure to cut a massive public deficit that has rattled international markets and sparked fears of contagion to other heavily indebted European countries.

The country faces an urgent need for help with nine billion euros (12 billion dollars) in debts due on May 19.

In exchange for emergency loans, Greece agreed new budget cuts of 30 billion euros over three years with the aim of slashing the public deficit to less than three percent of output by 2014, said Finance Minister George Papaconstantinou.

The deficit reached 13.6 percent of gross domestic product last year.

Among the major measures to make the budget cuts, the Greek government is to scrap bonus 13th and 14th month wages for public sector workers as well as for retired people from both the public and private sectors, Papaconstantinou said.

The 21-percent value added tax would also be lifted this year by one to two percentage points. Illegal construction, which is rampant in the country, would also be taxed.

Papaconstantinou said the measures were the "only road to save the country", which was threatened with default on debts totalling nearly 300 billion euros.

The country faces a long road out of recession as the finance ministry announced that the economy would shrink by four percent this year, instead of the previously estimated 2.0 percent, and only return to growth in 2012.

The debt will rise from 133 percent of output this year to peak at 149 percent in 2013 before beginning to fall again in 2014, the ministry said.

Papaconstantinou said the overall value of the EU-IMF bailout package would be announced at an extraordinary meeting of eurozone finance ministers Sunday afternoon in Brussels.

French Finance Minister Christine Lagarde has said the loans could run from 100 to 120 billion euros (133 billion to 160 billion dollars) over three years.

Visibly uneasy making the announcement on the morning after violent anti-government protests in Athens, Papandreou said the size of the bailout was "without precedent" in the world.

After months of hesitation, eurozone countries decided to accelerate rescue efforts for Greece out of fear its debt crisis could pull down other members with severely strained public finances such as Portugal or even Spain.

"Today the problem has taken on huge dimensions, today the fire risked extending not only to Greece but to the eurozone and beyond," Papandreou said.

"The cost of extinguishing it is very high, and it's very high for Greek citizens."

Speaking after Papandreou's announcement, European Union Commission Jose Manuel Barroso recommended the aid package be activated, saying the austerity measures planned by Athens were "solid and credible".

After eurozone finance ministers back the deal, the funding will have to be approve by some parliaments, including the German and French legislatures.

Greece was left with no choice but to turn to the EU and IMF after its borrowing costs soared to record heights and its credit rating was cut ot junk status last week.

The government, the EU and the IMF wrapped up negotiations on Saturday as 15,000 people swarmed through the streets of Athens in May Day protests against the austerity drive.

Anti-riot police fired tear gas at youths to contain clashes on the margins of the marches which Greek union leaders wanted to be a prelude to what they hope will be a crippling nationwide general strike on Wednesday.

Yahoo 02 May 2010

Greece wins widespread support for boldness of reform plans

Greece faces ‘big sacrifices'

Eurozone agrees €110bn Greece loan

IMF chief Strauss-Kahn tries to ease Greece fears

Dominique Strauss-Kahn, the managing director of the International Monetary Fund, says the Greek people should not fear the IMF ...

ANALYSIS
Andrew Walker, BBC News, Washington

A cuddly, friendly IMF - that was the picture painted by Dominique Strauss-Kahn.

Inevitably, the prospect of IMF involvement in the Greek rescue has some people worried. The reputation is for painful cuts in public spending, which are unwelcome in their own right and seen by some critics as likely to aggravate an economic downturn.

The Greeks are not the only ones demonising the IMF, Mr Strauss-Kahn said. This is how he said they ought to see the IMF: as "a kind of cooperative organization, where all the countries of the world work together to try to help those in trouble. Today, Greece is in trouble. Tomorrow, maybe another".

Preventing the crisis spreading to some of those others is what the IMF is keen to do.

What we know is that Mr Strauss-Kahn is keen to get on with things and have the IMF loan agreed. But he batted away questions about the detail ...

