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Ireland to be subject to Troika inspections for almost 20 years


Inspections will allow Brussels propose possible budget changes

The International Monetary Fund (IMF) says there is no evidence that Irish austerity policies are doing it harm.

The fund has rejected complaints from its former chief of mission to Ireland Ashoka Mody who said the austerity policies were doing more harm than good.

It has meanwhile emerged that Ireland will have to remain subject to regular budget inspections for almost two decades despite exiting the bailout this year.

Mr. Mody had said Ireland should consider scaling back its austerity policies. However the IMF says Mr. Mody no longer works for the fund and his views do not represent those of the fund.

The IMF has suggested it wants a full budget package of €3.1 billion in spending cuts and tax increases even if it is more than enough to meet Irish targets.

The Finance Minister has meanwhile confirmed that Ireland will remain subject to Troika inspections for almost two decades.

Michael Noonan says rules agreed by ministers last year will mean Ireland will have regular visits until it has repaid three-quarters of its EU bailout loans. Under our current timetable Ireland will not reach that target until 2032.

The inspections will allow authorities in Brussels to propose possible changes to future Irish budgets long after the bailout programme ends this December.

via Newstalk – Ireland to be subject to Troika inspections for almost 20 years.

Does austerity promote economic growth?


The IMF and others impose austerity measures on government to pay down their debt and to increase investor confidence in countries. The result over the longer term is supposed to be increased investor confidence, a more competitive economy for the country and hence economic growth. But is the empirical evidence or even theory supportive of this viewpoint?

First in terms of what one would expect in theory. Austerity would be expected to decrease demand but if there is decreased demand then less production is needed to fill that demand. Therefore other things being equal austerity would tend to decrease production rather than increase it.

Harvard economist Alberto Alesina shows that government debt reduction by expenditure cuts and tax increases does not always have negative effects. However an IMF study of 17 countries that implemented austerity plans in the last 30 years showed that debt reduction plans that were intended to reduce debt and lead to prosperity on the whole did not do so. Some of the positive results in the earlier study were cases where the aim of austerity was sometimes to cool down an overheated economy and this was often successful with growth continuing but at a less heated rate.

The overall findings of the IMF study of austerity policies designed to reduce debt were that consumption expenditure declined and the economy was weaker. This is what one would expect. Greece is a good empirical example of where this is happening with the country actually going into a recession. Some critics question the results but nevertheless the empirical data give at least some support to critics of austerity programs who claim that stimulus rather than austerity is the more sensible policy over the short term to help an economy grow and produce more revenues to then pay down debt. For more see this article.

Given that the IMF’s own study shows that their  policies reduce economic growth why would they continue to recommend them. Because these policies do please investors. They weaken labor and lower labor costs. The point is not to grow the economy but to increase the power of capital over labor. The policies do that. Economic growth per se is not the aim but growth in profits. In the longer term after labor is crushed, pension benefits eroded, the safety net mostly gone, then as the theory has it the country will be more competitive, Perhaps investors may return. Of course many workers may have long ago migrated to areas with better prospects. Ireland apparently is already seeing renewed emigration as the boom there has given way to austerity.

via kenthink: Does austerity promote economic growth?.

IMF Rethinks Sovereign Defaults, Again


I noted back in January that the IMF had started to do its own “lessons learned” on its European financial crisis response and had begun to admit it had made some fairly terrible mistakes in its assessment of the debt sustainability of a number of nations, including Greece, under its current programs.

Late last week the IMF released another discussion paper (available below) that covers recent developments in sovereign debt restructures and their effect on IMF policy. The paper concludes that:

First, debt restructurings have often been too little and too late, thus failing to re-establish debt sustainability and market access in a durable way. Overcoming these problems likely requires action on several fronts, including

(i) increased rigor and transparency of debt sustainability and market access assessments,

(ii) exploring ways to prevent the use of Fund resources to simply bail out private creditors, and

(iii) measures to alleviate the costs associated with restructurings

Second, while creditor participation has been adequate in recent restructurings, the current contractual, market-based approach to debt restructuring is becoming less potent in overcoming collective action problems, especially in pre-default cases. In response, consideration could be given to making the contractual framework more effective, including through the introduction of more robust aggregation clauses into international sovereign bonds bearing in mind the inter-creditor equity issues that such an approach may raise. The Fund may also consider ways to condition use of its financing more tightly to the resolution of collective action problems;

Third, the growing role and changing composition of official lending call for a clearer framework for official sector involvement, especially with regard to non-Paris Club creditors, for which the modality for securing program financing commitments could be tightened; and

Fourth, although the collaborative, good-faith approach to resolving external private arrears embedded in the lending into arrears (LIA) policy remains the most promising way to regain market access post-default, a review of the effectiveness of the LIA policy is in order in light of recent experience and the increased complexity of the creditor base. Consideration could also be given to extending the LIA policy to official arrears.

In short, the assessments of debt sustainability have been woeful, there aren’t strong enough binding terms (read CACS) in sovereign securities, the official sector, but not the IMF itself, need to play a part in defaults and the IMF should investigate the optimal debt resolution mechanisms available for negotiating between creditors and debtors.

The paper discusses the implication of the ongoing litigation against Argentina as well as the experience of the fund in the recent case of Greece. Of note is the admission by the fund that it was forced to lower its assessment of the country due to contagion worries from the official sector in Europe:

Accordingly, when a member’s sovereign debt is unsustainable and there are concerns regarding the contagion effects of a restructuring, providing large-scale financing without debt relief would only postpone the need to address the debt problem.

Instead, the appropriate response would be to deal with the contagion effects of restructuring head-on by, for example, requiring that currency union authorities establish adequate safeguards promptly and decisively to cushion the effect of spillovers to other countries (via, e.g., proactive recapitalization of creditor banks, establishment of firewalls, and provision of liquidity support). In the context of the first Greece program, financial assistance was delayed until Greece had lost market access. In response to concerns about possible spillovers from debt restructuring, the Fund lowered the bar for exceptional access (second criterion) by creating an exception to the requirement for achieving debt sustainability with a high probability in the presence of systemic inter national spillover effects. In light of these issues, the modification of the exceptional access policy could usefully be reviewed

In other words, Europe, and its banks, weren’t prepared for a Greek default so the IMF was forced to pretend that the country’s position was better than it actually was. That was obviously a mistake and the country, like many before it, was forced to take a second bailout followed by a re-structure that should have occurred up front. As noted by the paper:

A review of the recent experience suggests that unsustainable debt situations often fester before they are resolved and, when restructurings do occur, they do not always restore sustainability and market access in a durable manner, leading to repeated restructurings. While the costs of delaying a restructuring are well recognized, pressures to delay can still arise due to the authorities’ concerns about financial stability and contagion. Delays were also sometimes facilitated by parallel incentives on the part of official creditors, who accordingly may have an interest in accepting, and pressuring the Fund to accept, sanguine assessments of debt sustainability and market reaccess.

