IMF loan means loss of sovereignty
Max Keiser talks to Stacy Herbert about the IMF taking global control.
From Gordon Brown Spills the Beans on the IMF by Michael Hudson (Counterpunch)
Last month the G-20 authorized the International Monetary Fund to increase its loan resources to $1 trillion. It’s not hard to see why. Weakening currencies in the post-Soviet states threaten to raise default rates on foreign-currency mortgages as collapse of the Baltic real estate bubble drags down Swedish banks, while the Hungarian property plunge threatens Austrian banks. It seems reasonable to infer that creditor-nation banks hope to be bailed out. The IMF is expected to lend the Baltic, central European and other debtor-country governments money to pay them. These hapless debtor economies are then to follow IMF “conditionalities” to squeeze enough money out of their populations to pay foreign creditors – and repay the Fund by imposing yet more onerous taxes on their labor and industry, making them even more high-cost and therefore pushing them even further into trade and credit dependency. This is why there have been so many riots recently in Latvia, Lithuania, Estonia and Ukraine, as was the case for so many decades throughout the Latin American countries that introduced the term “IMF riot” to the global vocabulary.
For fifty years the IMF has organized such payouts to creditor nations. Loans are made to debtor-country governments to “promote exchange-rate and price stability.” In practice this means pouring tens of billions of dollars into currency markets to make bad gambles against raiders. This is supposed to avert the beggar-my-neighbor nationalism and financial protectionism that aggravated depression in the 1930s. But the practical effect of IMF lending is to demand that debtor countries impose onerous IMF “conditionalities” that stifle their domestic markets. This is why the IMF was left with almost no customers until last year’s debt crisis deranged the world’s foreign exchange markets.
It is supposed to be merely incidental that the largest IMF shareholders, the United States and Britain, happen to be the major creditor nations and their banks the main beneficiaries of IMF loans. But in a Parliamentary question-and-answer session on May 6, Britain’s Prime Minister Gordon Brown spilled the beans. Under pressure for his notorious “light-touch regulation” as Chancellor of the Exchequer (1997-2007), he undid half a century of rhetorical pretense by announcing that he was pressuring the IMF to bail out Britain in its nasty dispute with the Icelandic owners of a British bank that went under. He was in a position to know the nitty-gritty of who owed what and which nation’s monetary authorities were responsible for which banks. So when he said that he was strong-arming the IMF and other organizations to force Iceland’s government to pay for his own government’s mistakes, he must have known this was breaking the unwritten law of pretending that the IMF is not the servant of creditor nations in bilateral disputes with smaller economies.
Here’s the background. Mr. Brown and his New Labour predecessor Tony Blair have saddled British taxpayers with a generation of payments to pay for their decade of deregulating London’s financial sector. Bad mortgage lending led to the failure first of Northern Rock and then the Royal Bank of Scotland, whose ambitious junk-mortgage program had made it the world’s largest bank. At $3.8 trillion before it collapsed, it was nearly twice the size of Britain’s $2.1 trillion gross domestic product (GDP). (For a review of New Labour’s deregulatory policies see Philip Augar, Chasing Alpha: How Reckless Growth and Unchecked Ambition Ruined the City's Golden Decade [2009].) So one can understand why Mr. Brown was flailing around to blame someone for New Labour’s “Don’t see, don’t ask” policy. ...
From Andrei Sannikov: “The most important thing is liberation of a person: in politics, economy, science and creative work”
In an interview to film director Yury Khashchavatski, the leader of the civil campaign “European Belarus” Andrei Sannikov tells about his vision of the Belarusian dream.
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- Now, in the conditions of the crisis, the Belarusian regime is taking huge credits, the state’s foreign debt is skyrocketing, secret, behind-the-scenes deals on sale of enterprises are made. What are possible threats of that?
- This is a very dangerous situation. Business mustn’t be dirty, and deals mustn’t be secret. Everything should be controlled by the public and independent media. We should develop relations with all countries on the terms which would bring the greatest benefit to the country and its people.
It is madness that the regime is accumulating credits today. Lukashenka can drive the country into such bondage that it would become a bankrupt. And then, it is possible to sell debts of the country. Entire countries were bought in this way in the 1990ies – their debts were bought, and in fact they were losing their sovereignty.
From Re-engineering our Economic Model: There are Alternatives by V. Bhardwaj
Indeed, from Jawaharlal Nehru to Rajiv Gandhi, political sovereignty has always been a precursor to economic sovereignty. This has been responsible for not getting India overexposed to the underbelly of globalisation and liberalisation. Safeguards to moderate the impact of adverse global impulses have been built into the process of economic reforms and had been the characteristic of India’s economic reform process since 1991.
