Personally, I like the idea of Christine Lagarde getting the post. She has a well rounded career and she would bring a fresh face to the role. She has the respect in Europe as well.
However, there are some countries that seem to have other ideas about who should lead the IMF. As regards to the opinions of the Goose (Wayne Swan) from Australia, he is such a bad Treasurer that his opinions should not matter in the slightest. He is one person who has absolutely no idea about what is required in the top job. Put it this way, I would value the opinion of Paul Keating (a man I detest anyway) over that of the Goose.
If the person is chosen on merits then Christine Lagarde should remain the number one contender. Amongst the other names being mentioned is the failed politician UK Gordon Brown. It is well known that he aspires to this type of role, but, he does not have the support of the present leadership in the UK. On top of that Gordon Brown messed up the economy in the UK in both of his roles.
Socialism and pushing socialism through the IMF is not going to help the world’s woes. At present the IMF has a big problem in Europe. It really does need someone with credibility in Europe to head the group. Gordon Brown does not have that credibility. Christine Lagarde has the credibility. The people being pushed from Singapore and other countries do not have that credibility. There is one other new contender from Brussels.
Some of the issues that I have with the IMF structure includes the heavy socialist emphasis. The challenges of the eurozone has meant that there has been a need to catapult some of the present ideas. Keynesian economics will not work in a time of stagflation. This is the lesson that should have been learned from the 1970s and the 1980s when the stagflation was prolonged. There is a need for a different set of responses to the crises that occur.
For too long Europe has turned to socialism (which is not quite the same as Communism) in order to offer a raft of welfare benefits to their communities. What most of these governments have forgotten is that there is a need to have people working in order to gather taxes, and there is a need for business and industry in order to have people working. Policies such as high taxes on business do not work because in the long term employers make the decision to leave the marketplace. When this happens the consequence is a drop in tax revenue as well as higher unemployment which in turn leads to higher welfare benefits.
Europe also has another problem that desparately needs attention: open borders attracts the wrong kind of immigrants. This can be seen in countries such as Spain, France, England and Germany, as well as in Norway and Denmark. These immigrants see this as an opportunity to place their wives on welfare, and they soak up all of the other welfare state benefits such as free medical, free education etc. etc. If this is not kept under control, inevitably it leads to a break-down in the whole system. At the root of this problem is taxation, or rather taxation receipts.
Under Dominique Strauss-Khan the IMF has steered a number of European countries towards putting in place austerity measures that are supposed to bring about a restructure of their economies. Those governments can only be compliant if the people are compliant and stop their protests that cause disruption, and in the instance of Greece, become extremely costly in terms of property lost, as well as lives lost due to the riots. The Greek attitude has not been conducive to the necessary reform required. Greece is the typical example of a country where the expenditure on welfare outstrips by a long shot the taxation receipts, but the lazy Greeks do not seem to understand the implications of their own bad welfare system.
I am not against some form of welfare buffer for the most vulnerable in the community. There is a need to protect such individuals. I am not against short term unemployment benefits for those who are able-bodied. I do think that government needs to have other structures in place that will help the unemployed find work. What I am really against is the expenditure of government funds on projects such as wind farms that are inefficient and will never deliver according to government expectations. The windfarms do not increase employment, but decreases employment in some sectors.
The watermelon policies and the claims regarding AGW or climate change need to be challenged, and governments everywhere need to stop wasting money on bogus research. This also means that I am against the use of IMF funds going third world countries, where such funds would only be wasted upon dead in the water projects whilst those third world countries continue to purchase arms and kill their own people.
According to this report from the BBC, the Japanese government has downgraded its assessment for the economy as a result of last month’s catastrophic earthquake, tsunami and nuclear plant accident.
Key areas of the economy, including industrial production and exports would suffer. Indeed, as a result of the nuclear accident, food exports are under threat.
This is the first time in 6 months that the Japanese government has downgraded its assessment.
At the same time the International Monetary Fund (IMF) cut its forecast of Japanese growth:
“The economy is showing weakness due to the influence of the Great East Japan earthquake” the Japanese government said in its monthly economic report. “It remains in a severe condition”.