And:

In hindsight, the Fund’s assessments of debt sustainability and market access may sometimes have been too sanguine.

The existing DSA framework does not specify the period over which debt sustainability or market access is supposed to be achieved (although it is generally understood that debt would be sustainable within a five-year horizon) or how maximum sustainable debt ranges should be derived, leaving this mostly to Fund staff judgment. Sustainability was generally assessed on the basis of an eventual decline in the debt-to-GDP ratio—Argentina, Seychelles and St. Kitts and Nevis were the only three cases that provided for a quick and sizable reduction in the debt-to-GDP levels post-restructuring. St. Kitts and Nevis also targeted an explicit debt threshold, i.e., the ECCU debt target of 60 percent of GDP by 2020. Most other cases allowed more than five years for the debt level to fall significantly below safe levels.

For example, in Greece the debt-to-GDP ratio in the most recent program projections is not expected to be reduced substantially below 110 percent before 2022, while in the forthcoming Fund-supported program with Jamaica, debt is still projected to remain close to 120 percent of GDP in five years’ time. In Grenada, the debt ratio at the end of the five-year horizon actually turned out much higher than staff projections at the time of the restructuring. Also, in Greece, Jamaica (2010) and Seychelles, staff medium-term debt projections have been revised upward substantially within only a few years compared to projections made at the time of the restructurings.

Also of note is the emphasis on the broader guidelines of the IMF programs , supporting countries sustainable return to private capital markets in a specific time-frame , and what that means in terms of the types of restructures that should be used and how, and when, the IMF can support them:

There may be a case for exploring additional ways to limit the risk that Fund resources will simply be used to bail out private creditors.

For example, a presumption could be established that some form of a creditor bail-in measure would be implemented as a condition for Fund lending in cases where, although no clear-cut determination has been made that the debt is unsustainable, the member has lost market access and prospects for regaining market access are uncertain.

In such cases, the primary objective of creditor bail-in would be designed to ensure that creditors would not exit during the period while the Fund is providing financial assistance. This would also give more time for the Fund to determine whether the problem is one of liquidity or solvency. Accordingly, the measures would typically involve a rescheduling of debt, rather than the type of debt stock reduction that is normally required in circumstances where the debt is judged to be unsustainable.

Providing the member with a more comfortable debt profile would also have the additional benefit of enhancing market confidence in the feasibility of the member’s adjustment efforts, thereby reducing the risk that the debt will, in fact, become unsustainable. While bail-in measures would be voluntary (ranging from rescheduling of loans to bond exchanges that result in long maturities), creditors would understand that the success of such measures would be a condition for continued Fund support for the adjustment measures. Such a strategy—debt rescheduling instead of debt reduction—would not be appropriate when it is clear that the problem is one of solvency in which case reducing debt upfront to address debt overhang and restore sustainability would be the preferred course of action.

In light of the ongoing litigation against Argentina the paper also appears to be pushing for two things, firstly the introduction of a standard across-the-board mechanism to support collective action clauses, and resolution, within the sovereign debt markets:

Recent experience indicates that the contractual, market-based approach has worked reasonably well in securing creditor participation and avoiding protracted negotiations. But these episodes have also foreshadowed potential collective action problems that could hamper future restructurings. These problems are most acute when a default has not yet occurred, large haircuts are needed to reestablish sustainability, and sovereign bond contracts do not include CACs. The ongoing Argentina litigation has exacerbated the collective action problem, by increasing leverage of holdout creditors. Assuming there continues to be lack of sufficient support within the membership for the type of statutory framework envisaged under the SDRM, avenues could be considered to strengthen the existing contractual framework.

These aspects of the Greek legislation resemble the aggregation features of the SDRM. The key differences between the framework envisaged under the SDRM and the Greek legislation is that the SDRM would be established through a universal treaty (rather than through domestic law),

apply to all debt instruments (and not just to bonds governed by domestic law), and be subject to the jurisdiction of an international forum (rather than the domestic courts of the member whose debt is being restructured). At this stage, there does not appear to be sufficient support within the membership to amend the Articles of Agreement to establish such a universal treaty.

—-

Complementing efforts to revamp CACs, the Fund may consider conditioning the availability of its financing more tightly to the resolution of collective action problems.

For instance, the use of high minimum participation thresholds could be required in debt exchange operations launched under Fund-supported programs to ensure broad creditor participation. Fund policy encourages members to avoid default to the extent possible, even after restructuring. An expectation of eventually being paid out in full may encourage holdouts. The use of high minimum participation thresholds would help reduce such incentives. The Fund could also routinely issue statements alerting creditors that securing a critical participation mass in the debt exchange would be required for the restoration of external stability—the implication being that failure to meet the

established minimum participation threshold would block future program financing, leaving no other option but default and protracted arrears.

Also, in pre-default restructurings, where collective action problems are most acute, the Fund could consider setting a clearer expectation (already allowed under existing policy) that non-negotiated offers by the debtor—following informal consultations with creditors—rather than negotiated deals, would be the norm, as in these cases speed is of the essence to avoid a default. These ideas could be explored in future staff work.

And the second area, that is also “to be explored in future staff work”, is what to do about the risks caused by asymmetry in the treatment of private and official sector creditors, something that was very apparent in the recent Greek restructure:

… arrears to private and official creditors are currently treated asymmetrically under Fund policy.

Private external arrears are tolerated but arrears to official bilateral lenders are not. This subjects the Fund to the risk that it could not assist a member in need due to one or more holdout official bilateral creditors who seek favorable treatment of their claims. Consideration could be given to extend the LIA policy to official bilateral arrears and in that context clarify the modality through which assurances of debt relief are provided by (non-Paris Club) official lenders. Another possibility would be for the Paris Club to extend its membership to all major lenders, so as to allow the Fund to rely on the Paris Club conventions with respect to financing assurances and arrears.

However, it is uncertain whether the Club could achieve such an expansion.

All up it’s an interesting paper and well worth the read if you are interested in this type of thing. The paper also has some discussion on the European crisis-resolution mechanism ( discussed in more detail here ) , although given recent back-steps from Europe on the banking union this looks to still be something of a distant dream at this point.

