|November 25th, 2014||#1|
Join Date: Jul 2014
#1 International Monetary Fund (IMF)
Does the Name "Strauss-Kahn" Ring a Bell?
Trotsky at the IMF
by MIKE WHITNEY
The International Monetary Fund has finally admitted that it was wrong to recommend austerity as early as it did in 2010-2011. The IMF now agrees that it should have waited until the US and EU economies were on a sustainable growth-path before advising them to trim their budget deficits and reduce public spending. According to a report issued by the IMF’s research division, the Independent Evaluation Office (IEO): “IMF advocacy of fiscal consolidation proved to be premature for major advanced economies, as growth projections turned out to be optimistic…This policy mix was less than fully effective in promoting recovery and exacerbated adverse spillovers.”
Now there’s an understatement.
What’s so disingenuous about the IMF’s apology, is that the bank knew exactly what the effects of its policy would be, but stuck with its recommendations to reward its constituents. That’s what really happened. The only reason it’s trying to distance itself from those decisions now, is to make the public think it was all just a big mistake.
But it wasn’t a mistake. It was deliberate and here’s the chart that proves it:
(Democrats Reap What They Sowed, Rob Urie, CounterPunch)
There it is, six years of policy in one lousy picture. And don’t kid yourself, the IMF played a critical role in this wealth-shifting fiasco. It’s job was to push for less public spending and deeper fiscal cuts while the Central Banks flooded the financial markets with liquidity (QE). The results are obvious, in fact, one of the Fed’s own officials, Andrew Huszar, admitted that QE was a massive bailout for the rich. “I’ve come to recognize the program for what it really is,” said Huszar who actually worked on the program, “the greatest backdoor Wall Street bailout of all time.” There it is, straight from the horse’s mouth.
So now the IMF wants to throw a little dust in everyone’s eyes by making it look like it was a big goof-up by well-meaning but misguided bankers. And the media is helping them by its omissions.
Let me explain: Of the more than 455 articles on Google News covering the IMF’s mea culpa, not one piece refers to the man who was the IMF’s Managing Director at the time in question. Doesn’t that strike you as a bit odd?
Why would the media scrub any mention of Dominique Strauss-Kahn from its coverage? Could it be that (according to NPR):
But why would that be, after all, Strauss-Kahn was the IMF’s Managing Director, his views should have carried greater weight than anyone else’s, right?
Right. Except DSK got the ax for a sexual encounter at New York’s ritzy Sofitel Hotel. So the changes he had in mind never took place, which means that the distribution of wealth continued to flow upwards just like the moneybags constituents of the IMF had hoped for.
Funny how that works, isn’t it? Funny how it’s always the Elliot Spitzers, and the Scott Ritters, and the Dominique Strauss-Kahn’s who get nailed for their dalliances, but the big Wall Street guys never get caught.
Why is that?
The fact is, Strauss-Kahn was off the reservation and no longer supported the policies that the establishment elites who run the IMF wanted to see implemented. They felt threatened by DSK’s Keynesian approach and wanted to get rid of him. That’s it in a nutshell.
Do you know why the bigwig plutocrats hated DSK?
It had nothing to do with his sexual acrobatics at the Sofitel Hotel. Nobody cares about that shite. What they were worried about were his plans for the IMF which he laid out in a speech he gave at the Brookings Institution in April 2011, one month before he got the boot. The speech got very little attention at the time, but– for all practical purposes– it was DSK’s swan song. And, I think you’ll see why.
The experience must have been a real shocker for the gaggle of tycoons and hangers-on who attend these typically-tedious gatherings. Instead of praise for “market discipline”, “labor flexibility” and “fiscal consolidation”, Strauss-Kahn delivered a rousing 30 minute tribute to leftist ideals and wealth-sharing sounding more like a young Leon Trotsky addressing the Forth International than a cold-hearted bureaucrat heading the world’s most notorious loan sharking operation. By the time the speech ended, I’m sure the knives were already being sharped for the wayward Managing Director. To put it bluntly, DSK’s goose was cooked. Here’s a clip from the speech that will help to explain why:
Do you think they liked that idea or do you suppose they lunged for their blood pressure medication before scuttling pell-mell towards the exits?
