July 22, 2008
Elaine Meinel Supkis
The IMF and China have been sparring openly for about a year. As the entire G7 banking system goes under the blood red waves of excessive debt, the IMF refuses to humble itself and admit the financial leaders in the world are all really sex-starved gnomes who have no interest in balancing their books. Instead, the IMF struggles to keep itself looking scary to third world nations or at least, project the image of being sober and powerful rather than drunken sots on a binge, in the gutter. And Bernanke, it is revealed, is investing in CANADIAN instruments, not in the things his besotted, stupid bank supports. And good grief, he certainly is NOT holding US Treasuries or debts. Forget Fannie Mae or Freddie Mac. Or even one of the pirates.
Richer countries, especially those in Europe, have jealously guarded their controlling stake in the Washington-based IMF, even as emerging markets such as China and India have become bigger players in the global economy.One argument for refusing to align management of international financial institutions with a world in which China has usurped Britain and France in economic might is that the sophisticated policy makers of the developed countries are best placed to keep the global financial system out of trouble.
But the credit crisis, rooted in the collapse of the loosely regulated market for U.S. subprime mortgages, robs the leading developed economies of that argument, said Mr. Martin, who made a rare public appearance at a conference on the IMF's future hosted by the Centre for International Governance Innovation in Waterloo, Ont., on Saturday.
The entire IMF system has no moral authority. This was lost long, long ago. When the US began to violate basic IMF rules, the US should have lost its position within the IMF. Instead, all the other nations who created the IMF banded together to prevent any solutions to the US trade and budget deficits! Indeed, they NEEDED both! For the US budget deficit pays for Europe and Japan's military protections and the trade deficit benefits Europe and Japan immensely. This one-two punch is perfectly OK with the IMF officers. The present status quo whereby the US spends more every year on military adventurism overseas coupled with yawning trade deficits is OK with the IMF. It is important to the IMF that this unbalanced, unnatural and deadly pile on of debt plus red ink, continues.
All other nations are punished if they run huge budget and trade deficits! But not the US. Indeed, lending to the US at ever-lower rates from 1980 till today was the major aim of all our trade partners, every one of them. When the US sent abroad ever-larger sums of dollars, the IMF stood idle as trade partners of the US accumulated ever-greater FOREX reserves. Normally, the IMF monitors this and encourage the various nations to put aside FOREX reserves. But when this went haywire starting in 1994 when Japan suddenly began to accumulate a trillion in FOREX reserves, the IMF stood by, silently. It was painfully obvious to me that this fund had one purpose: to weaken the yen and tip trade in favor of Japan.
Soon, China began this, too, starting in 1999. Today, everyone is piling in on this scheme. The US is perfectly fine with this. For this suits the new anti-inflation mantra: the suppression of inflation via outsourcing and offshoring of US jobs! So the US was de-industrialized then office jobs were sent away and now the US is a 'consumer society' that needs to have destabilized trade and budget deficits forever and ever. The very thing the IMF is supposed to prevent.
The conference's 40 participants agreed the IMF is at a crucial point in its history, and has only a few years to regain the confidence of developing countries before those nations establish competing institutions or opt to go it alone.The IMF's role as a lender of last resort has diminished because countries such as Argentina and Russia have paid off their debts. That leaves the fund's staff with little leverage to convince governments to follow their policy advice.
NO ONE LISTENS TO THE IMF. They all listen to.....THE CHINESE DRAGON! Indeed! The Chinese dream of being the global bank is now coming true this year. Amazing. Just amazing. Knock me over with a feather. It was only in 1985 that they first came up with the scheme to enable the US to go deep in debt with China. I snorted. 'Impossible. Or maybe, in 50 years,' I said back then.
Well, it has been a mere 24 years and here we are: we raced towards this collapse of our own finances by going hog wild with tax cuts and offshoring. Free trade and free handouts killed us. And wars. The US, instead of realizing the dangers, walked right into the Chinese trap. In 2000, I was in despair when I saw the US public waver and then allow Bush to seize the government based on false promises of balancing the budget while cutting taxes. Off the cliff, we sailed.
Even so, today we still lecture the planet about balancing budgets, trade and solvency! Even as our entire system folds and collapses, we still lecture everyone. I posted a story today about the NYT lecturing the Chinese about human rights, free press and other noxious matters. I want a free press here! I want human rights here! Arrest Chertoff and all the other Homeland Security goons. This impulse to lecture the world about war, ethnic cleansing and terror is a mental illness of our leaders.