For all the cuddliness, the policy conditions are likely to be painful. The aim will be to stabilise Greek government debt.

The IMF's critics will argue that cutting public spending is the wrong thing to do in an economy that is already contracting.

It is certainly a tough judgment to get right, but further cuts and the political trauma they bring are likely to be on the menu.

BBC NEWS  25 Apr 2010    The Euro

Greek meltdown in danger of spreading

Years of austerity for bailed-out Greece

IMF urges double tax hit on banks to refund taxpayers

In a report delivered to G20 nations on Tuesday, but yet to be published, the Fund has urged countries around the world to impose two new taxes on financial institutions: a "financial stability contribution" which levies a small charge on their balance sheets, and a "financial activities tax", which taxes excess profits, including bonuses ...

Telegraph  20 Apr 2010

IMF fastens the policy tightrope

The IMF has recently proved its worth by displaying a remarkably nuanced view of markets.

Far from the overly rosy view of deregulation the fund was once accused of, the report explains how “financial channels can amplify sovereign risk”.

That sovereigns usually do not have to post collateral for over-the-counter swaps, the IMF says, makes dealers hedge any perceived risks through credit default swaps rather than call additional “margin” as they would with corporate clients.

So worries quickly spread to a shallow and therefore volatile short CDS market, whose waves in turn can spill over to other assets.

Policymakers, then, confront two tremendous tasks. One is to make financial markets safer – reform is moving in the right direction, but too slowly.

The other is a fiscal balancing act to retain – or regain – credibility with lenders without cutting off lifelines to economies still in need of them.

Leaders must overcome short-termism and divisions to convince the public they will do what it takes to consolidate public finances in the medium term.

Fiscal statesmanship is now indispensable.

FT  20 Apr 2010    Fractional Reserve Banking

America’s disastrous debt is Obama’s biggest test

... the real issue is not whether Greece or another small country might fail. Instead, it is whether the credit standing and currency stability of the world’s biggest borrower, the US, will be jeopardised by its disastrous outlook on deficits and debt.

America’s fiscal picture is even worse than it looks. The non-partisan Congressional Budget Office just projected that over 10 years, cumulative deficits will reach $9,700bn and federal debt 90 per cent of gross domestic product – nearly equal to Italy’s ...

How bad is the outlook? The size of the federal debt will increase by nearly 250 per cent over 10 years, from $7,500bn to $20,000bn.

Other than during the second world war, such a rise in indebtedness has not occurred since recordkeeping began in 1792.

It is so rapid that, by 2020, the Treasury may borrow about $5,000bn per year to refinance maturing debt and raise new money; annual interest payments on those borrowings will exceed all domestic discretionary spending and rival the defence budget ...

FT  19 April 2010

IMF highlights sovereign debt risks

Climate aid threat to countries that refuse to back Copenhagen accord

The give-away is that the G20 is addicted to growth. And it's leaders also must by know realise that 'green growth' is a fantasy. But - here comes that Third Face of Power again - it cannot admit any of this, so it searches for substitutes - offsets - like, paying poor countries to give up on their growth. As blogger smoothisland makes clear, this is also a fantasy.

The pressure on poor countries to support the US, EU and UK-brokered Copenhagen accord came as 190 countries resumed UN climate talks in Bonn in an atmosphere of mutual suspicion.

"The pressure to back the west has been intense," said a senior African diplomat. "It was done at a very high level and nothing was written down. It was made very clear by the EU, UK, France and the US that if they did not back them then they would suffer."

According to other African climate diplomats, threats to cut aid were accompanied by promises of financial support for countries that complied.

"There was definite strong-arming of countries. A lot were left in no doubt that there would be repercussions if they did not associate themselves with the accord," said Saleemul Huq, of the International Institute for Environment and Development, in London ...

smoothisland
11 Apr 2010, 12:30AM

I'm a firm believer in climate change but I'm really not comfortable with the idea of giving $100 billion a year to developing countries.