Let’s face it; Strauss-Kahn was headed in a direction that wasn’t compatible with the interests of the cutthroats who run the IMF. That much is clear. Now whether these same guys concocted the goofy “honey trap” at the Sofitel Hotel, we may never know. But what we do know is this: If you’re Managing Director of the IMF, you’d better not use your power to champion “distribution” or collective bargaining rights or you’re wind up like Strauss-Kahn, dragged off to the hoosegow in manacles wondering where the hell you went wrong.
DSK was probably done-in by the people who hated his guts. Now they want to polish-up their image by rewriting history.
And, you know, they’re rich enough to pull it off, too.
|December 26th, 2014||#2|
Join Date: Jul 2014
Talking Left to Walk Right?
Has the IMF Been Reformed?
by PATRICK BOND
In a Washington Post op-ed last week, ‘The IMF’s Perestroika Moment’, Boston University political economists Cornel Ban and Kevin Gallagher suggested ‘conventional wisdom’ about the International Monetary Fund is ‘outdated’ because the IMF is no longer ‘a global agent of economic orthodoxy.’ Hmmm.
Also last week, Counterpunch economic columnist Mike Whitney surmised that at a critical moment in April 2011 at the Brookings Institute in Washington, IMF managing director Dominique Strauss-Kahn (‘DSK’) ‘made his pitch for “progressive taxation”, “collective bargaining rights”, “protecting social safety nets”, “direct labour market policies” and “taxes on financial activities”.’ Hmmm.
Given that no one has done more to challenge the IMF on capital controls than Gallagher, and that few write about economic injustice more forcefully than Whitney (I read them both religiously), it pains me to again take issue with such excellent allies.
To be sure, Whitney recognises the IMF did not implement the pitch; apparently the financial oligarchy didn’t appreciate DSK’s bolshi sentiments. Recall how DSK also apparently suffered periodic Viagra overdoses – oh, and somehow in the process, attracted repeated charges of sexual predation akin to a ‘rutting chimpanzee’. In May 2011 Strauss-Kahn was suddenly forced to stand down from the IMF and also from what would soon have been a run at the French presidency. New York’s finest whisked him off his first-class Air France seat at JFK Airport for the perp walk and rape charges.
Looking beyond ‘that shite’ (sic), Whitney recounts, ‘Strauss-Kahn was headed in a direction that wasn’t compatible with the interests of the cutthroats who run the IMF. That much is clear. Now whether these same guys concocted the goofy “honey trap” at the Sofitel Hotel, we may never know. But what we do know is this: If you’re managing director of the IMF, you’d better not use your power to champion “distribution” or collective bargaining rights or you’re wind up like Strauss-Kahn, dragged off to the hoosegow in manacles wondering where the hell you went wrong.’
Sorry, it is hard to take seriously the argument that because the oft-‘honey-trapped’ (sic) DSK momentarily adopted ‘a Keynesian approach’ (a matter not in dispute given how close the world financial system was to melting down), he was suddenly ‘off the reservation and no longer supported the policies that the establishment elites who run the IMF wanted to see implemented. They felt threatened by DSK’s Keynesian approach and wanted to get rid of him.’
Actually, from late 2008 through early 2011, the shakiest period for world capitalism, Strauss-Kahn ran the reservation – and from a hedonistic financier’s perspective, quite well indeed. The 2008-09 crisis and the IMF’s April 2009 $750 billion recapitalisation provided an unprecedented power boost (recall that for many months until then, the fast-contracting IMF had been nicknamed the ‘Turkish Monetary Fund’ because it had only one substantive client, lost 75% of its interest income and as a result fired 15% of staff).
Critically, IMF exploitation of the world’s poor did not change substantively on Strauss-Kahn’s watch. As Rebecca Solnit recalled, the IMF very nearly re-wrecked Haiti in the immediate wake of its 2010 earthquake by refusing to forgive debt and instead pushing more loans; only activists like Camille Chalmers stopped that.