The earthquake and tsunami had affected many companies with operations in the affected regions, destroying factories and blocking supply chains. The electricity shortages caused by the nuclear accident at Fukushima Daiichi power plant are likely to continue into summer. The government has therefore warned of a negative impact on exports, with shipping tipped to decline as manufacturers seek to bring their production lines back to full capacity.
Japan had been struggling to emerge from the impact of the global financial crisis but as a result of the earthquake and tsunami, as well as the aftershocks that have followed, the direction of the economy has been downward.
The BBC reports that the Irish Government is set to unveil new austerity measures as required by the EU-IMF rescue plan.
It will be a 4 year austerity plan targeting cuts of $15billion euros or 11% of Ireland’s output;
the aim is to bring down Ireland’s budget to 3% of GDP;
reform of the banking sector just falling short of nationalization;
the IMF recommends that Ireland should gradually cut the benefits to the long term unemployed;
the IMF also recommends that Ireland should reduce its minimum wage to be in line with the general fall in wage levels in the Eurozone;
There are some concerns about the proposed austerity measures. First the Cowan government could lose the support of the Independents plus some of his own party’s backbenchers. Second, the measures may prove self-defeating.
As expected, the stupid economist Krugman claims that the spending cuts will lead to a deeper recession. However, is this necessarily true?
European countries such as Ireland are in deep trouble because of their generous welfare state benefits. As a result of the generous benefits these countries have attracted immigrants from other parts of Europe as well as the Middle East and the sub-continent. These immigrants have a tendency to bludge on welfare instead of becoming wage-earners and tax-payers. They have a tendency to scam the welfare system. Like some of the long term unemployed who prefer being on the dole rather than worker, these people do need to have welfare benefits reduced in order to encourage them to seek out real work. These Governments cannot continue to pay for their welfare state without a corresponding increase in taxes, either through increasing the tax rate or by the entry of more wage-earners into the tax system.
The Keynesian economics that lies behind the Krugman concerns have already failed in the past. Long term welfare payments will not get an economy out of its malaise. On top of that there is always the possibility that in the longer term these welfare payments will contribute to a return to the days of stagflation – high unemployment, high inflation and high interest rates. Just like in the 1970s, such a return to stagflation would be a disaster.
When I first began this blog, and using the Internet as my source for information I came across the acronym PIGS – Portugal, Ireland, Greece and Spain. Well, Greece was the first to require a bailout, and there is still quite a bit of angst in Greece because of the austerity measures that have been visited upon the lazy Greeks. Ireland has been the next domino to fall, and the Irish Government has given in to the pressure to request a bailout.
It is interesting to note that the Green Party has had a significant role in this new situation. As I find out more about the Irish situation I will probably have more to say about the influence of the Watermelons, because it seems inevitable that the implementation of watermelon policies seems to end up in a disaster. (This is especially true in Spain because Spain wasted a lot of money on those uneconomic wind farms).
According to the German online magazine Der Spiegel (English Edition), Ireland has requested and the EU has agreed, to a bailout package. Ireland’s Prime Minister, Brian Cowan requested the financial assistance, said to be worth $100billion Euro and the finance ministers agreed to the request. The money is required to support Ireland’s ailing banks.
The political situation in Ireland is yet another one that can be considered interesting. The Watermelons have been in Coalition with Fianna Fail and Independents. Now the Watermelons are intending to pull out of the coalition and want Ireland to head to the polls in January to “end the uncertainty”. So once again we can see that the Green Party aka the Watermelons have had a sizeable influence on the Government of Ireland. (what could go wrong?)
So, why exactly did Ireland suddenly agree that it needed a bailout package?
Der Spiegel writes:
Justifying the request for help, Irish Finance Minister Brian Lenihan had said earlier on Sunday that his country had accumulated a deficit of €19 billion that it could not currently refinance on the financial markets. He said tens of billions of euros were probably needed to help ailing banks in the country, but insisted it would not be a "three-figure sum."