Fan He, a professor at the Chinese Academy of Social Sciences, told the conference that his country's government is tiring of IMF advice that does little more than echo U.S. complaints about how the Communist regime runs the world's fastest-growing major economy. "If the fund doesn't deliver, it will be marginalized, it will disappear," he said. His government has compiled international reserves of almost $2-trillion, at least in part to help survive another Asian crisis without having to worry about loans from Western powers. "We have the confidence to live without the fund."
The Dragon is warning us, we have no reserves. Fannie Mae has no reserves. The Federal Reserves has virtually no reserves. Neither does Goldman Sachs, JP Morgan or Congress. Our finances are in total collapse. As the great thinker, Liu at Asia Times said yesterday, 'If you are undercapitalized, you are bankrupt.'
China has set the goal to supersede the US as global banker 24 years ago and they succeeded. Proof is their $2 trillion FOREX reserves. I noted last year that the first goal would be $1 trillion and then China would cease talking nice to us when we yap about their currency. Right on target, last year, when China reached that important goal, the pulled off the gloves and began to fight back. Here is a story from exactly a year ago where I discuss all this:
Sometimes very small matters that barely make the news end up determining the fates if billions of people's lives. I sense the arcane banking accords, the Basel II understandings and the Pillar I, Pillar II and Pillar III developments are part of the triggering mechanism that is going to play a key roll in the coming financial and political confrontation of the depressed and dying US and Japanese economic systems. As I keep pointing out, the world's #1 and #2 economies cannot both be running dying currencies simulatneously without explosive results. Today, I am going to compare an interview with the head of the Chinese delegation to the IMF and the head of the IMF itself. Ouch! They tell totally different stories about negotiations!
At every previous G7 meeting, the clowns would trot out and start yapping about the value of the yuan, not the yen. I figured early on, the US and Europe were using the Japanese carry trade so they wanted a weak yen. But this was dangerous since Japan was reaming out the US markets the Japanese wanted to rip apart! We had to stop them. But the lure of easy, nearly free credit meant all efforts to fix the US/Japan trade deficits would be lax or non-existent. Instead, the US and Japan conspired to attack China for doing what Japan is doing!
Up until this day last year, China would mutter, 'Yes, yes, I will do as you say.' But when China hit the $1 trillion goal and sailed past, the Chinese ceased this muttering and began to push back. Rato, coming in on the heels of the June 2007 G7 chastisements of China, thought China would bow to him when attacked. Instead, this began a very dangerous row. The Chinese showed their claws.
Decision on Bilateral Surveillance over Members' Policies:Reporter: As I know, the Executive Board of the IMF has recently adopted the Decision on Bilateral Surveillance over Members' Policies (the new Decision), whereas you have expressed reservations about that adoption. Would you please talk about the relevant circumstances?
Mr. Ge Huayong: In 1978, The IMF formally allowed its members to adopt floating exchange rate regime. Since then, the Decision on Surveillance over Exchange Rate Policies (1977 Decision) has been used as guidance on IMF bilateral surveillance over members. During the past three decades, the Executive Board has conducted biennial reviews on the implementation of the 1977 Decision, and concluded with only three minor amendments to the 1977 Decision.
Mr. de Rato put forward the IMF's Medium-Term Strategy in August 2005, soon after he took his post as the Managing Director of the IMF, and claimed that modernizing surveillance was a central element in the Strategy. In March 2006, the Managing Director further decided that review of the 1977 Decision would be an important measure to improve surveillance. The Executive Board supported the IMF to improve its surveillance to adapt to the developments of globalization. However, Directors differed much in their views on the necessity to revise the 1977 Decision.
The attempt at revising the 1977 business failed because it was being used to corner and then chop up China. Instead of giving China more power in the IMF, this was a run around to prevent China from gaining power.
This is pretty firm. China is obviously outraged at the speeding up of the process concerning the way countries report to the IMF and the way the IMF itself is structured. China is no longer the outsider begging to come in, it will be the world's #3 economy in another mere 4 months or less! This is highly significant.The fading European powers joined with the US and Japan to attack China's growing girth. Namely, the world's strongest currency joined with the world's two weakest to attack the Bank of China that has the world's biggest FOREX reserves and a healthy yuan! This is a conspiracy, of course, a hostile conspiracy. When the G8 met this year, they attacked China repeatedly while being totally mum about the dollar and the yen, the Bert and Earnie duo of the developed world.
It is interesting to me to see these things evolve. Today, there are many, many hysterics in the West to try to destroy the Olympics. People want to muscle China. I will note that not half this much pressure is being applied to other despotic situations on earth such as the despotic situation in the US itself, just for example. Americans are upset about China supporting dictators? The US does this a great deal, and with a lot of blood, too. Americans are upset about Chinese prisons? I don't see huge demonstrations against the torture, imprisonment and now trial of Bin Laden's chauffeur! Or the 15 year old boy held at Gitmo who grew up under severe child abuse.