The most transformative intra-capitalist strategy would have been a return to Keynes’ idea of penalising trade surpluses, which Greek political economist Yanis Varoufakis believes Strauss-Kahn once hinted at – but China, Germany and the Middle East would quickly veto that idea.
In contrast, the fiscal and monetary laxity Strauss-Kahn facilitated was merely system preservation. Alongside World Bank president Robert Zoellick, he bandaged the crisis by shifting and stalling it across space and time using his new Special Drawing Rights and associated credit binges. In the process, bankers were bailed out, inequality soared and most countries were left with a higher foreign debt.
North Africa Tests the IMF
In what would be his last IMF press conference, Strauss-Kahn was asked about North African activists carrying Che Guevara flags: “Do you have any fears that there is perhaps a far left movement coming through these revolutions that want more, perhaps, closed economies?” His answer: “We’re in a globalized world, so there is no domestic solution.”
Two and a half years earlier, Strauss-Kahn was awarded the Order of the Tunisian Republic (the country’s top honour) by pro-Western dictator Zine El Abidine Ben Ali. Strauss-Kahn returned the compliment: ‘Economic policy adopted here is a sound policy and is the best model for many emerging countries.’
In September 2010, in its ‘Article IV Consultation’ (each country’s marching orders), the IMF advised how that ‘best model’ should continue, given ‘that the tax burden on businesses is relatively high in Tunisia, and that there is scope to increase the yield from taxes on consumption.’
IMF economists cherish the Value Added Tax (VAT), which hits poor people far harder than it does the wealthy, as a percentage of income. In Tunis, they brazenly called for ‘a reduction in profit tax rates offset by an increase in the standard VAT rate.’ But while enthusiastically calculating the revenue benefits, they neglected the social costs, especially increased pressure on poor people including ordinary fruit sellers (e.g. Mohammed Bouazizi). (Philip Rizk observed the same problem in Egypt: VAT as the IMF’s ‘poor tax’.)
Still, thanks to Strauss-Kahn’s leadership, the IMF quickly adapted on the difficult new terrain of class struggle, prior to the 2011-14 counter-revolutions that swept away North Africa’s democratic hopes.
Some new phraseology would come in handy, e.g. ‘country ownership’, ‘poverty reduction’, and ‘social protection’. In June 2011, Strauss-Kahn’s temporary replacement, John Lipsky, was even heard pronouncing the words ‘social justice’ as his top priority objective, when seducing Egypt to borrow more so as to repay $33 billion of the dictator Hosni Mubarak’s old loans.
The South African name of this game is ‘talk left, walk right.’ If such incidents teach us anything, it is that IMF orthodoxy forever represents regime maintenance for financial imperialism, even if that requires innovative semantics.
The IMF was already becoming flexible 17 years ago
In contrast, Ban and Gallagher insist the IMF has undergone ‘deep transformations that often point in a more Keynesian direction’ and now has an awareness of ‘the systemic risks posed by the interconnectedness of global banks.’
(To be clear, again, I do credit Gallagher as much as any applied scholar for creating this awareness. But we must always exercise caution, explained African revolutionary Amilcar Cabral: ‘tell no lies, claim no easy victories.’)
Really, how deep does this ‘transformation’ go? The answer: ‘Since the 1970s, the IMF has been heavily criticized for being insensitive to the diversity of domestic conditions.’ Surely though, that’s the ‘heavy criticism’ of reformist Keynesians? A broader political economic critique does not stop at ‘diversity’. It considers the IMF’s role in the reproduction of world capitalism, especially when stressed.
Geopolitically, for example, isn’t it still true that ‘The IMF is a toy of the United States to pursue its economic policy offshore,’ as even an establishment economist, Rudiger Dornbusch, once frankly confessed?
Economically, the overall IMF objective is stabilising crisis-prone world capitalism on behalf, mainly, of Western financiers. The best rebuttal from Ban and Gallagher: ‘Surprising its critics, the IMF has endorsed capital controls.’
