IMF Follies Don't Impress Chinese

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.

MF ripe for shakeup, Paul Martin says----Former PM says credit crisis shows richer nations lack moral authority to guide world economy unchallenged

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 Globe and Mail:

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:

Here is an important story I wrote exactly one year ago about China and Rato over what the IMF should be doing:

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.

From my 7/22/7 blog:

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.

My older blog posting:

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.

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Comments

[Blunt Force Trauma]

Oh, that's good. Helicopter Ben is investing in my country. How many economies does that guy need to wreck?

[Dragon]

一統天下

[Elaine Meinel Supkis]

We will ship Bernake over to Montreal, Blunt Force T.

Dragon: please translate. We need to know what our future bosses think.

[Ralph]

Dear Elaine,
Ron Paul recently stated that members of Congress have already basically accepted the notion of blockading and bombing Iran. Will China continue to fund washingtons pofilgate war spending? What clues can we look for that China is just done with us? Do you expect any change in chinese policy after the olympics?

[Elaine Meinel Supkis]

Ralph, if we were standing on a ledge with a knife in our hands screaming we want to kill the cat that is perched just out of reach, should we expect the Dragon to save us? Or hand us a knife and watch the fun?

[Elaine Meinel Supkis]

In other words, after this war kills our economy, destroys our military powers and ruins our fiances, who wins?

[Ralph]

I see this outcome too. Why can't your voice be heard? You should be a speaker at Ron Pauls massive rally in Minneapolis!!! You should contact someone at his campaign office or something. I love your writing, reading your stuff makes my day. The sex crazed gnome idea is so strong. Keep it up.

[Gary]

Elaine......

You must get published !

In the future, your writings may stimulate some study programs
at decent universities. Money and Mythology it could be called.
Or Money and Sex Studies. Or Money and the Human Subconscious.

I'd suggest you go to Common Courage Press in Monroe Maine
They edit and publish a lot of Chomsky's writings. There are several other publishers that publish Chomsky,Zinn, Cockburn,
and Naomi Klein's material. Your blog is one of the best and you
have some unique concepts I've seen nowhere else

You need a good editor and publisher to put your writings into
a book or pamphlet form. You should reach a wider audience
and get your ideas out more into the public.

What the hell ? At least your writings will go on the record and help stimulate future leaders.

[Pluto]

No. I have the perfect book for Elaine to write on economic warfare.

Elaine, you have a gift to see inside of each of the players and understant their motives.

Sadly, so many of the characters you write about (I guess mainly the UK and US) seem so dumb. For certain, we have the dumbest people.

And still, it's only business. Bravo.

[CK]

The single greatest weapon any enemy can possess is for its opponents to believe it to be dumb, inept, foolish. It is naieve to attribute to stupidity what can be as easily and more honestly attributed to malice.

[PJSV]

Elaine,

Do you mind if your readers organize/look for/donate for you a publisher in order to you write a book about you and your thoughts ?

By the way, maybe we should set up a «Elaine Supkis» fun club !

[PJSV]

sorry: «Fan», not «fun».

[Elaine Meinel Supkis]

No, FUN not fan. Except for hot days. Then may be a fan.

Getting published: if I do this, I have to stop the web site for a book is very time consuming. In winter, I have more time, am not outside working so much, maybe. Except when it snows. Then I am out plowing.

[Anthony]

UK is not very healthy. It's about to croak.

http://www.terradaily.com/reports/Walkers_World_European_economies_unravel_999.html

In Britain, the government has resorted to its highest level of borrowing since the public finance records first began in 1946. It borrowed $49 billion in the last three months, an annual rate of $200 billion, which is close to 10 percent of GDP.

In June the prices British manufacturers paid for their raw materials and fuel jumped by 30 percent from the previous year. Motoring costs are up 24 percent and food prices up 10 percent.

And yet foreign investment into London reached a record high this year, despite the financial crisis. A record 178 international companies set up or expanded business in the capital in the year to March, pumping $1.5 billion into the city's economy and creating more than 6,000 new jobs. Most of the investment, about 30 percent, came from the United States, 9 percent each from India and China, 8 percent from Australia, 7 percent from France and 6 percent from Japan.

[RobG]

I thought the UK was a EU member, and that all EU members were required to have balanced budgets?

[PJSV]

Is anybody interested in buying a book from Elaine published using lulu.com ? 100 books with 200 pages each would cost only 6.93 USD. For me it would be a precious gift to give to some friends of mine.

Anyone interested can contact me using [email protected]. Then I will send the list to Elaine in order to convince her to make a book.

[PJSV]

100 books with 200 pages each would cost only 6.93 USD each book.

[RobG]

Interesting death grip happening at WaMu: (Death Spiral Financing):

Even if TPG took no action on its own accord, others understanding the implications of the ratchet agreements WaMu agreed to, probably shorted the hell out of it. Any company that desperate or that stupid deserved to be shorted into oblivion.

