Ali’s blog

Mostly quant stuff with occasional digressions

The IMF’s increased funding

Posted by alifinmath on April 7, 2009

Just reading Michael Hudson’s piece on the implications of increased funding for the IMF. It’s said that the truth hurts. That it surely does. This is another deeply depressing piece from Hudson. An excerpt:

Not much substantive news was expected to come out of the G-20 meetings that ended on April 2 in London – certainly no good news was even suggested. Europe, China and the United States had too deeply distinct interests. American diplomats wanted to lock foreign countries into further dependency on paper dollars. The rest of the world sought a way to avoid giving up real output and ownership of their resources and enterprises for yet more hot-potato dollars. In such cases one expects a parade of smiling faces and statements of mutual respect for each others’ position – so much respect that they have agreed to set up a “study group” or two to kick the diplomatic ball down the road.

The least irrelevant news was not good at all: The attendees agreed to quadruple IMF funding to $1 trillion. Anything that bolsters IMF authority cannot be good for countries forced to submit to its austerity plans. They are designed to squeeze out more money to pay the world’s most predatory creditors. So in practice this G-20 agreement means that the world’s leading governments are responding to today’s financial crisis with “planned shrinkage” for debtors – a 10 per cent cut in wage payments in hapless Latvia, Hungary put on rations, and permanent debt peonage for Iceland for starters. This is quite a contrast with the United States, which is responding to the downturn with a giant Keynesian deficit spending program, despite its glaringly unpayable $4 trillion debt to foreign central banks.

Loan-sharking backed by military might is the neo-colonial system of rule.

Postscript: Just found this at globalresearch.ca:

Declaring something a success doesn’t necessarily make it so. We learned this at the Bush-led G-20 summit only four months ago, when global leaders were expected to do something far-reaching in response to the world-wide economic crisis, instead of chatting about it. When nothing came of the meeting, we were told that the summit “succeeded” because it “laid the groundwork” for the next G-20 gathering, recently led by Obama.

The four months between G-20 summits was one of rising massive unemployment and social misery for millions of people, creating an urgency that was unmet by the world leaders in London.

The truly pitiful joint-response of the summit sparked zero inspiration in the peoples of the world. The corporate controlled media, however, hailed the meeting a success of epic proportion and awarded Obama the title of Messiah.

What were these successes? The triumph most blasted through the media was the one trillion dollars of stimulus spending agreed upon, to be funneled through the globally-hated International Monetary Fund (IMF).

It needn’t be said that one trillion dollars, on a global scale, is peanuts. It should be mentioned, however, that much of this money was committed prior to the summit, and inserted into the G-20 numbers to beef up public relations.

Another G-20 “triumph” paraded through the media was a $100 billion dollars committed to the equally-hated World Bank, supposedly to help the poorest of the poor countries. This benevolent act — itself peanuts— was immediately contradicted by the Wall Street Journal:

“…anyone who has followed our editorials on the corrupt uses to which the bank’s [World Bank] existing $30 billion annual budget is routinely put can easily imagine that much of the G-20’s financial benevolence will never reach its intended targets in poor countries.”

And then you have the hot topic issue of financial regulation, the complete absence of which allowed the illusory financial boom to go on for years, thus intensifying the current recession. Regulation was a central demand of the European countries, who are seeking curbs on the U.S. financial institutions that out-competed European companies, while invading their economies with “top-rated” stocks and bonds that were actually worthless.

But a special hobby of Obama’s has been to prop up these institutions, as he continues to give billions of dollars of U.S. taxpayer money to U.S. mega-banks and insurance companies. This dynamic shaped Obama’s opinion on the G-20 debate: he agreed only to a vague and toothless international regulatory committee to be set up in the unforeseen future.

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