Lenihan insisted however that Ireland’s low 12.5 percent corporate tax would not be touched, despite calls from other European politicians for the tax rate to be raised.
The United Kingdom and Sweden, which are not euro-zone members, have also said they will provide bilateral aid to Ireland. British Chancellor George Osborne has agreed to pay 7.5 billion pounds (€8.8 billion or $12 billion) toward the bailout.
One very interesting point here, the company tax rate in Ireland is probably one of the lowest in the world. I would have thought that lifting the company tax rate should be an option in order to raise more revenue for government. However, one thing to keep in mind is that the lower tax rate should be working as an incentive for international companies to invest in Ireland and start building up some industry. With such a low tax rate as an incentive, I would have expected that revenues for the government would have increased as new firms opened their doors for business in Ireland. In other words, has this happened, and if not, why not?
Another question that needs to be asked is: exactly why has Ireland found it necessary to ask for help. Well this, it seems is the problem of being a part of the Eurozone. As we already know, Greece asked for and received financial help. In fact Greece was a real basket case. Spain remains on the precipice with regard to the help that will be required but what has this got to do with Ireland?
Der Spiegel writes:
Pressure on the Irish government to accept EU help had increased in recent days, in the hope that a rescue package would reassure the markets. Although the government does not need to immediately refinance its debt, Ireland’s problems have caused turbulence on the financial markets. Other beleaguered euro-zone countries such as Greece and Spain have seen their borrowing costs climb as a result, with rises in spreads on Irish, Greek, Portuguese and Italian government bonds.
Losses at five Irish banks have required a €45 billion bailout from the government at a time when tax revenues are significantly down due to the recession. The bank bailout has cannibalized the public finances, pushing the public deficit temporarily to 32 percent of GDP for 2010, 10 times that allowed by EU rules.
I have the following questions to ask:
1. why did the Irish government loan money to the Irish banks with public finance? Are these banks too big to fail?
2. what has been the impact on the Irish economy as a whole with regard to the world-wide recession?
I hope to find answers to those questions. At the same time I do suspect that the Irish government, like so many others has been busy wasting money on the useless implementation of Watermelon policies. It is also highly likely that the government coffers have been drained because of the welfare state. (stay tuned, I hope to find answers on these questions)
Despite the rather flowery language of the author, this article on the IMF and where it wants to head is worth reading. It takes time to digest because it becomes necessary to remove all of the flowery language to get down to the nuts and bolts.
There are several European countries that are in danger of collapse: Spain, Greece, the U.K., Ireland, Turkey, Italy and a new one to add to the list Hungary. The IMF seems intent upon interfering in the economies of these countries by providing loans coupled with austerity measures. This is certainly the prescription that was given to Greece. (I have already covered the issue of the laziness of the Greeks). The question though, is whether or not this interference is justified, especially when these Socialist countries do not seem to want to reform, let alone grasp the reality that their Socialist policies might be to blame for the imminent collapse of their respective economies.
Hungary had been on the brink many times since the fall of the Berlin Wall, and it had been borrowing from the IMF on and off for several years, until the negotiations were broken off. Any country borrowing from the IMF must be prepared to make certain necessary reforms including: a reduction in the civil service employees and employee pensions. Here is an outline of Hungary’s interaction with the IMF and the results for that country (not all that encouraging):
Hungary has been an IMF member since 1982. The country embarked on economic reforms early on, and to do so it needed IMF loans — to the tune of $520 million in the first year of its accession to the Fund. Hungary, a model student when it came to developing a market economy, relaxed its import policies in 1984. Subsidies were cut and the Hungarian forint was devalued, all at the request, urging or instruction of the IMF.
The country received six more loans by 1996, one for $365 million, another for $480 million, and in 1991 the Fund approved a loan worth $1.6 billion. In all those years, Hungary was reinventing itself. The banking system was restructured to satisfy free-market requirements, and a value-added tax was introduced. In 1990, the government passed laws to allow foreign investment, removed customs barriers, reduced government bureaucracy and lifted controls on prices and wages.
