♠ Posted by Emmanuel in IMF at 4/04/2012 11:58:00 AMThis will be short and unsweet as it demonstrates that you do not have to go very far to observe the mind-boggling ludicrousness of the world economy. My homepage ever since I hopped into cyberspace in 1994, Yahoo! News, is carrying an Agence-France Presse clipping about how IMF Managing Director Christine Lagarde is now calling on the United States to contribute more to the IMF, especially to ensure that the European debt crisis does not spill over to America.
Given that the United States is the world's most superindebted nation, with a national debt over 100% of its GDP at $15.62 trillion and rising annually at a trillion-dollar-plus rate, it's reminiscent of cadging a bankrupt. And a haughty bankrupt at that who would rather not fulfil its international obligations despite hosting the institution. Call it Yankee UN disease. With US elections coming up, no politicians wants to be seen adding to American fiscal malaise:
But her comments will be anathema to politicians in Washington, as the country hurtles toward elections this November. US officials, including Treasury Secretary Timothy Geithner, have for months trod a thin line between supporting the IMF's efforts to bolster its resources and actually kicking in some more cash. Washington has yet to ratify 2010 reforms which would see it send $63 billion more to the IMF's coffers, under a new quota agreement.
The corresponding press release on the IMF website is an odd mix of warning about the US about its dire debt situation while at the same time cautioning it about reining in spending at the current time (and asking for IMF funding in the meantime):With the United States itself mired in high levels of debt, increasing IMF funding or shipping tens of billions of dollars abroad to help Europe could be tantamount to political suicide.
On fiscal policy, she warned that “a global undifferentiated rush to austerity will prove self defeating,” and that “countries like the United States with low costs of borrowing should not move too quickly.” But she also cautioned about complacency regarding U.S. public debt, and urged a stronger push to curb the growth of entitlement spending and raise more revenue. More action is also needed in the United States to ease the burden of household debt, which is holding back the recovery.This returns me to my earlier criticism of this "stimulate now, consolidate later" approach insofar as the US federal budget has not fallen year-on-year since 1965! Once America goes on a spending binge, it will most likely stay on it. So, there is little reason to expect a major diminution in US deficits in the near future given these inertia and snowball effects. But, don't let that stop Lagarde:
She stressed that for the IMF to continue to be effective, it needed more financial resources. “Now that the Europeans have moved first with their firewall, the time has come to increase our firepower,” she said. The IMF is a good investment for all its 187 member countries, including the United States, she said, adding that no member country has ever lost money by contributing to IMF resources.
Given that she made her name at the US law firm Baker & Mackenzie, it's no surprise that she has no distaste for asking for money unlike most other Europeans. Still, the high comedy of whom she is approaching is evident. Truly, it's the global neighbourhood equivalent of asking the long-ago millionaire but now hermit-living-in-genteel-poverty for lots of money.
Not gonna happen.