Yet these are not usually controls on outflows and capital flight, instead on hot-money inflows. (Only when Iceland and Cyprus were about to default were outflow bans allowed.
Anyhow, we’ve heard all this before. In the wake of Mexico’s 1995 crisis and the 1998 East Asian meltdowns, ‘capital controls could be acceptable to the IMF, for a transitional phase,’ conceded IMF second-in-command (now deputy Fed chair) Stanley Fischer.
‘The IMF recognizes the problem of surges of short-term capital across borders and the need to find ways to deal with that,’ said Fischer, including Chile’s so-called ‘speed-bump’ against hot-money inflows, a strategy ‘that needs to be considered.’
Such language was not uncommon, legal scholar Timothy Canova reminds, due to ‘a very real and growing split within the world of finance’ regarding ‘the use of temporary controls and prudential restrictions on the flow of short-term hot money.’
Malaysia’s exchange controls were much stronger: they also halted outflows and speculative currency trading. Yet during a November 2012 Kuala Lumpur speech, Strauss-Kahn’s replacement Christine Lagarde was still only willing to concede that in some cases, ‘temporary capital controls might prove useful.’
A dozen years before, an IMF report had already approvingly acknowledged, ‘The controls gave the Malaysian authorities some breathing space to deal with the crisis.’
BRICS pull the IMF left?
Aside from overestimating internal ideological change at the IMF, Ban and Gallagher misidentify a catalyst: the Brazil-Russia-India-China-South Africa (BRICS) bloc. According to Gallagher, the BRICS ‘defend “cooperative decentralization” to regulate capital flows’ and so ‘the establishment of the BRICS bank might bring competition to the IMF.’
That’s not how it appears from South Africa, reviewing the recent evidence. To illustrate, the BRICS spent $75 billion helping recapitalize the IMF in 2012, providing a sole mandate I could identify in the public domain: more ‘nasty’ (sic) policies for southern Europe, as South Africa’s finance minister insisted while preparing the funding transfer.
(Disclosure: my political heart aches, because thirty years ago this week, the same man – Pravin Gordhan – taught me revolutionary guerrilla theory at Mahatma Gandhi’s former Durban ashram, I kid you not.)
Last July, the BRICS devised a ‘Contingent Reserve Arrangement’ (CRA), that actually empowers the IMF, as even the eloquent pro-BRICS economist Mark Weisbrot admits: ‘Note that CRA currently has a 30% provision limit requiring an IMF programme, which is disturbing – and reveals the problem of politics within those five states and whether to adopt a neoliberal or alternative path.’
That choice was already explicitly made in China, India and South Africa. True, there may still be pressure from the crony-capitalist Russian right and Brazilian social democrats, providing Weisbrot ‘whether to’ weasel words.
But as a unit, BRICS is actually a subimperial (not anti-imperial) project. It reinforces not only prevailing world financial policies, but also do-nothing-until-it’s-too-late climate change mitigation. The BRICS represent not ‘competition,’ but collusion in financial imperialism.
Article IV-ed again
In Pretoria, Nelson Mandela’s African National Congress chose to move from apartheid to neoliberalism after 1994, instead of to the party’s 1955 Freedom Charter. In this spirit, finance minister Nhlanhla Nene announced that when his next budget is revealed in February, we should expect ‘tough times’, ‘a new age of pain.’
As if egging him on, the World Bank’s Pretoria office soon claimed that South Africa’s world-leading Gini Coefficient measure of inequality falls dramatically, from 0.771 to 0.596, once welfare spending is calculated. But though ‘fiscal tools’ are supposedly counted ‘comprehensively’, Bank staff entirely ignore Pretoria’s vast state subsidies to corporations, which means their inequality conclusion is merely a biased thumb-suck.
Likewise, consider the IMF’s Article IV Consultation here last week: ‘the current account deficit remains high (5.8% of GDP in 2013), reflecting persistent competitiveness problems, soft terms of trade, supply bottlenecks, and subdued external demand.’