While Russia and Latin America accepted the Washington Consensus during the period that their economies went wrong, India moderated, regulated and calibrated under the leadership of P.V. Narasimha Rao and Manmohan Singh. “Indian institutions have always been cautious, as we came from a mixed economy. With a huge deficit of poverty, we can't afford to throw everything to the market.”
[ ... ]
Everywhere, in the rest of the world, countries and regions are moving away from the discredited neoliberal paradigm. Africa has been the main victim of ruthless neoliberal policies imposed by the IMF and the World Bank for nearly three decades, with catastrophic economic, social and political consequences that we are still witnessing. Therefore, it is time to make bold and decisive moves toward an alternative development paradigm that recognizes the importance of economic security and builds a consensus behind the objectives of democratic, equitable and sustainable development and working toward the realization of a long-term vision of the democratic alternative. The beginnings of a strategy for getting us from here to there are outlined below:
An alternative strategy
Public Finance: Discard fiscal and monetary austerity as prescribed by the IMF, because these policies tend to choke off economic growth by limiting public investments in key sectors and by drastically reducing social spending. Spend more on social services and social investments. The largest portion of the next budget should go to social services and investments – health, education, housing, social welfare, investments in energy and agriculture, etc.
From The IMF and Economic Sovereignty by John Kutyn
When the IMF moved into Thailand, Korea, and Indonesia, their first order of business was an attempt to restore confidence in currencies through a major increase in interest rates. The IMF's second order of business was to institute severe austerity programs.
The economic crisis in these countries was due primarily to excessive corporate debt levels - which due to over capacity and falling profitability, companies were unable to repay. By raising interest rates and bringing in austerity programs, the IMF substantially increased business costs, while at the same time caused contraction of demand. The IMF's totally illogical policies will bankrupt virtually every major company in these countries.
From Central banks give countries' financial sovereignty to IMF by Joan Veon (News With Views)
In January, the Bank for International Settlements chief economist, William White wrote a white paper of his own calling for a return to the gold standard or global or regional currencies to help with global imbalances and for the IMF to have the power of surveillance over a country's finances even if it means losing part of their national sovereignty.
This IMF/World Bank meeting was extremely historic because it, in essence, gave the IMF more power than ever before in its history. Part of the crescendo in this opera was the fact that everyone was calling for a greater supervisory role for the IMF. The white papers, the discussion, the agenda, the objective of the meeting was simply to use "global imbalances" to take more financial sovereignty that ever before. The chief economist of the IMF said this, "People tend to dismiss these [role of various actors today] as minor frictions, sand in the gears of the globalization juggernaut. History, however, suggests there is a short distance from economic patriotism to unbridled nationalism. This is why the multilateral discussions in meetings like this are so important. They help ensure we continue to benefit from globalization in an atmosphere of mutual responsibility and shared destiny."
In a speech by Rodrigo de Rato, the IMF Managing Director, he said, "the IMF should pay the role of "umpire" in the international system." He explained that "neither the players nor the rules of the same are static. The days when G7 finance ministers could sit in a hotel room and make decisions about exchange rates are gone. This is a whole new ballgame." He went on to say, "As the players and the ground rules in the global economy change, we have the capacity to reflect these changes, and to be the place where policy makers can come together to shape the forces of globalization and make it work for us." He talked about the issue of surveillance and the problem of global imbalances and how "coordinated action would be both politically easier and economically more effective than governments in systemically important countries acting alone.
He proposed that the Fund begin REGIONAL consultations (my words, not his). He described it as "the Fund complement its existing arrangements for consultations with individual countries with multilateral consultations, which would allow the Fund to take up issues comprehensively and collectively with systemically important members and, where relevant with entities formed by groups of members such as the EU and the Gulf Cooperation Council." The IMF is now calling for regional not individual country participation. The IMF will devise a "more systematic assessment of the consistency of exchange rate policies with national and international stability."
There was also a great deal of talk about "shared responsibility" and "multi-stakeholder" participation. Multi-stakeholder participation refers to the fact that in the 21st century interdependent world, ALL ACTORS must work together: government, business, NGO's, labor unions, academia, etc. NO ONE CAN DO IT ALONE! The phrase "interdependent" not only refers to a world without borders, it also refers to the fact that no one country, NGO, business, labor union, etc. can do it alone. There is a new glue that now holds the world together.
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