Bernanke Reports as Much as $2.5 Million in Financial Assets
(Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke held low-risk mutual funds and retirement investments last year as he led central bank efforts to calm financial markets amid the subprime mortgage crisis.Bernanke and his family owned $1.2 million to $2.5 million in financial assets in 2007, little changed from the previous year. The filing requires officials to report only the range in the value of their specific holdings.
The Fed chairman's investments ranged from Canadian Treasury bonds to a retirement annuity, according to annual financial-disclosure filings released by the Fed today.
Bernake's faith in the US dollar is most touching. Arrest Bernake. Charge: treason. He CANNOT protect himself while shoving our entire nation into the poor house by destroying the value of the dollar, destroying our savings here at home! HOW DARE HE???? This bastard should be tarred and feathered. I am just astounded. This man is destroying MY savings. And he is sending HIS to Canada. Why not open a Swiss bank account, eh? Or bank in Beijing.
Good grief. He merrily rows off from the Titanic while shouting instructions and telling us not to panic. Arrest him.
WaMu Shows Paulson Mortgage Rescue Plan Is Perilous
(Bloomberg) -- Treasury Secretary Henry Paulson's plan to revive U.S. mortgage financing depends on investors buying the same kind of bonds they're shunning in Europe.Paulson wants to create a version of Europe's market for covered bonds in the U.S. just as sales of the debt have fallen to a six-month low and prices have dropped 2.5 percent this year. While the securities are backed by loans and bank assets to get AAA ratings, most are valued, on average, as if they were three levels lower.
None of our rulers want this trash. We must sell it to our European allies! Right! Or how about selling all this to....CHINA! No one believes our AAA ratings are real. Indeed, the premium everyone wants for insuring this crap has been rising as our star falls. Maybe Bernake could show some faith in this system by openly buying and holding these worthless bonds and securities. HAHAHA. He won't. He is a con man and a thief. Paulson, of course, is Goldman Sachs. He wants us to buy this junk which his buddies are selling. He brought in one of his army of gnomes to help him create new pieces of crap to peddle to the Chinese. Why won't he and his horrible spawn buy this? No? NO. They run away.
China Tightens Scrutiny of Foreign Investment to Curb Hot Money
(Bloomberg) -- China's top economic planning agency said it tightened scrutiny of foreign direct investment to prevent fake ventures that are being used to channel speculative capital ``endangering'' the world's fastest-growing major economy.Money is flowing in through sham joint ventures, fake investments and shell companies, the National Development and Reform Commission said in a statement on its Web site today.
China has to deal with all our banking mess as well as the excess liquidity that still pours out of the broken Bank of Japan system. Both the Bank of Japan and the US Federal Reserve have decided to keep interest rates far, far, far below even the fake rate of inflation. Everything has become totally unreal. And all of this blooming red ink is flowing to China. Perhaps the Chinese can demand the IMF force these two banks to be more realistic?
U.K. Budget Deficit Balloons to Widest Since 1946
(Bloomberg) -- The U.K. budget deficit ballooned to the widest since records started in 1946, adding pressure on Prime Minister Gordon Brown to ease his decade-old borrowing rules.The shortfall was 24.4 billion pounds ($49 billion) in the three months through June, the Office for National Statistics said today. Last month, the deficit expanded to 9.2 billion pounds, more than the median forecast of 7.4 billion pounds in a Bloomberg News survey of 17 economists.
Britain, like the US and Japan, spends public money like there is no tomorrow. If this keeps up and they continue to use the IMF to hammer China and use every G7 meeting to attack Russia and China and if they continue to menace and harass Iran Kitty, eventually China will force everyone into bankruptcy. Then see how well our empire fares. We can only spend like this thanks to the Chinese. We should be begging them for pardon. And kissing toes. Note that all the leaders will be doing exactly that at the Olympics.
The US will get the Gold medal in Toe Kissing. Then comes the OPEC ass kissing event.
"...the trade deficit benefits Europe and Japan immensely."
Elaine, don't forget China! One half of our trade deficit in manufactured goods (which represents fully one third of our entire trade deficit - about $250 billion per year) ends up in China!
This is the direct result of granting free access to our healthy, high per capita consumption market to grossly overpopulated nations unable to offer access to equivalent markets in return. The trade deficit and loss of jobs is automatic, thanks to our goofy trade policies.
Posted by: Pete Murphy | July 23, 2008 at 08:49 AM