The record of giving money to developing countries - whether in direct aid or otherwise - is that the corrupt leadership have a field day and the money goes to waste. When you've got Robert Mugabe lining up for a handout you really have to wonder at the wisdom of this plan.

And, as I understand it, people of the developing countries have far lower carbon footprints precisely because their economies are under developed.

Observer  11 Apr 2010    Heathrow Third Runway

Carbon emission targets are 'death by a thousand cuts'

G20 wants to stop climate change – but who on earth will pay for it?

Finance, politics, climate: three crises in one

Beyond the triple crisis

IMF targets banks with 'excess profits tax'

The Fund is expected to suggest the tax – which is effectively on banks' cashflow – as one of the best ways governments can raise significant amounts from banks without drastically distorting the financial system.

The tax will be announced alongside the Obama-style banking levy, which the IMF will also rubber-stamp in its report, to be published at its spring meetings this month ...

Michael Devereux, director of the Oxford University Centre for Business Taxation, said:

"Although this is effectively a tax on banks' cash flow, if I were the IMF, I would present it as an excess profits tax – additional to everything else and particular to banking because that is whom we would like to tax.

"Unlike a balance sheet levy, it is not designed to change behaviour and stop them from doing silly things. It is a way of collecting money – the most efficient way we can do it." ...

Telegraph  05 April 2010

Tories accused of scuppering vulture funds bill

Development secretary writes to David Cameron after mystery of who derailed private members' bill designed to protect poorest countries ...

Amid tumultuous scenes in the Commons today, a Conservative MP objected to the bill, preventing it from passing to its third reading, despite a commitment from the party's front bench to support it.

Sally Keeble, the Labour MP who was involved in drafting the bill, claimed that the handful of Conservative front-benchers present covered their mouths with their hands, so that it was impossible to tell who had shouted "object" at the crucial moment ...

Vulture funds are investors that buy up the debts of poor governments at a fraction of their face value, and then try to win the money back in courts around the world, regardless of whether the country in question has secured international debt relief.

The bill would have prevented such cases being brought in London, and would also have applied retrospectively. That could have protected Liberia, which lost a $20m (£13m) case against two investment funds in the UK late last year ...

Guardian  12 Mar 2010    WEF Davos

Capital controls back in IMF toolkit

The IMF has changed its mind and realised Keynes's capital controls are a good thing. It's time to practise what they preach ...

... as recently as November 2009, in response to Brazil's announcement of a temporary tax on inflows of speculative capital, IMF head Dominique Strauss-Kahn said "the problem is that most of the time it does not work".

All that changed on Friday 19 February when Strauss-Kahn's own economists published a staff position note empirically showing that capital controls not only work but "were associated with avoiding some of the worst growth outcomes" of the current economic crisis.

The paper concludes that the "use of capital controls – in addition to both prudential and macroeconomic policy – is justified as part of the policy toolkit." ...

The goal of these measures ... is to prevent massive inflows of hot money that can appreciate the exchange rate and threaten the macroeconomic stability of a nation.

The IMF's findings couldn't come at a better time. The carry trade is again bringing speculative capital to developing countries that could disrupt their recovery from the crisis. To make the proper deployment of capital controls effective however, at least three obstacles need to be overcome ... First, speculative capital can still wreak havoc because hot money blazes by countries that successfully deploy controls to nations that don't.

Second, after a while investors creatively evade capital controls through derivatives and other instruments.

Third, US trade and investment agreements make capital controls illegal ...

Guardian  01 Mar 2010

Currency Carry Trade

Time For Coordinated Capital Account Controls?

The Fund Should Help Brazil

Trading on thin ice

My colleagues and I looked at 41 countries that have current loan agreements with the IMF. We found that in 31 of those countries, the agreements had imposed what economists call pro-cyclical macroeconomic policies.

That is, as these countries' economies were slowing sharply or falling into recession, the agreements called for tightening fiscal policy (eg cutting spending) or tightening monetary policy (raising interest rates or curtailing money supply growth).