In reality, there is another far more important reason, one that right-wing Harvard economist Ricardo Hausmann also completely neglected during his recent visit: the unjustifiable outflow of corporate profits, including massive illicit capital flight.
As for macroeconomic policy advice, the IMF ‘called for decisive structural reforms to unblock supply-side constraints, lift growth, and rebalance the economy towards exports and investments… and highlighted that containing the wage bill and raising taxes will be essential.’
In sum, renewed commitment to economic orthodoxy.
To their credit, Ban and Gallagher do concede, ‘a schizophrenic division has come to characterize the IMF’s approach to policy research on the one hand and policy practice on the other’ because ‘not much has changed in terms of how the IMF acts regarding relations between states and their creditors.’
Exactly! So if the IMF talks left, we need to ask: is it doing so in order to walk right?
|March 31st, 2015||#3|
Join Date: Jul 2014
Repeal, Don’t Reform the IMF!
By Ron Paul
Ron Paul Institute
March 31, 2015
A responsible financial institution would not extend a new loan of between 17 and 40 billion dollars to a borrower already struggling to pay back an existing multi-billion dollar loan. Yet that is just what the International Monetary Fund (IMF) did last month when it extended a new loan to the government of Ukraine. This new loan may not make much economic sense, but propping up the existing Ukrainian government serves the foreign policy agenda of the US government.
Since the IMF receives most of its funding from the United States, it is hardly surprising that it would tailor its actions to advance the US government’s foreign policy goals. The IMF also has a history of using the funds provided to it by the American taxpayer to prop up dictatorial regimes and support unsound economic policies.
Some may claim the IMF does promote free markets by requiring that countries receiving IMF loans implement some positive economic reforms, such as reducing government spending. However, other conditions imposed by the IMF, such as that the country receiving the loan deflate its currency and implement an industrial policy promoting exports, do not seem designed to promote a true free market, much less improve the people’s living standards by giving them greater economic opportunities.
The problem with the IMF cannot be fixed by changing the conditions attached to IMF loans. The fundamental problem with the IMF is that it is funded by resources taken forcibly from the private sector. By taking resources out of private hands and giving them to IMF bureaucrats, government distorts the marketplace, harming both American taxpayers and the citizens of the countries receiving the IMF loans. The idea that the IMF is somehow better able to allocate capital than are private investors is just as flawed as every other form of central planning. The IMF must be repealed, not reformed.
The IMF is not the only US institution that manipulates the global economy. Over the past several years, a mysterious buyer, identified only as “Belgium,” so named because the buyer acts through a Belgian-domiciled account, has become the third-largest holder of Treasury securities. Belgium’s large purchases always occur at opportune times for the US government, such as when a foreign country sells a large amount of Treasuries. “Belgium” also made large purchases in the months just after the Fed launched the quantitative easing program. While there is no evidence this buyer is working directly with the US government, the timing of these purchases does raise suspicions.
It is not out of the realm of possibility that the Federal Reserve is involved in these purchases. The limited audit of the Federal Reserve’s actions during the financial crisis that was authorized by the Dodd-Frank Act revealed that the Fed actively intervenes in global markets.
What other deals with foreign governments is the Fed making? Is the Fed, like the IMF, working to bail out Greece and other EU countries? Is the Fed working secretly to aid US foreign policy as it did in the early 1980s, when it financed loans to then-US ally Saddam Hussein? The lack of transparency about the Fed’s dealings with overseas central banks and foreign governments is one more reason why Congress needs to pass the audit the fed bill.
By taking money from American taxpayers to support economically weak and oftentimes corrupt governments, the IMF distorts the market, enriches corrupt governments, and harms both the American taxpayer and the residents of the counties receiving IMF “aid.” It is past time to end the IMF along with all instruments of American interventionist foreign policy.
|July 20th, 2015||#5|
Join Date: Jul 2014
IMF appoints new Jewish chief economist
Monday 20 July 2015 19.48 BST