But there was a dark side to the policies, even though they pleased Washington, attracted investors and were rewarded by the financial markets. The real wages of Hungarians — those who even had a job — declined by 22 percent between 1989 and 1996. When the Berlin Wall fell and the country opened up to global markets, Hungarian industrial production declined by more than a third, unemployment rose and inflation reached 30 percent. In other words, workers, retirees and the overwhelming majority of Hungarians had less in their pockets from one year to the next, they had to work longer for a pension that was smaller than expected, and when they became welfare cases, the state no longer felt responsible for them — because the very nature of the state had changed.
Hungary’s accession to the EU in 2004 brought a new round of so-called adjustments. And then came the global economic crisis. By 2008 Hungary was on the verge of default. To avert a disaster, the IMF, the World Bank and the EU joined forces to provide Budapest with $25 billion. The IMF, which put up $15.7 billion of the total, dictated the conditions: pension cuts and a freeze on civil servants’ salaries. It was back to square one for Hungary.
The real gems in this article come from the economist Rogoff from Harvard University. These gems includes not very flattering assessment of the new financial reform legislation, as well as some not very flattering comments about the way in which the IMF and the G-20 handled the GFC. Here are some of the statements and assessments by Rogoff:
“A Greek bankruptcy is unavoidable. There is a 95 percent chance that Spain will go bankrupt. Hungary is on the brink. Things will get much worse in Eastern Europe. We will have a certain number of countries that will go bankrupt. We will have a number of euro zone countries that would be well advised to take a sabbatical from the euro for a year. The situation in the United States is very worrisome. The markets will refuse to tolerate this level of debt.”
and on the Wall Street reform legislation:
The government asked him to comment on a draft bill on the regulation of the financial sector. “The draft had 2,000 pages,” says Rogoff. “I don’t know what to say to that. I suspect that those 2,000 pages are filled with enough loopholes that Wall Street will discover and exploit to come up with new business models.”
A real reform of the banking and finance sector would have to drastically shrink the system to a business volume that existed 30 years ago. Rogoff says: “The financial market, with all of its products, adds up to $200 trillion, $120 trillion of which represents trading in debt securities. I remember a speech given by Angela Merkel. She said that the Americans make the profits while distributing the risks, with all those debt securities, worldwide. That’s true. This could be curbed.”
On the IMF and crisis management efforts:
“We are fundamentally too quick with bailout packages and too hesitant with default,” he says. Rogoff believes that the G-20 and the IMF, with their protective mechanisms, have already pre-programmed future misconduct. Experts call this a “moral hazard,” the notion that bailout packages, instead of preventing crises, simply create new ones. “It boils down to the banks ultimately speculating with taxpayer money,”
The final gem in this piece comes from the Chinese IMF worker Min Zhu. It is actually a sage piece of advice, and I might add here that it is quite obvious that this is the remedy that Europe should be seeking (rather than agreeing to follow the Watermelons to the precipice of destruction):
. “There is the issue of social welfare, and demographic change. Everybody has longevity, so the cost for the pension and health insurance is very different today than, say, 20 years ago. The model, of course, does not fit today’s needs. It would not survive tomorrow.” Besides, he adds, Europe needs a growth strategy, an industrial strategy. Europe must invent new products and sectors that meet the demands of the world — otherwise, with labor costs of $30 an hour, they won’t prevail “against a country that pays $3.”
The International Monetary Fund was established after the second world war. Its purpose has been to assist countries when they are unable to pay their debts. In the past the IMF has been rightfully criticized for some of its positions. In particular it has been criticized by those who fear the establishment of a global New World Order. I do not know whether those fears are well founded, yet every now and then I hear snippets from the powers that be, that make me think that those who fear the coming of a New World Order are correct after all.
Der Spiegel has an interview with Dominique Strauss-Kain, the present director of the IMF. According to the author of this article the IMF had become more or less irrelevant prior to the GFC but afterwards it had gained back a lot of its prestige.