These are policies that we in the US or other rich countries would not adopt in a downturn (witness the 11.2% of GDP budget deficit in the US and near-zero policy interest rates). Nor does the IMF recommend such policies in the high-income countries.

In a number of countries, the IMF made such recommendations on the basis of projections that underestimated the impact of the world recession on developing-country economies, and in some cases the recommendations were subsequently changed.

Still, there was damage done, and if it was just based on forecasting errors then there were way too many of them ...

Given (its) track record and the long, continuing history of imposing inappropriate macroeconomic policies on developing countries, should the IMF be given more power – as is currently being proposed – to help decide when governments should reverse their current expansionary policies and shift to tighter macroeconomic policies as the world economic recovers?

Macroeconomic policy is just one area where the IMF influences growth and development in low- and middle-income countries, through its loan agreements and more importantly through its role as gatekeeper for other sources of credit.

It also influences policy in the areas of trade, financial liberalisation, privatisation of state-owned enterprises, the size and role of the public sector and more.

Does anyone think that South Korea – which was as poor as Ghana in 1960 but now has living standards on a par with some western European countries – would have succeeded if it had been under IMF/World Bank tutelage during these decades? ...

... in some countries – for example Latvia, where the IMF projects a GDP decline of 18% this year – the people probably would have been better off refusing aid and allowing the currency to devalue. Current policy, supported by the IMF and EU, is dedicated to maintaining the country's fixed, overvalued exchange rate.

This is very important to western European creditor banks, who have loaned enormous amounts in euros to Latvia and other central and eastern European countries.

Maintaining the exchange rate means that the country's current account deficit must be adjusted through shrinking the economy (and therefore imports) and real wages ...

Guardian  08 October 2009

Latvia 'to find more budget cuts'

Cheng Siwei, former vice-chairman of the Standing Committee and now head of China's green energy drive, said Beijing was dismayed by the Fed's recourse to "credit easing".

"We hope there will be a change in monetary policy as soon as they have positive growth again," he said at the Ambrosetti Workshop, a policy gathering on Lake Como ...

If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies," he said.

China's reserves are more than – $2 trillion, the world's largest.

"Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not to stimulate the markets," he added ...

Mr Cheng said the Fed's loose monetary policy was stoking an unstable asset boom in China. "If we raise interest rates, we will be flooded with hot money. We have to wait for them. If they raise, we raise ... "

Mr Cheng said China had learned from the West that it is a mistake for central banks to target retail price inflation and take their eye off assets.

"This is where Greenspan went wrong from 2000 to 2004," he said. "He thought everything was alright because inflation was low, but assets absorbed the liquidity."

Mr Cheng said China had lost 20m jobs as a result of the crisis and advised the West not to over-estimate the role that his country can play in global recovery.

China's task is to switch from export dependency to internal consumption, but that requires a "change in the ideology of the Chinese people" to discourage excess saving. "This is very difficult".

Mr Cheng said the root cause of global imbalances is spending patterns in US (and UK) and China ...

Telegraph 06 September 2009

Boom and bust capitalism won't be fixed

... this weekend, finance ministers from the G20 will meet in London (ahead of a heads-of-state summit in Pittsburgh), shake hands and breathe a collective sigh of relief that the worst of the crisis is over. The world has been informed that their main order of business will be to find some way of restraining bankers' pay – rather than concentrating on the infinitely more important question of how to ensure something this horrific never happens again.

Some time in the past 12 months, there was a brief window in which we really could have improved capitalism: made it less prone to boom and bust, ensured that levels of inequality would yawn no further apart. We missed it. No one is talking – as they were back in April, ahead of the last G20 meeting – about creating a "new Bretton Woods". The idea that we need a wholesale rethinking of how the world's economic parts fit together, as happened in the wake of the Second World War, has been put on the shelf.

This is a tragedy. The core problem over the past few decades was not bankers' greed or the complex financial instruments that enabled them to satisfy it. It was the immense pyramids of debt built up by the Anglo-Saxon half of the world, and the equally massive mountains of savings created in the other.