It will be interesting to see if this paper has any effect on future programs, but it does appear, if only very slowly, that the IMF is learning from past mistakes and attempting to shift policy in a direction to address that issue. It would appear, at least from this paper, that the IMF will be demanding a more realistic assessment of the debt sustainability of target nations and a greater use of up-front restructuring as a per-requisite for program engagement. We’ll have to watch the next steps in Europe to determine if this is simply a talking point or something the IMF board will action.

via IMF Rethinks Sovereign Defaults, Again « naked capitalism.

Financial Empire and the global debtors’ prison


Merkel-puppets

Financial Empire may have reduced us all to debt prisoners, but we can still become the social protagonists of history’s greatest-ever prison break.

Let there be no doubt about it: we live in the era of Financial Empire. Unlike the military conquests that drove the territorial expansions of the empires of old, contemporary Financial Empire consists not in the highly visible exercise of a Big Stick ideology (although military imperialism undoubtedly continues today), but rather takes the shape of an Invisible Hand. Where in the late 19th and early 20th centuries the logic of domination was driven by the instrumental power of imperial states, the Empire of the 21st century no longer needs any sticks to enforce the submission of sovereign states: through the global enforcement mechanisms of market discipline and IMF conditionality, the structural power of finance capital now ensures that all shall bow before the money markets.

In The Accumulation of Capital (1913), Rosa Luxemburg noted that, “though foreign loans are indispensable for the emancipation of rising capitalist states, they are yet the surest ties by which the old capitalist states maintain their influence, exercise financial control and exert pressure on the customs, foreign and commercial policy of the young capitalist states.” So great was this financial control that in the First Wave of Globalization, which ran from 1870 until the onset of WWI in 1914, defaulting countries faced a 40 percent chance of being invaded, subjected to gunboat diplomacy, or having foreign control imposed on their domestic finances under threat of a naval blockade. In a telling and ironic sign of the times, even the Hague Peace Conference of 1906 recognized the legitimacy of the use of force in settling sovereign debt disputes.

Big-Stick

Enforcing Debtor Discipline: the Era of Gunboat Diplomacy

The late 19th and early 20th century logic of imperialism thus took a military form that ultimately relied upon the instrumental power of the imperial states themselves. In 1882, for instance, following the Urabi revolt in Egypt, which had just deposed the French and British administrators who had taken control of Egypt’s finances in the wake of the 1870s debt crisis, Britain summarily invaded the country and incorporated it into the British Empire as a protectorate. Fast-forward some 130 years, and we have the foreign administrators of the IMF moving in on the heels of yet another popular uprising to make sure that Egypt does not default on its debts to Western banks. Today’s creditors no longer need to resort to the military force of their own governments to enforce their loan contracts: as a global disciplinarian, the IMF will do it for them.

The Ottoman Empire similarly defaulted in the 1870s, and although it was still powerful enough to withstand an outright European invasion, the Turkish government had to submit itself to a humiliating agreement with its foreign creditors: a Council of Foreign Bondholders, made up of representatives of the largest European banks, took control over its tax and customs offices. According to one member of the Council, Edgar Vincent, “There is no instance in which powers so extended have been granted to a foreign organization in a Sovereign state.” Fast-forward 130 years once more, and Turkey yet again finds itself in dire straits financially. The IMF is called upon in 1998 and thoroughly restructures the economy, marginalizing millions of poor Turks and leaving the Bretton Woods Project to conclude that, “over its long decade with the IMF, Turkey managed to replace public deficits with a democracy deficit.”

In 1898, Greece also fell under foreign financial control after defaulting on the debts it accrued during its war with Turkey. Mitchener and Weidenmier recount that, “As terms of the peace treaty, European powers were given authority to assume the administration of revenues on behalf of existing creditors and to effectuate payment of the war indemnity.” The historical parallels between the Greek debt crisis of 1898 and the one of today are striking. Since Germany had been the “major player in arranging the protection of foreign bondholders’ interests” in 1898, “it was given authority by the other European countries to come to terms with Greece about the operation and control over Greek finance as well as the terms of the debt settlement.” These terms were laid out in a new law; but, as Mitchener and Weidenmier stress, the approval of this law — just like today’s austerity memorandum — “was a sovereign act in appearance only.”

A few years later, in 1902, President Cipriano Castro of Venezuela refused to compensate European investors for the losses they made during the revolutionary upheaval that had brought him to power. The creditor response was swift and decisive: for four months, German, British and Italian gunboats shelled Venezuela’s coastal defenses and blockaded its main ports in order to force Castro to repay the debt in full. Two years later, largely in response to this blatant display of European imperialism in the Western hemisphere, President Theodore Roosevelt announced his infamous Roosevelt corollary to the Monroe Doctrine, which held that — rather than having the European powers messing around in its backyard — the US would now enforce the legitimate debt contracts of European financiers in Latin America and the Caribbean itself. Announcing his new foreign policy doctrine, Roosevelt issued a thinly veiled threat to his neighbors: “If a nation shows that it knows how to act with reasonable efficiency and decency in social and political matters, if it keeps order and pays its obligations, it need fear no interference from the United States.”

A year later, in 1905, US Marines invaded the Dominican Republic after it tried to default on its debts, taking over the country’s customs revenues to ensure full repayment to private bondholders. Nicaragua befell a similar fate in 1911-’12. Fast-forward another couple of decades, to 1982, and the United States is once again mingling in the sovereign affairs of its Latin American neighbors, sending in the IMF and World Bank on behalf of powerful private creditors. In Venezuela, seven years of IMF-sanctioned austerity measures eventually reach a dramatic apotheosis in the massive Caracazo protests of February 27, 1989, in which hundreds of thousands demonstrate against cuts in fuel and food subsidies that are part of the government’s agreement with the IMF. This time around, instead of having to fall back onto the gunboats of the US government, Wall Street bankers can rely fully on the internalized debtor discipline of the Venezuelan government: security forces open fire on the protesters and kill over 3,000 people. The debt, of course, is largely repaid.

Merkel-Imperialism

Enforcing Debtor Discipline in the Era of Financial Empire

Today, the imperial era of gunboat diplomacy may have come to an ignominious end, but the era of Financial Empire is still in full swing. What the ongoing European debt crisis confirms once more is that financial capitalism, once fully developed and globalized, has no need for debtors’ prisons, gunboat diplomacy or US marines to enforce debtor discipline. The iron bars of the debtors’ prison are replaced with the global flows of finance capital; the gunboats have long since made way for what Warren Buffet called the financial weapons of mass destruction; and the foreign administrators of tax and customs offices no longer wear military suits but carry IMF suitcases. Through its control over capital flows and its ability to withhold much-needed credit, the global bankers’ alliance (made up of the big banks and institutional investors, along with international financial institutions and the financial and monetary authorities of the dominant capitalist states) has obtained a form of structural power that allows it to discipline the behavior of indebted countries without having to resort to military coercion. It is this discipline enforced by global capital markets and financial institutions that forms the backbone of Financial Empire.