The CEO, CFO, and COO all ought to get fired for agreeing such terms as well as for not seeing the need to raise capital until shares fell to $13. Then again, those executives paid the ultimate sacrifice of foregoing their bonus for a quarter.

WaMu Is Screwed

Washington Mutual is screwed. It cannot raise capital by equity deals even if it wants to. Those who translated "We have no plans to raise capital" into "No Need to Raise Capital" are sadly mistaken.

WaMu desperately needs to raise capital. However, those death spiral financing arrangements it made means WaMu can't raise capital. And if WaMu can't raise capital, it stands to reason it would have no plans to do so.

[Paul S]

Under-rating one's opponent is not good obviously, but there's a deadlier weapon your enemy can have. That is when YOU feel you are special; that you are part of an elite. When you feel that you are so much more brilliant than your adversary you will always win; that you can fool, swindle or strong arm ANYONE you so desire to treat that way. I beleive this describes our ruling class in the US. Chairman Mao said it: when the US loses its moral underpinnings, it will be finished as a world power. Mao knew his history. What is happening to the US is a good example of what happens to a ruling class when you combine supreme arrogance and total incompetence. Exhibit A: look who is their figurehead leader, the President of the US, "Dubaya". Case closed.

[Bear of Little Brain]

RobG:

"I thought the UK was a EU member, and that all EU members were required to have balanced budgets?"

There is a thing about deficit limits of 3% of GDP. A quick check to see when Germany became the culprit (2002, then on for a few years) reveals that France, Italy and six recent entrants all exceeded the limit. I think that, because the UK is not in the Euro (yet?), the Maastricht treaty penalties cannot be invoked.

Whatever, the USSE is going to face its first real test over the next few years. The NWO may find it difficult to hold things together in the face of mass unemployment, if it goes that way. If you don't know Europe, you cannot imagine the possibilities for friction, dissension and conflict - between and within countries. Let's face it, at the most basic level, there is not even an agreed common language. To me, common sense would indicate that the first priority is a common language, not a common currency. Maybe "they" think it is easier to divide and rule without one. The too-obvious choice would have been English, an obvious non-starter for the French. Ho, hum.

On another tack, I just watched Bunning on Bloomberg discussing this Freddie/Fannie/All-of-Hank's-buddies bailout legislation. He said that 700 pages had just been added to the Bill. Strange how these things spring fully-formed in a matter of days or so when a crisis is created/occurs. Reminds me of the Patriot Act.

They wouldn't be thinking of crashing the currency and issuing Amero's (another fully-formed solution), would they? No, didn't think so.

[Elaine Meinel Supkis]

English replace French? HAHAHA. Nope.

GERMAN replaces the others....OOOOPSIE! Der Heiligen Romanisch Reich...Sieg Heil!

About the book: PJSV, sounds interesting. I want it to be low cost due to people not being rich.

[Anthony]

Hey, a book documenting the current collapsing global economic arrangement is worth reading. I bet a lot of big economist are very polite and don't dare to say exactly what happens.

[PJSV]

Elaine,

I receivede an email from one of your readers interested in the «book». Myself, I yould be interested in 3 or 4. So, I think you should do a post about you publish book about your thoughts and background, using lulu.com or a regular publisher. After all you have several hundreds of users daily. I wouldn't be hard do sell. Each book costing you less them 10 USD, you could make also some profit.

PS: I don't have any affiliation with lulu.com.

[Elaine Meinel Supkis]

PJSV, it would have to have lots of cartoons, of course.

Summer is a bad time since I am outside as much as possible. Right now, I am building a new road that is over a mile long up the mountainside. This involves lots and lots of digging. During the digging, I am getting lots of rocks which are moved to where the stone wall are rising, stone by stone. So there are few idle hours. But starting in October, once the food is secured, the firewood sawn up and chopped and stacked and all the roads in good working order, then I have many hours for doing indoor things.

[RobG]

OMG, Elaine is going to explode tomorrow - House passes the bailout - bumps up the national debt to >$10.6 trillion.

[Anthony]

South Korea's Economy Likely Maintained Pace of Growth, Spurred by Exports South Korea's economy probably expanded in the second quarter at the same pace as the first as export gains made up for cooling consumer and business spending.
http://www.bloomberg.com/apps/news?pid=20601068&sid=auQk9YuILsaY&refer=economy

Japan June Unadjusted Trade Surplus at 138.6 Billion Yen: Table of the Day Following is a summary of Japan's merchandise trade balance from the Ministry of Finance in Tokyo.
http://www.bloomberg.com/apps/news?pid=20601068&sid=aYSCck6btTC4&refer=economy

----------
yep. The big asian economy are all lowering their currency. China is joining soon. (what good is giant forex reserve if not for playing the game to pump up the economy?) Use it or lose it right?

So, everybody there will start using their gigantic pile of money.

It'll be interesting what china will do.

[Elaine Meinel Supkis]

Yup. Just got up due to fierce lightning bolts shaking the entire house. What storms we are having! 4 inches of rain so far tonight....