Almost everything that occurred in the past couple of years was, directly or indirectly, a consequence of this.

No one should have let Britain run such large deficits, and the Chinese such vast surpluses, over such a long period. And yet both got away with it, in what must count as the most momentous economic policy failure in modern history.

Those imbalances (the sterile word economists use) created the mountain of money that fed the frenzy of mortgage lending and eventually caused a financial crisis. Part of the problem was that the much-mythologised Bretton Woods agreement was a botched job: it failed to stipulate that the world's big exporters and savers – China and Germany, for instance – should be just as responsible for setting right these imbalances as the debtor nations.

In order for the world economy to recover, the big savers will have to start spending, just as governments and consumers in countries such as Britain will have to borrow less. It would be nice to assume that this will happen automatically. But given the disaster our misshapen international economic system has foisted on us, we can hardly rely on such an outcome ...

Telegraph  02 September 2009

The International Monetary Fund urged the government yesterday to act faster to bring public finances under control by cutting public spending or raising taxes once the economy recovers.

IMF officials called on the government to specify how it planned to limit public spending. Ministers were advised to allocate any surprise tax revenue to reducing the deficit and to build a broad public consensus for balancing the books.

Public debt should be set "on a firmly downward path faster than envisaged in the 2009 Budget", IMF officials said after an annual inspection of the economy. They gave warning that the "success of the current policy package hinges on the continued trust in the sustainability of the fiscal position".

The IMF also favoured cutting spending plans rather than increasing taxes. It said evidence from Australia, Canada and Denmark suggested lower public spending was a more durable policy.

The fund chose not to revise upwards its forecast for UK economic growth. It said not enough had changed since its World Economic Outlook report last month for it to revise up its forecast of a 4.1 per cent contraction in the UK this year, followed by a 0.4 per cent shrinkage in 2010.

The Treasury said yesterday, however, that City economists had begun to revise their forecasts to predict higher growth. The consensus forecast, compiled by the Treasury yesterday, showed economists had become slightly more optimistic about 2010 - the first time the year-ahead consensus forecast had risen for more than a year.

The disagreement between the IMF and Treasury rests on contrasting analyses of household and bank finances. The fund sees stretched balance sheets as a reason for concern about the speed of recovery, reflecting the Bank of England's new emphasis on the same issue.

It says banks' weaknesses are likely to curtail their ability "to sustain credit provision at levels required for a robust economic recovery". Households "are likely to retrench spending to reduce debt and rebuild savings" in response to lower house prices and other asset values, the fund says.

The Treasury thinks the house-price effect on spending is exaggerated. It is encouraged by a recent rise in asset prices, which it thinks will improve bank balance sheets and help restore lending. Recent weak evidence has supported the Treasury's position, with lending and deposits in banks recovering in the first quarter after a disastrous fourth quarter of 2008.

To improve credit conditions further, the fund urged the authorities yesterday to strengthen banks' balance sheets by encouraging them to raise fresh private capital, to "stand ready to provide further public support where needed", and to promote restraint in banks' dividend payments to preserve capital cushions.

The IMF supported the general thrust of the Treasury's rescue plan for banks, although it noted that measures had to balance several conflicting objectives, such as restoring confidence and limiting the extent of government involvement.

It also backed the Bank's quantitative easing policy - pumping money into the economy by buying assets - although officials joined calls for the Bank to extend its purchases of assets beyond predominantly government bonds.

FT 21 May 2009

Guardian 21 May 2009

Employers join IMF call for government to slash £175bn deficit

Banking bailouts have done little to ease credit crunch

Britain's credit rating faces threat from S&P

"A policy mistake made by some major central bank may bring inflation risks to the whole world," said the People's Central Bank in its quarterly report.

"As more and more economies are adopting unconventional monetary policies, such as quantitative easing (QE), major currencies' devaluation risks may rise," it said. The bank fears a "big consolidation" in the bond markets, clearly anxious that interest yields will surge as western states try to exit their QE experiment.