When talking about Empire, Hardt and Negri remind us, we should not be fooled into thinking that we are referring to a metaphor. It is not that the abolition of Greek monetary and fiscal sovereignty is somehow reminiscent of the Nazi invasion, as both left-wing and right-wing protesters in Greece seem to claim; unfortunately, the reality is both more complex and more subversive than that. Rather than falling into the trap of making simple historical allegories between the territorial empires of old and the Financial Empire of today, we should conceive of Empire as a concept; a concept which, in Hardt and Negri’s words, “is characterized fundamentally by a lack of boundaries.” In this sense, the rule of Financial Empire — unlike that of the Third Reich or the British Empire — has no limits. Unlike Nazi troops or British navy vessels, finance capital cannot simply be expelled from Greece’s sovereign territory. Rather than posing a territorial threat to national sovereignty as an occupying force, Financial Empire dissolves the notion of national sovereignty altogether by subverting the power base and popular legitimacy upon which the modern state ultimately depends: its ability to direct the flow of capital through monetary and fiscal policy.

To an extent, capital always-already operated beyond the boundaries of the modern nation state. As Marx and Engels observed in the Communist Manifesto, “The bourgeoisie has through its exploitation of the world market given a cosmopolitan character to production and consumption in every country.” But with the resurgence of global finance from 1973 onward, the state’s structural dependence on globally-mobile capital has been greatly increased. The state, which continues to exist in its territorial realm, is gradually stripped of its ability to control the de-territorialized flows of investment upon which it relies for its continued existence. As a result, Subcomandante Marcos, who in 1994 led the Zapatista uprising against the Mexican state — which had by that point become fully incorporated into Financial Empire – poetically remarked that, “in the cabaret of globalization, the state appears as a table dancer that strips off everything until it is left with only the minimum indispensable garments: the repressive force.” Thus the creditors’ need to exercise physical repression is greatly reduced: by stripping down the state and exposing its naked essence of institutionalized violence, the process of globalization serves to internalize debtor discipline into the state apparatus, rendering state managers structurally subservient to the logic of global capital.

In 1982, with the structural power of capital firmly on the rise following the collapse of the Bretton Woods regime, the American political scientist Charles Lindblom wrote a controversial article in the Journal of Politics in which he compared the market to a prison. By allowing private investors to withhold much-needed capital from the state and the economy, Lindblom observed, the market effectively functions as a disciplinary mechanism for state managers: you want to raise environmental standards? You’ll have to take into account the impact on business investment — and thus on jobs and your approval rating as a politician. Want to regulate the financial sector? You’ll have to worry about big banks simply moving their assets to another country. Want to raise taxes on the wealthy? You’ll have to consider the fact that your famous movie stars might move to Russia. Whatever you want to do as a politician, as soon as you’re in power, the first thing you have to contend with are business interests, and the punishments businessmen can bring to bear by withholding investment if they don’t like your policies. Most remarkably, Lindblom noted, “this punishment is not dependent on conspiracy or intention to punish … Simply minding one’s own business is the formula for an extraordinary system for repressing change.”

Lindblom’s notion of the market as prison can easily be extended to the global capital markets of today. As Robert Kuttner recently put it in his review of David Graeber’s Debt: The First 5,000 Years, “entire economies abroad, indentured to past debts, find themselves in a metaphoric debtors’ prison where they can neither repay creditors nor resume productive livelihoods.” Similarly, financial lawyer Ross Buckley has written that “we still have something very like debtors’ prisons for highly indebted nations.” As we saw in Greece and Italy in 2011, the automatic disciplinary mechanism of global capital markets ultimately serves to undermine democratic procedures, replacing them with technocratic administration. In the process, politicians are reduced to the role of temporary managers of the state apparatus in the name of financial capital; an arrangement that is ultimately much more convenient and much less costly to the global bankers’ alliance than sending in gunboats or physically occupying a country. In this sense, today’s Financial Empire is really not just a metaphor: it is the culmination of capitalist development into the perfected form of imperialism — one that hardly requires any bloodshed on the part of capital while still ensuring a massive upwards wealth redistribution from the poor to the rich.

Structural-Power-Cartoon

We Are All Debt Prisoners Now

But for some, even the overwhelming structural power of finance capital does not appear to be good enough. Even though default has already been ruled out a priori as a “legitimate” policy option in the management of international debt crises, there are still voices going up for further intervention into the sovereign affairs of indebted countries. In the wake of Argentina’s 2001 default, for instance, MIT economists Ricardo Caballero and Rudi Dornbusch argued that “Argentina cannot be trusted” and “Somebody has to run the country with a tight grip.” Stopping short of promoting an outright CIA-assisted military coup — the preferred solution of US-based capital throughout the Cold War era — the authors suggested that “Argentina now must give up much of its monetary, fiscal, regulatory and asset management sovereignty for an extended period, say five years,” and allow foreign commissioners to take over financial management of the country. “Specifically,” they stressed, “a board of experienced foreign central bankers should take control of Argentina’s monetary policy.”

Similarly, Mitchener and Weidenmier, two economists who went to great lengths to emphasize the efficacy of military coercion in deterring sovereign debt default between 1870 and 1913, suggest that today “some type of fiscal or monetary control by an external financial committee may impose needed discipline on recalcitrant debtors.” One prominent conservative commentator on the Latin American debt crisis of the 1980s, whose book was notably praised by IMF Managing Director Jacques De Larosière, Federal Reserve Chairman Paul Volcker, and leading banker Charles Dallara, even went so far as to propose the somewhat frightening notion that “gunboats are the borrowers’ best friend.” Not surprisingly, similar calls for the abolition of fiscal sovereignty are being echoed in European policy-making circles today. In 2011, for instance, one leading member of Angela Merkel’s conservative party argued that “Greece must give up something, like some of its national sovereignty — at least temporarily,” to allow private creditors to be fully repaid.

