Clark,
Thanks for posting JR's comments. He gets a little rabid, but is always entertaining, and writes well--unlike many economists, at least you know what he is saying, and where he stands.
I have copied a few excerpts below, in case people didn't bother reading the whole article, and would welcome reading any comments on them. The IMF as Ponzi scheme--a fascinating idea which I haven't seen as clearly expressed anywhere else, although in a sense it is obvious once he points it out. But is it true that Mexico has asked for another larger loan after the $50 billion loan of, what was it, 10 or 12 years ago? I don't recall one, in any case. Also the notion that the purpose of the IMF (after providing some nice jobs and pensions for thousands of otherwise probably unemployable economists who can't write as well as JR) is to continually be available to bail out Chase et al, banks whose captains are likely the bluest of blue blood Republican "free" market folks--another fascinating, obvious point.
Comments and discussion eagerly awaited.
<<Moscow is ignored as everyone scrambles to survive. You will find evidence every where of a collapsing
society: rusting missiles, dilapidated military trucks, crops rotting in the fields, lakes filled with sewage,
oil rigs in disrepair. Thanks to the Central Intelligence Agency, the world never recognized the Soviet
Union was no more than a third-world country with a fine space program and a savvy chess team.>>
<<The IMF claims great success and profitability over the past 50 years. If this were really so, why do they
keep coming back for more? They would be one of history's great self-financing money machines if their
numbers were real. After all, most large banks pay out dividends every year. Yet here we have one that
constantly drains its shareholders rather than even financing itself. What more evidence do we need that
this is a scam and a house of cards? You and I would be in jail if we kept our books this way and continually took in public money.>>
<<Keep checking and you will find some interesting things. One is that the bureaucrats at supranational
agencies were once graded by the amount in loans they placed–not by their loan-loss ratio, a technique
employed by most successful lending institutions. The first commandment of banking, after all, is to
make sure loans are repaid. This, however, wasn't a top priority of the IMF.
They knew that every time a loan failed they could just make a new, larger one to the original party,
covering up the problem. These countries learned they could go back year after year for new loans–and
they have. Take this mode of operation to the extreme and what you have is a Ponzi scheme.
A Ponzi scheme? The benevolent International Monetary Fund?
Afraid so. It is an enterprise that in effect, repays established investors–often itself with money from
newer investors–often itself, as opposed to profits from a successful ongoing operation. When a
developing country borrows $50 million for a water project, making IMF consultants, favored
contractors, the nephews of incountry bureaucrats, and local Mercedes-Benz dealers rich, it doesn't
matter so much if the water project is productive or even successful as long as the original loan, its
interest, and expenses are repaid by yet another loan the year after.>>
<<Workers at the IMF do better than the countries they advise. Its pension plan is larger than its special
disbursement account–that part of the balance sheet that you and I would call its net worth. Those
dedicated to helping the disadvantaged seem to have advantaged themselves very well indeed, a case of
doing well by doing good.
The activities of the organization is gussied up in sanctimonious prose about aiding the poor and raising
the living standards of the third world. Don't be fooled. These bailouts are really about protecting
interests of Chase Manhattan, J.P. Morgan, and Fidelity Investments. Of course, if Chase went directly
to Congress and asked for taxpayer help to cover a bad loan it had made to Korea, it's not hard to
imagine the response Chase would get. But under the cover of the IMF, it can do this regularly without
so much as a peep of criticism.
It is especially ironic that in the case of Russia, European banks are on the hook for even more than U.S.
banks. Yet it is the U.S. who is being asked to foot the largest part of the bill. There is a telling silence in
Europe as they wait for us to write another check. Europe has more money than we do and more to lose
in Russia yet is hanging back. I would too if I wanted someone else's money to help bail me out. If we
say no, then they will have to bail themselves out–or not, as the case may be. If it is such a good thing,
they will put up the money. If they do not, we will know we would have been real fools to send our
money over.>> |