Simon Derrick, currency chief at the Bank of New York Mellon, said the report is the latest sign that China is losing patience with the US and aims to diversify part its $1.95 trillion (£1.3 trillion) foreign reserves away from US Treasuries and other dollar securities.

"There is a significant shift taking place in China. They are concerned about the stability of the global financial system so they are not going to sell US bonds they already have. But they are still accumulating $40bn of fresh reserves each month, and they are going to be much more careful where they invest it," he said.

Hans Redeker, head of currencies at BNP Paribas, said China is switching into hard assets. "They want to buy production rights to raw materials and gain access to resources such as oil, water, and metals. They know they can't keep buying bonds," he said.

Premier Wen Jiabao left no doubt at the Communist Party summit in March that China is irked by Washington's response to the credit crunch, suspecting that the US is engaging in a stealth default on its debt by driving down the dollar. "We have lent a massive amount of capital to the United States, and of course we are concerned about the security of our assets. To speak truthfully, I do indeed have some worries," he said.

Days later, the central bank chief wrote a paper suggesting a world currency based on Special Drawing Rights issued by the International Monetary Fund ...

Telegraph 08 May 2009

The IMF said the US is at the epicentre of this crisis just as it was in the Depression, setting the two episodes apart from normal downturns. However, the risks are greater this time. "While the credit boom in the 1920s was largely specific to the US, the boom during 2004-2007 was global, with increased leverage and risk-taking in advanced economies and many emerging economies. Levels of integration are now much higher than during the inter-war period, so US financial shocks have a larger impact," it said.

The IMF said the global financial system is still under acute stress, with output tumbling and inflation falling towards zero in key nations. "The risks of debt deflation have increased," it said.

Abrupt halts in capital flows can have "dire consequences" for emerging economies, it said. Eastern Europe has already suffered the effects, with a 17.6pc fall in industrial production in February. The region is highly vulnerable to the credit crunch since it owes more than 50pc of its GDP to Western banks.

Synchronised world recessions striking all major regions are "historically rare" events, the Fund said. They last one and a half times as long typical downturns, and are followed by painfully slow recoveries.

Telegraph 16 April 2009

A single clause in Point 19 of the communiqué issued by the G20 leaders amounts to revolution in the global financial order.

"We have agreed to support a general SDR allocation which will inject $250bn (£170bn) into the world economy and increase global liquidity," it said.

SDRs are Special Drawing Rights, a synthetic paper currency issued by the International Monetary Fund that has lain dormant for half a century.

In effect, the G20 leaders have activated the IMF's power to create money and begin global "quantitative easing". In doing so, they are putting a de facto world currency into play. It is outside the control of any sovereign body. Conspiracy theorists will love it.

It has been a good summit for the IMF. Its fighting fund for crises is to be tripled overnight to $750bn. This is real money.

Dominique Strauss-Kahn, the managing director, said in February that the world was "already in Depression" and risked a slide into social disorder and military conflict unless political leaders resorted to massive stimulus.

He has not won everything he wanted. The spending plan was fudged. While Gordon Brown talked of $5 trillion in global stimulus by 2010, this is mostly made up of packages already under way.

But Mr Strauss-Kahn at least has resources fit for his own task. He will need them. The IMF is already bailing out Pakistan, Iceland, Latvia, Hungary, Ukraine, Belarus, Serbia, Bosnia and Romania. This week Mexico became the first G20 state to ask for help.

It has secured a precautionary credit line of $47bn ...

Telegraph 03 April 2009

China's central bank has called for a new global reserve currency run by the International Monetary Fund to replace the US dollar.

Central bank governor Zhou Xiaochuan did not explicitly mention the dollar, but said the crisis showed the dangers of relying on one currency.

With the world's largest currency reserves of $2tn, China is the biggest holder of dollar assets.

Its leaders have often complained about the dollar's volatility.