During the negotiations between Greece and its private creditors last year, Larry Elliot, the economics editor of The Guardian, rightly observed that, even though “the warships have been replaced by spreadsheets … the Troika’s gunboats will [still] get their way.” The real pressure, he observed, now “comes from banks, hedge funds and the team of officials of the International Monetary Fund, the European Central Bank and the EU.” Perhaps, then, we are not as far from the imperial era as we would like to think — and while the use of military force may be considered off bounds today, its real absence is not just the result of some enlightened liberal morality but rather a product of the high costs of military intervention compared to the much more effective methods of financial interventionism that replaced it. Even though one-third of US states still allow citizens to be imprisoned for failure to repay their debts, the general tendency in Financial Empire has been to move away from the direct exercise of punishment towards more structural forms of domination. In this sense, debtors’ prison is no longer just a physical place where “recalcitrant debtors” are locked away from the rest of society; it has become a de-territorialized disciplinary mechanism that encompasses the globe as a whole. We are all debt prisoners now.

Luckily, the structural power of finance capital can never be complete. In fact, those who are willing to take a closer look can already see the cracks in the prison walls – some of them made by the countless escape attempts of the prisoners themselves, as they desperately try to break their way out; others caused simply by the inability of the global financial architecture to support the unbearable weight of the debt load that states, firms and households have accrued over the years. As Lindblom himself importantly stressed, wherever there are prisons, there will also be prison breaks, and the crumbling system of market discipline that sustains Financial Empire is clearly far from escape-proof. The Argentine experience of 2001 is a case in point. While there is no need to romanticize Argentina’s widely-discussed default — rather than a revolutionary act of defiance, it was simply a desperate (and successful) populist attempt by the established Peronist elite to cling on to power in the face of massive social unrest — the most important lesson to emerge from Argentina is that, in the face of a spontaneous and sustained popular uprising, even the strongest walls will eventually cave in.

Indeed, Financial Empire may have reduced us all to modern-day debt prisoners, but we can still become the social protagonists of history’s greatest-ever prison break — as long as we draw the right lessons from the long history of imperial domination that led us to this defining point in human history.

Syntagma-Argentine-flag

via Financial Empire and the global debtors’ prison | ROAR Magazine.

via Financial Empire and the global debtors’ prison | ROAR Magazine.

IMF delivers tough assessment of Irish economy


Repossession is the order of the day from the IMF.

So what is next on the IMF agenda? Is it to be the total destruction of the Irish Nation… Shortly to be known as “Destitution Incorporated ” administered by the IMF

The International Monetary Fund has delivered a tough assessment of Ireland’s economic situation, highlighting lack of progress by banks and dangers of the country’s debt becoming unsustainable if growth forecasts are missed.

The fund has criticised Irish banks for “inadequate progress” in dealing with non-performing loans.

In its latest review of Ireland’s bailout programme, the fund also raises concerns that banks are losing money even before putting cash aside to cover bad loans.

The IMF states that lenders are “only beginning to tackle non-performing loans”.

It says repossessions are low at 0.3% of total mortgage arrears in 2012, compared to 3.25% in Britain and the United States.

The IMF suggested a need to strengthen the efficiency of the repossession regime.

It also said that the designation of specialist judges could concentrate expertise for handling a “potentially larger volume of repossession cases in an expedited manner”, while maintaining protections for homeowners.

While acknowledging progress to date, the fund expects Ireland’s economy to grow by 1.1% this year, by 2.2% next year and by 2.7% in 2015.

However, it says if growth was to fall short of these targets and to remain a sluggish 0.5% per year, public debt would escalate to one-and-a-half times the size of the economy by 2021.

That would put the economy on what the IMF calls an “unsustainable path”.

The IMF also has called on the EU to deliver on pledges made to Ireland, including recapitalisation of Irish banks from European funds, to ensure a successful exit from the bailout programme.

It says allowing the European Stability Mechanism bailout fund to directly invest in Irish banks could play “an invaluable role” in improving the country’s prospects for recovery and making the public debt burden more sustainable.

The high unemployment rate is also a focus of IMF attention.

“If involuntary part time workers and workers only marginally attached to the labour force – two groups that registered significant increases – are also accounted for the unemployment and underemployment rate stands at a staggering 23%,” the review says.

via IMF delivers tough assessment of Irish economy – RTÉ News.

via IMF delivers tough assessment of Irish economy – RTÉ News.

IMF: Eurozone Banks Are In Trouble, Trample Taxpayers and Democracy To Bail Them Out!


Eurozone nations have to fundamentally reorganize themselves and shift sovereignty away from national parliaments to new layers of centralized, transnational, beyond-control bureaucracies that can decide at will when to extract untold wealth from taxpayers. That’s what the Eurozone has to do, according to the “first ever European Union-wide assessment of the soundness and stability of the financial sector,” released Friday by the institution that the world couldn’t do without, the IMF.

“Financial stability has not been assured,” the report stated flatly about the fiasco in the Eurozone, despite ceaseless hope-mongering by Eurocrats and politicians, and banks remain “vulnerable to shocks.” The report, which never mentioned banks or countries by name, discussed a number of “risks” that could topple these banks, with some of these “risks” already having transitioned to reality:

“Declining growth.” Banks with “excessive leverage, risky business models, and an adverse feedback loop with sovereigns and the real economy” are particularly vulnerable. Hence, most banks. A number of European countries have been in a deep recession, some of them for years. So “declining growth” is a reality, and these “shocks” are happening now, said the IMF in its more or less subtle ways.

“Further drop in asset prices.” Real estate prices are now dropping in some countries that didn’t see a collapse during the first wave, including France and the Netherlands—where it already took down SNS Reaal, the country’s fourth largest bank [A Taxpayer Revolt Against Bank Bailouts In the Eurozone]. So hurry up and do something, the IMF said.

The report points at other risks for banks. Pressures in wholesale funding markets could dry up liquidity and tighten refinancing conditions. And the market could lose confidence in the sovereign debt that banks hold. For example, an Italian bank, loaded with Italian government debt, would topple if that debt lost value—but of course, the report refuses to name names.

And in “several countries,” the heavy concentration of megabanks “creates too-big-to-fail problems that could amplify the country’s vulnerability.” So Germany, France, and the UK. Alas, in Europe too-big-to-fail doesn’t necessarily mean big. In tiny Cyprus, fifth country to get a bailout, the banks, though minuscule by megabank standards, are getting bailed out anyway. It’s psychological. A fear. If even a small bank were allowed to go bankrupt, the confidence in all banks across the Eurozone would collapse. That’s how fragile Eurocrats and politicians fear their banks have become—despite their reassurances to the contrary.

And so “policymakers and banks need to intensify their efforts across a wide range of areas” to save these banks, the IMF exhorts these Eurocrats and politicians.

