Mohan:
''Whenever your economy is in a crisis, the first thing to remember is not to call the IMF.'' This is a very wise counsel, consistent with my posts many days ago here.
The biggest champions of the so-called free-market economy do not understand the meaning of free-markets. I recall once Fischer Black (the author of Black-Scholes formula) was invited by the Fed. At the BOG meeting, Fischer said to Alan Greenspan and the Board to close the Federal Reserve Board and abolish the organization since that would be optimal for tax-payers. In a free-market, a Central Bank has no role and an IMF is distortionary; these institutions try to achieve their own agenda when they get an opportunity, like squeezing every drop of blood from SE Asia to the advantage of the creditors who are at fault in lending excessively to companies without adequate monitoring.
I can easily sense that removing corruption is not an important goal of the IMF and that the IMF would rather entice the corrupt officials to toe their line on other matters -- repay loans at any cost and reduce the asset values so that the same capital can get in to acquisition of the assets at low prices. The main IMF goal (IMO) appears to economically recolonialize the SE Asian nations by taking over their economies. Kissinger has issued a warning in this regard because of the anti-Americation sentiment that is likely to ensue in Asia.
In a free market, these countries would simply not pay their debt when they could not. This is the standard tenet of borrowing and lending in a free market. This is why a creditor spends a considerable time and energy to asses the borrowers' creditworthiness and accounts for the possibility of defaults. When a company in the US does not pay its creditors; the company simply walks out -- US regulators do not force the shareholders to come up with money from their parents or from their other endowments. Why should Koreans or Indonesians pay for the banks and companies that did the wrong or for the misdeed of creditors like Citibank? I do not understand why these countries should have to listen to the dictates of the IMF that is forcing massive unemployment, poverty and social unrest? Well, this is a form of subtle corruption that is being fostered in the name of help and to achieve the ulterior goals (IMO).
I am afraid that many of Suharto's pet projects, proposed by his cronies, will be allowed to continue and that he will stay in power despite massive corruption to get his consent to the IMF policies. My belief is that Indonesian policy makers have been doing their best under the restrictions of their president and that they may have advised him for seeking a moratorium. The government did not borrow much. IMO, the Citibank, Chase Mahattan, Morgan Stanley, etc. are at fault by extending excessive credit to companies without monitoring the abilities of those companies, under the presumption that the Korean govt or the Indonesian govt would rescue. IMO, these countries should not have gone to IMF, consistent with Sachs' views, and should not have declared their support for the irrational policy prescriptions.
Sankar
IMF comes under attack in Asia
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