China has long been uneasy about relying on the dollar for trade and to store its reserves and recently expressed concerns that Washington's efforts to

rescue the US economy could erode the value of the currency.

His speech was, unusually, published in both Chinese and English, signalling it was intended for an international audience.

The outbreak of the crisis and its spillover to the entire world reflected the inherent vulnerabilities and systemic risks in the existing international monetary system," said Mr Zhou in an essay on the People's Bank of China website.

Mr Zhou said the primacy of the US currency in the financial system had led to increasingly frequent crises since the collapse in the early 1970s of the system of fixed exchange rates ...

BBC NEWS 24 March 2009

China has the power to reduce the dollar’s dominance

This crisis affords a glimpse of global power in transition

China urges switch from dollar as reserve currency

China presses G20 reform plans

Eastern Europe is heading for a violent "spring of discontent", according to experts in the region who fear that the global economic downturn is generating a dangerous popular backlash on the streets.

Hit increasingly hard by the financial crisis, countries such as Bulgaria, Romania and the Baltic states face deep political destabilisation and social strife, as well as an increase in racial tension.

Last week protesters were tear-gassed as they threw rocks at police outside parliament in Vilnius, capital of Lithuania, in a protest against an austerity package including tax rises and benefit cuts.

In Sofia, Bulgaria, 150 people were arrested and at least 30 injured in widespread violence. More than 100 were detained after street battles between security forces and demonstrators in the Latvian capital, Riga.

According to the most recent estimates, the economies of some eastern European countries, after posting double-digit growth for nearly a decade, will contract by up to 5% this year, with inflation peaking at more than 13% ...

In Latvia, years of strong economic growth have given way to recession, soaring inflation and rising unemployment ...

Last year Latvia was forced to ask the International Monetary Fund for a £6.25bn bail-out package, fuelling a jingoistic backlash against a perceived "national humiliation" ...

Observer 18 January 2009

Latvia rocked by protests

Latvia bailed out by IMF and European Union

Pioneer of the 'flat tax' taught the East to thrive

Flat Tax: Eastern Europe

Latvian Real Estate

'Good for Growth'

The impact of the Washington Consensus has been felt mainly through the IMF’s increasing use of loan conditions (‘conditionality’) to force policy change in developing countries.

The use of loan conditions can be traced to section 1(v) of the Fund’s Articles of Agreement, which encourages the IMF to make its funds “temporarily available . . . under adequate safeguards”.

But while conditions had, in the 1950s and 1960s, been used to promote global financial stability (as per the IMF’s Articles of Agreement) in the late 1970s and 1980s, loan conditions began to be used as "structural adjustment" tools, and conditionality – structural change in client countries – became a central focus for the IMF’s work.

Structural adjustment policies mean across-the-board privatization of public utilities and publicly owned industries.

They mean the slashing of government budgets, leading to cutbacks in spending on health care and education.

They mean focusing resources on growing export crops for industrial countries rather than supporting family farms and growing food for local communities.

And, as their imposition in country after country in Latin America, Africa, and Asia has shown, they lead to deeper inequality and environmental destruction. ...

"Research shows clearly that the policies prescribed by the IMF have, among other things, not produced strong or sustainable growth; opened countries, communities and families to new vulnerabilities; exacerbated inequalities, which puts a brake on growth, stresses political systems to the breaking point, and engenders new and powerful forms of criminality and social tension.

Bolivia has been a model student of such "reforms", and is now also a showcase for the contradictions and crisis these policies engender."

The IMF "supports the rapid conclusion of obscure deals made by un-transparent multinationals and unaccountable politicians, deals in which it is impossible for people to evaluate or have a choice." observes researcher Tom Kruse in LaPaz ...

Sourcewatch

The fund is a body with 184 members. It is run by seven of them - the US, Japan, Germany, the UK, France, Canada and Italy. These happen to be the seven countries that (with Russia) promised to save the world at the G8 meeting in 2005. The junta sustains its control by insisting that each dollar buys a vote. The bigger a country's financial quota, the more say it has over the running of the IMF. This means that it is run by the countries that are least affected by its policies.