Big priorities: “bank balance sheet repair”; banks should build larger capital buffers to be able to absorb shocks. And “credibility” repair of these balance sheets. In an admission that bank balance sheets still aren’t worth the paper they’re printed on, the IMF calls for stiffening the disclosure requirements, “especially of impaired assets” that are decomposing in hidden-from view basements.

The new Single Supervisory Mechanism (SSM), the EU-wide banking regulator under the ECB, to be operational by early 2014, would have to have real teeth, along with expertise, the IMF pointed out. It should regulate all banks in the Eurozone “to sustain the currency union” and in the entire EU to sustain “the single market for financial services.” In other words, without the SSM, the currency union won’t make it.

But the IMF’s killer app is the Banking Union, a “single framework for crisis management, deposit insurance, supervision, and resolution, with a common backstop for the banking system.” Under this system, taxpayers in all Eurozone countries would automatically be responsible for bailing out banks, their investors, bondholders, counterparties, and account holders in any Eurozone country.

For the most hopeless cases, the Single Resolution Mechanism would step in to dissolve banks “without disrupting financial stability”—hence bail out investors, disrupting financial stability being a term that’s commonly used to justify anything. The medium would be the transnational taxpayer-funded ESM bailout fund; it would bail out banks directly, rather than bail out countries after they bail out their own banks—which is the rule today.

In the process, countries would surrender much of their authority over banks—and how or even whether to bail them out—to this new instrument. Decision makers would be Eurocrats, far removed from any popular vote. Victims would be the people who’d end up paying for it. Investors and speculators would profit. Other beneficiaries would be politicians who’d no longer have to bamboozle voters into bailing out banks because it would be done by a distant power.

The dictum that there is never an alternative to bailouts would be cemented into the system. Democracy, which always gets trampled during bailouts, would be essentially abolished when it comes to transferring money from citizens to bank investors. And that’s of course the ultimate goal of the banking industry.

The stark reality facing millions of Spaniards, Italians, Greeks, and Portuguese is hidden—buried deep under a mountain of economic data, massaged to suit the purposes of the central planners-in-chief.

via IMF: Eurozone Banks Are In Trouble, Trample Taxpayers and Democracy To Bail Them Out! | Zero Hedge.

via IMF: Eurozone Banks Are In Trouble, Trample Taxpayers and Democracy To Bail Them Out! | Zero Hedge.

Time to protect Utilities in Ireland fom the Friends of the IMF


IMF HARVEST

What deregulation means

In the “free” market in electricity, grabbing water systems was a sure bet: Governments had already paid for the pipes and the market is captive, customers undeserved and thirsty.  Thatcher’s England led the way with the first privatizations. In Britain, water bills shot up astronomically for consumers .

Once deregulation comes rest assured gas ,water and the cost of electric  services will rise in an ever upward spiral

Enron Purchase of the Buenos Aires water system in Argentina province.

Workers were fired en masse, allowing Enron to pocket their pay, in violation of the company’s solemn promises to invest. Without maintenance workers, water mains were left broken. Enron’s profitable neglect of the system left water contaminated.

“Maintaining our water infrastructure in public ownership is of major importance for future generations. It is essential that we ensure that this asset is maintained under democratic control and not allowed to fall into the hands of those who would wish to exploit this resource for private profit at the expense of the public interest,” said Jack O’Connor, president of Services industrial professonal and technical union (SIPTU).

SIPTU Sector Organiser, Michael Wall, said: “The alliance will focus on the role of staff in the new company and highlighting the consequences for the country if the process of privatisation of water services is continued.

“The unions will develop a joint policy and actions across the country as the efforts to reduce public ownership of water services is rolled out.”

The unions involved in the new alliance are SIPTU, UNITE and the TEEU.

and

What IMF loans mean

Take the case of Ecuador

While trying to pay down the mountain of IMF obligations, Ecuador foolishly “liberalized” its tiny financial market, cutting local banks loose from government controls and letting private debt and interest rates explode. Who pushed Ecuador into all of the nonsense why none other than the IMF so their corporate friends could benefit

Statement from SIPTU Ireland

Maintaining our water infrastructure in public ownership is of major importance for future generations. It is essential that we ensure that this asset is maintained under democratic control and not allowed to fall into the hands of those who would wish to exploit this resource for private profit at the expense of the public interest,” said Jack O’Connor, president of Services industrial professional and technical union (SIPTU).

Don’t turn the tap off and let the IMF benefit from Ireland’s utilities

download (4)

 

IMF image produced by Alec Foley

Controlling the International Flow of Money


For the past 35 years, the world’s largest financial institutions and most Western governments have worked to strip away all obstacles to the free flow of money from country to country,” and the results have been disastrous, the New Economics Foundation reports.

“Neoliberalism has come to dominate economic policy in the modern world,” the foundation says in a short film on the subject. “As the wisdom goes, removing restrictions on the flow of capital will ensure that investment naturally makes its way from rich countries to poorer ones. But this doesn’t seem to be happening.”

Economist columnist Philip Coggan says in the film that “We’ve had 40 years of money being freely available, of no real restrictions on exchange rates in the developed world to move. The result of all that has been a whole series of asset bubbles and a huge expansion of debt relative to GDP. It’s very hard to see how that’s sustainable.

“How to put the genie back in the bottle?” he asks. “One answer would be to have capital controls,” ways to monitor and regulate the flow of money in and out of economies. Critics in the business and especially at the top level of the global financial community say such regulation would reduce investment in countries that need it by inhibiting competition. (This same class of people tells us that competition is the most important factor in the health of an economy.)

But Peter Chowla, a coordinator of global finance watchdog Bretton Woods Project who also appears in the film, says that “[t]heories which predict that you might have some costs from regulating capital flows actually don’t bear any relation to reality as we experience it.”

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Examples of the harmful effects of unregulated money flows are numerous. “A classic example perhaps was Thailand in the 1990s,” reports Coggan. “They had this huge bubble and boom. As money went into the economy, it all went into building new office blocks and other speculative property investments. And then all the money went out again. So it was as if you had this massive storm which went all through the sewers at one moment. A lot of stuff flowed out of the sewers as a result, not all of which … smelling very pleasant and Thailand went through a very deep recession after they were forced to devalue their currency in the late 1990s.”

Chowla says, “I think the evidence has been that countries that have done this haven’t experienced any drop in the kind of investment that they want. On the contrary actually, as you put in these kind of regulations, you make your economy more stable, you make things more predictable, you make your exchange rate more stable, and then investors actually have a better prospect for investing in the longer term.

“We should also remember that this is not the way it always is,” he says. “This is not the natural state of affairs. In the past we actually had quite strict rules about where money could move and how. Originally, back in 1945, the IMF actually believed very strongly in using capital controls and they believe that for the first 30 years of their existence.”