The author of this article seems to like the idea of a Global economy so that the slant of the article is one that highlights a “global economic outlook”. I would personally not agree with this point of view for a variety of reasons, including the fact that I believe in the preservation of nation sovereignty. Even so, there are some things from this article that I wish to highlight:
On a Tuesday afternoon in late September, as the first leaves are falling from trees outside, the director, wearing a blue suit and a blue tie, is sitting on a blue couch high up in his office at the headquarters of the International Monetary Fund (IMF), outlining his idea of a new world. Some of it already exists, in the form of a new world order established in September 2008 to replace the one that was collapsing at the time. The result wasn’t half bad, but it is robust”
According to this author the New World Order was established in September 2008. This seems to be a very strange statement. What it is implying is that when the GFC was triggered by a run on banks in USA and with the collapse of Lehman bros etc. the New World Order was established!! A conspiracy theorist would have a field day with this kind of statement.
Looking more closely at what Strauss-Kahn is stating:
These are important times for humanity. The crisis has forced everyone to see many things from a new perspective. Now the IMF is preparing for its annual meeting on Oct. 8. Can it live up to expectations, and can it police the new global economic order and keep global banks in check?
“You have to imagine the IMF as a doctor,” says Dominique Strauss-Kahn, the 61-year-old director of the International Monetary Fund. “The money is the medicine. But the countries — the patients — have to change their habits if they want to recover. It doesn’t work any other way.”
The IMF, says Strauss-Kahn, warned the world about the collapse and about the American real estate bubble and its consequences, but “politicians don’t want to hear bad news.” And when the crisis arrived in the fall of 2008, as predicted, it took the old world — Europe, which always takes six months to make a decision — too long to react.
That was the time when the world was laying the foundation for a new order.
What exactly does the director of the IMF mean by NWO. It turns out he is talking about the rise of the economies of India and China and the demise of Europe and the USA (and possibly Australia). The director speaks of Europe as “lagging behind”, but more telling is the following statement:
The new world could be a frightening place. The IMF director says: “The Europeans still believe they are the center of the world, but in reality this is not clear any longer. Currently, the question is whether Europe will remain a participant in a game with many players — that is not necessarily a given.”
Some of the more telling comments with regard to what this man believes include the following statement:
The United Nations will probably become less important; the organization is far too slow-moving and sluggish. And, if one understands DSK correctly in this point, the importance of the United States — that egomaniacal country which is incapable of action — will also decline.
This is very disturbing because it seems to feed into the fears of those who have been against the establishment of this very New World Order. It seems to add to their fears that the current POTUS has been assisting the collapse of the USA through a series of bad economic decisions. It also feeds the idea that Øbama is following the orders of someone who actually wants to see America’s economy collapse so that this NWO can in fact be established, with China and India in the ascendancy.
It seems that the author of this article is pushing his own agenda in relation to this New World Order, and may in fact be putting words into the mouth of Strauss-Khan, who did not directly state what this author has stated. What was pointed out though, is that the USA Congress and Bush/Øbama Administrations adopted a piecemeal approach to the crisis as it loomed. (in fact the Øbama Administration has continued to not deal adequately with all of the problems associated with Fannie and Freddie that led to the crisis in September and October of 2008).
So here is some more from this interview:
What will become important, however, is the G-20, that coalition of the strongest economies, the center of power in a new world. The G-20 gave the IMF $850 billion (€620 billion) and the mission to solve the crisis. What followed, says, Strauss-Kahn, was “the biggest global coordination ever.”
In Strauss-Kahn’s view, the IMF should become an administrative unit of sorts for the G-20, an agency that “tries to find solutions for global and national problems,” come up with plans and create values. “In the end we aim at much more than just the right financial and economic policies. The ultimate goal of course is world peace through economic stability.” This is the way Strauss-Kahn views his organization, and the astonishing thing is that hardly anyone, with the exception of a lone professor in Boston, disagrees with him anymore.
It seems that Strauss-Khan has fallen victim to the hype of “world peace through economic stability”. Is that really going to happen? He has also fallen for the “climate change hype”. Or at least the author of this article is pushing the “climate change” hype.
You can read the whole article here