A major decision requires 85% of the vote, which ensures that the US, with 17%, has a veto over the fund's substantial business. The UK, Germany, France and Japan have 22% between them, and each has a permanent seat on the board. By a weird arrangement permitting rich nations to speak on behalf of the poor, Canada and Italy have effective control over a further 8%. The other European countries are also remarkably powerful: Belgium, for example, has a direct entitlement to 2.1% of the vote and indirect control over 5.1% - more than twice the allocation of India or Brazil. Europe, Japan, Canada and the US wield a total of 63%. The 80 poorest countries, by contrast, have 10% between them. ...

The Guardian September 5, 2006

How the IMF Props Up Dollar

It is a cause of bitter mirth in the poor world that among the conditionalities the IMF and World Bank demand are 'good governance' and 'democratization'.

Their own governance of the economy of poor nations could scarcely be more damaging, while in terms of accountability, transparency and the ability of their subject peoples to dislodge them by peaceful means, they about as democratic as the government of Burma.

The nations they control, and in which they claim to be encouraging 'democratization', are permitted to choose only one political and economic strategy: market fundamentalism. It is imposed with a zeal which, at times, appears totalitarian.

They work like this because, though they operate on the poor, they are controlled by the rich. ... The G8 nations possess 49 per cent of the votes within the IMF and ... 48 per cent of the vote within the World Bank.

... these figures ... make these bodies look rather more democratic than they are, for they create the impression that if the rest of the world pooled its votes, it could turn a decision against the rich nations.

The constitution of both bodies ensures that all major decisions require an 85 per cent majority. The US alone possesses 17 per cent of the vote in the IMF, and ... 18 per cent of the votes in the world bank. By itself ... it can veto any substantial resolution put forward by another country, even if all the other members support it.

Just in case the poorer countries somehow fail to get the message, the Managing Director of the IMF is always a European, and his deputy is always a North American, while the President of the World Bank is always a citizen of the United States, nominated by the US Treasury Secretary.

Both institutions are based in Washington DC.

The result is that there is one rule for the rich and one for the poor. While the poor nations are forced to beggar themselves to pay their unpayable debts, the world's biggest international debtor, the United States, which owes a total of $2.2 trillion, is left to its own devices: it suffers from no externally imposed austerity programmes, inflation control or forced liberalisation.

Indeed, one of the reasons why America's indebtedness has not resulted in its economic collapse is that the IMF and World Bank insist that the foreign exchange reserves other nations maintain to defend themselves from speculative attacks are held in the form of dollars.

This reinforces the dollar's position as the dominant international currency, artificially enhances its value, and permits the United States to reap three significant subsidies from poorer nations.

• The first arises from the fact that dollar reserves must be invested in assets in the United States, which boosts US capital accounts.
• The second is that poorer nations must pay around eighteen per cent interest on the dollars they borrow, yet they lend back to the US at three per cent.
• The third is that a government issuing currency obtains what is known as seignorage: the difference between the value of that currency and the cost of producing it.

Not only are the IMF and the World Bank helping to destroy the economies of weaker nations, but they are also helping to sustain the economic dominance, and therefore the political hegemony, of the United States.

America's Own Kleptocracy

EU leaders push for new framework

Fiat Currency

France calls for uniform global financial rules

Gangster Economics

Global Trade Watch

Friends of the Earth: WTO

Governments v Libertarians

How the neoliberals stitched up the wealth of nations for themselves

Identifying secrecy jurisdictions

It's Time to Decommission the IMF, World Bank and WTO

Obama backs crackdown on tax havens

The gods that failed

The Shock Doctrine

Top Ten Reasons to Oppose the IMF

The Wrecking Crew

Vulture Funds

Wealth gap creating a social time bomb

WTO: "a secretive, shadowy body"