Examples of the benefits of regulating capital flows are also numerous. “Brazil … has implemented a financial transaction tax, otherwise known as a ‘Robin Hood’ tax,” the New Economics Foundation’s Lydia Prieg notes in the film. “And this is explicitly to try to penalize and thus reduce speculation. Other examples include countries like China, which have enjoyed extraordinary levels of growth recently. China has strict limitations on what non-residents can invest in with regards to shares and bonds. And then you’ve got countries like India which effectively banned foreign investment in Indian banks.

Joseph Stiglitz … a Nobel Prize-winning economist and the former chief economist at the World Bank, did lots of studies into the Asian financial crisis,” she continues. “And he found that countries that implemented capital controls … had much shorter and much shallower downturns than countries that didn’t.”

—Posted by Alexander Reed Kelly.

via Controlling the International Flow of Money – Truthdig.

via Controlling the International Flow of Money – Truthdig.

1 Recall The Bailout, 2 Remove The Corrupt Politicians, 3 Pay NO Taxes Until 1&2 Are Completed!! Follow Iceland!! « Political Vel Craft


Can Ireland learn from Iceland?

Icelanders who pelted parliament with rocks in 2009 demanding their leaders and bankers answer for the country’s economic and financial collapse are reaping the benefits of their anger.

Iceland Continues To Grow Using ‘Startups’ By Replacing ‘Banks’: Iceland Refused To Bailout Rothschild’s Corrupt Banking Cabal.

Executives At Collapsed Iceland Bank Jailed For Fraud.

Since the end of 2008, the island’s banks have forgiven loans equivalent to 13 percent of gross domestic product, easing the debt burdens of more than a quarter of the population.

“I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a monied aristocracy that has set the government at defiance. The issuing power (of money) should be taken away from the banks and restored to the people to whom it properly belongs.”  – Thomas Jefferson

The island’s steps to resurrect itself since 2008, when its banks defaulted on $85 billion, are proving effective. Iceland’s economy will this year outgrow the euro area and the developed world on average, the Organization for Economic Cooperation and Development estimates.

Iceland’s approach to dealing with the meltdown has put the needs of its population ahead of the markets at every turn. Once it became clear back in October 2008 that the island’s banks were beyond saving, the government stepped in, ring-fenced the domestic accounts, and left international creditors in the lurch. The central bank imposed capital controls to halt the ensuing sell-off of the krona and new state-controlled banks were created from the remnants of the lenders that failed.

Europe can learn from Iceland”

Iceland’s special prosecutor has said it may indict as many as 90 people, while more than 200, including the former chief executives at the three biggest banks, face criminal charges. That compares with the U.S., where no top bank executives have faced criminal prosecution for their roles in the subprime mortgage meltdown. The Securities and Exchange Commission said last year it had sanctioned 39 senior officers for conduct related to the housing market meltdown.

History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling the money and its issuance.  – James Madison

 

Even the IMF Agrees with Europe’s Anti-Austerity Protests


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At its semiannual meeting in Tokyo in October, the IMF announced that the austerity packages applied throughout southern Europe since 2009 have been counterproductive, undermining economic growth and increasing rather than bringing down public debt ratios. Greece provides ghastly proof of the failed logic of the euro orthodoxy. After three years of shock therapy, the Greek economy is in depression and will have shrunk by more than 22 percent at the end 2013, the IMF warns. Employment in Greece has fallen to 1980 levels, and Greek debt dynamics have only deteriorated. Public sector debt has soared from 144 percent of GDP in 2010 to 170 percent, and unless the official lenders agree to take a haircut in a controlled restructuring of debt—as private lenders did earlier in the year—Greece may be forced to leave the euro. “The IMF has admitted the blunder, but tell that to the Greeks,” said Zoe Lanara, international relations secretary of the Greek General Confederation of Labor at a conference organized in October by left think tank TASC in Dublin.

The incompetence and negligence in the management of the crisis is staggering. In 2010, the troika of the European Commission, the European Central Bank and the IMF had calculated a manageable impact on growth of the adjustment packages in Greece, Ireland and Portugal, with fiscal multipliers in the region of 0.5. That means for every 2 billion euros’ worth of cuts, maybe 1 billion would have been lost in GDP. But the fund now believes this is far too low: “IMF staff research suggests that fiscal cutbacks had larger-than-expected negative short-term multiplier effects on output,” says the fund’s latest Economic Outlook report. Far from 0.5, “our results indicate that multipliers have actually been in the 0.9 to 1.7 range.” This, the IMF notes, “may explain part of the growth shortfalls.”

In other words, overzealous fiscal adjustment cripples an economy, driving down tax revenues, forcing up welfare costs and causing more debt problems. While labor unions and sections of the European left have expressed concern at the impact of austerity on growth since the very beginning, “a year or so ago, most finance ministers didn’t even know what fiscal multipliers were,” said Terrence McDonough, a Marxist economist at the National University of Ireland.

Despite applause from Brussels and Berlin for its steady progress in deficit reduction, Ireland holds sobering lessons. Its exports have helped it avoid outright depression, but with debt at around 140 percent of GNP, Dublin may be as close to insolvency as Athens, warn the unions. “We are in the sixth year of contraction of domestic demand, and they are still cutting spending. If the IMF is right and multipliers are 1.7, this will be devastating for Ireland,” said Michael Taft of the Irish union Unite.

The IMF 2013 forecast for Portugal, meanwhile, has been revised downward to a full-blown recession with a 3 percent fall in GDP. Only Latvia—recovering strongly and keen to join the eurozone after its own dose of shock treatment—remains to vindicate the EU orthodoxy’s penchant for austerity, wage cuts and internal devaluation. Yet the tiny Baltic state was close to expiring on the operating table, losing a quarter of GDP and one-seventh of its youth to emigration. Even with its current growth rates, it will take five years to get back to where it started.

Notwithstanding the discouraging evidence from the eurozone, pressure is being piled on the Obama administration to agree to a “grand bargain” of fiscal consolidation with the Republicans in Congress. Here, too, the IMF has warned that a front-loaded fiscal adjustment could abort an already weak recovery. Given that interest rates on US bonds are at rock bottom, Congress could instead be legislating public investment programs at virtually no cost. “The European monetary union has created its own constraints and needs to be overhauled, but the US should be using fiscal policy to boost growth,” says Greek economist Dimitri Papadimitriou, president of the Keynesian Levy Economics Institute at Bard College.

The IMF’s methodology, at least, is being hastily adapted to the landscape of destruction and strife across the EU periphery. Yet it is still not clear that the European leaders will change tack. In Greece, the troika ordered more than 9 billion euros’ worth of cuts and tax increases, which, if multipliers are indeed 1.7, will reduce GDP by another 8 percent. Meanwhile, as Spain prepares to request a bailout package that will activate the European Central Bank’s bond purchasing program, the troika teams in Madrid appear to be designing something similar to the disastrous Irish program. The troika had raised hopes with a promising commitment to recapitalize Spain’s banks, but it now appears that so-called legacy debt—the bad loans inherited from previous bubbles—will not be covered. This means that in Spain, just as in Ireland, the state will be left to provide the capital needed to help banks absorb the impact of a deteriorating housing market. This will feed what the IMF calls a “pernicious feedback loop” where bailouts to stricken banks undermine public sector finances.

As Spain slides further into recession (the IMF forecasts a 1.3 percent drop in GDP next year, after a 1.5 percent contraction in 2012), concerns about debt sustainability will deepen and the bank will be forced to intervene at increasing intervals against a backdrop of mass unrest. That is a recipe for backlash in Germany that could end the eurozone once and for all.

via Even the IMF Agrees with Europe’s Anti-Austerity Protests | The Nation.

via Even the IMF Agrees with Europe’s Anti-Austerity Protests | The Nation.

“IMF is dead, a walking dead”


2012imfisdeadfdcphilippines.jpg

2012imfzombie.jpeg

2012philippinesprotest.jpg

MANILA, Philippines – As the first female chief of the International Monetary Fund (IMF) visited the country for the first time and met with Pres. Benigno S. Aquino III Friday morning, debt watchdog Freedom from Debt Coalition staged a protest near the Malacañan Palace, in solidarity with the peoples of the Eurozone.

“For FDC, the IMF is dead, a walking dead,” said the group’s president, Ricardo Reyes. “The sooner we bury this economic zombie, the better for the economies and the peoples of the world.”

IMF Managing Director Christine Lagarde arrived Thursday afternoon and met with the President Friday, ostensibly to solicit insights on how to solve the Eurozone economic crisis and also to advise the Philippine government to rationalize tax incentives granted to business. She is in the country as part of a visit to Southeast Asia. She is also scheduled to attend a meeting of ASEAN nations in Cambodia early next week.

In a statement, FDC said that Lagarde’s coming and her reception by the Philippine government evokes a surreal scene. “This institution has been widely dismissed as monstrous failure to stabilize the global financial system and as a wrecker of developing economies,” it said.

“No amount of persuasion and distortion of history can redeem the IMF from its pathetic track record – its failure to predict many crises of regional and global impacts, including the US financial crisis; its counterproductive prescriptions to such crises, and its policy conditionalities to its loans to many developing countries, like the Philippines, which drove them deeper into debt and maldevelopment. For all these reasons, the IMF should have long been consigned to oblivion and death,” FDC said.

“But no, the G-20, especially the G-7 masters of global finance capitalism has artificially resuscitated it with a new mission: to push for the same old rotten prescriptions of monetary tightening and fiscal contraction or austerity measures, this time, in Eurozone countries in crisis while promoting countercyclical macroeconomic policies like expansionary spending and investments to counter the recession in the US and Western Europe,” added FDC.

“We, Filipinos, were once victims and, until now, suffer the grave consequences of the structural adjustment programs (SAPs) imposed by the IMF on us in the 1980s. Now, we witness once again the grave consequences of IMF’s recycled mantra, as our fate will be the same fate of the peoples of the Eurozone under the IMF’s direction. Massive cuts in public spending and the negative multiplier effects they generate have led to massive unemployment and collapse of social services. Consequently, this will result in intensifying global inequality between the North and the South, and between the 99% of the North and their super, super-rich elites,” FDC said.

“We, in FDC, join the peoples of the Eurozone who are currently on strike. The IMF should not be permitted to spread socioeconomic diseases through its vile, anti-people and neoliberal policies here in the Philippines, or in the Eurozone, or in any other country,” FDC said.

“IMF is dead, a walking dead” – FDC – Indymedia Ireland.

via “IMF is dead, a walking dead” – FDC – Indymedia Ireland.

We told you so and now even the IMF realises we were right –


Ireland cannot continue to sacrifice everything, even people’s lives, in order to balance the books, writes Brendan O’Connor

YOUNGER readers won’t believe this but there used to be a time when the IMF was the bogeyman in this country. If we didn’t behave ourselves, the IMF would come and there would be no pussyfooting around. They would slash public sector wages in half and double taxes and get our house in order in jig time. This was before we learnt to live quite casually with the fact that we are no longer an independent country and that we are subject to something called the troika, one third of which is the IMF.

That would have been unthinkable back in the day, that we would not be governing ourselves. Back then, it was regarded as the ultimate shame if the IMF had to come to a country. It was something that happened to banana republics in South America and basket cases in Africa. The IMF had come to the UK once but that was an aberration, apparently. It really wasn’t something that could ever happen in so-called developed countries.

Little did we think that we would look back and wish that we had invited in the IMF, that they were in charge. Little did we think that the IMF would turn out to be the most reasonable foreign ruler a country could hope to have. But we didn’t manage to get just the IMF in. Instead we got saddled with EU zealots as well, and despite the IMF’s increasing best efforts, we are still being slowly ground into the dust.

While the IMF used to have the name of being all about making people balance the books fast, it has become an increasingly pragmatic and realistic institution in the last few years. It has tended to be the most sceptical of the big international institutions when it comes to austerity at all costs, and it has been the one that has cautioned most about the need for growth as well. This surprises some people because the IMF is regarded as a right-wing organisation stuffed with Yankee capitalists (the worst kind). But then again dismay about austerity has not been limited to the left. It has been, as Fr Jack would say, an ecumenical matter. Only the other day I found myself in heartfelt agreement with a press release that arrived in my email from Joan Collins TD. In terms of economists, there has been agreement from across the left-right spectrum that austerity unchecked could be as, if not more, dangerous than capitalism unchecked was.

The IMF took its distaste for austerity a step or two forward last week. Christine Lagarde has now upset a lot of people, and attracted much criticism internationally, by coming out and saying straight that Greece and Spain should be given more time to balance their budgets. Her point seems to be that when there are so many countries engaged in austerity, it doesn’t make sense for them all to do it so quickly at the same time.

via We told you so and now even the IMF realises we were right – Analysis, Opinion – Independent.ie.

via We told you so and now even the IMF realises we were right – Analysis, Opinion – Independent.ie.

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