Congress Gives IMF Your Tax Dollars to Bailout Greece

Lost in the debacle known as Greece is the fact no one seems to challenge the premise on how Greece is being bailed out.  Most of the money for the bailout of Greece comes from other European nations while the International Monetary Fund (IMF) has stepped in to supply 1/3 of the bailout funds through loans from the U.S. and other G20 nations including Japan, China and Brazil.

Where does the U.S. get these funds to loan the IMF?  Where do any of these countries get the money to give them?

Congress Uses Your Tax Dollars to Bailout Greece and Other Nations

In 2009 at the Group of 20 (G20) nations summit in London, countries in attendance agreed to a “war chest” to prevent any future global financial meltdown from occurring.

Leaders of the world’s 20 largest economies earlier this month offered the IMF a $1 trillion war chest to help countries in trouble and pledged to make it the premier financial watchdog to help avoid the next global downturn.

$1 Trillion?  Are things really that bad?

The U.S. contribution to the IMF war chest was $100 billion in June of 2009. Did the U.S. just have $100 billion sitting around to give the them when just 8 months earlier the Republicans and Democrats approved a $700 Billion TARP bailout of U.S. banks?  Did Congress sell some of our gold or National Parks to raise the capital to send to the them?  Did you write a check to Congress and direct it towards them?  Well, the answer is, yes…you did, whether you know it or not.

How can a country that is over $12 trillion in debt allow Congress to loan $100 billion to the IMF? Where does this money come from?

To answer these questions, one must first resolve just who the IMF is and why Congress is so eager to give them your tax dollars.

Who Is the IMF

In a nutshell, the IMF is just a bunch of rich countries banding together to help out the smaller countries, typically of the third world variety.  Of course in doing so, the rich countries want something in return.

The International Monetary Fund was founded in 1944 at Bretton Woods, New Hampshire as a result of the financial turmoil of the 1930s. The aim was to create an institution that would help rebuild – along with the World Bank – the world economy.  The IMF is neither a world central bank nor a development bank. It acts as a monitor of the world’s currencies by helping to maintain an orderly system of payments between all countries. It is also a kind of international credit union. Member countries contribute money to the Fund, which in turn lends money to members who face severe balance of payment problems. Critics of the IMF complain that its short-term loans are accompanied by stringent conditions that often end up doing more harm than good. Original Source: AWorldConnected.Org

The IMF defined mission from their own site is:

An organization of 186 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

But let’s be real…it’s really the rich countries that tell the others what to do.

What Effect Do the Policies Implemented by the IMF Have?

These “stringent conditions” on the loans given to countries are further defined as:

(1) Monetary austerity: Tighten up the money supply to raise internal interest rates to whatever heights needed to stabilize the value of the local currency. (2) Fiscal austerity: Increase tax collections and reduce government spending dramatically. (3) Privatization: Sell off public enterprises to the private sector. And (4) Financial liberalization: Remove restrictions on the inflow and outflow of international capital as well as restrictions on what foreign businesses and banks are allowed to buy, own, and operate. Only when governments sign this “structural adjustment agreement” does the IMF agree to: (5) Lend enough itself to prevent default on international loans that are about to come due and otherwise would be unpayable. And (6) arrange a restructuring of the country’s debt among private international lenders that includes a pledge of new loans. Original Source: AWorldConnected.Org

In other words, it’s just a way for these nations to acquire the wealth/assets/productivity of the nations who weren’t able to manage their own affairs.

Debt is an efficient tool. It ensures access to other peoples’ raw materials and infrastructure on the cheapest possible terms. Dozens of countries must compete for shrinking export markets and can export only a limited range of products because of Northern protectionism and their lack of cash to invest in diversification. Market saturation ensues, reducing exporters’ income to a bare minimum while the North enjoys huge savings. Susan George, A Fate Worse Than Debt, (New York: Grove Weidenfeld, 1990)

The result is something like what has happened in Jamaica as described in the documentary Life and Debt.  The citizens of these countries receive a lower quality of life as they become debt slaves to the IMF, whose mission you will remember is to “reduce poverty.”  In reality, they are the mechanism that ensures poverty so the rest of the world can buy low cost goods.

The Economist (18.9.99), not a magazine noted for radicalism, calls the IMF “an overbearing organisation with a well-thumbed book of macro-economic policy nostrums”. It goes on to argue that “the Fund and [World] Bank have been hijacked by their major shareholders for overtly political ends. Whether in Mexico in 1994, Asia in 1997 or Russia throughout the 1990s, the institutions have become a more explicit tool of western, and particularly American, foreign policy.”

They do not reduce poverty and mainly benefit the better off in poor countries; they seem designed more to benefit large corporations by giving them cheaper raw materials and access to new markets.  Kicking the Habit By Joseph Hanlon and Ann Pettifor

So How Is It the IMF Can Do What They Do?

If you think about it, the IMF is somewhat just like the FDIC.  All of the banks in the U.S. pay a fee to the FDIC to insure that if one or more of the banks has financial problems, they can be bailed out by the FDIC.  186 nations contribute to the IMF.  If one or more of these nations have financial problems, they can be bailed out by the IMF.  In reality, they are just an extension of the Federal Reserve as “lender of last resort.”

Government deposit insurance was only one of many policies adopted during the 20th century designed to suppress economic and business failures. On the theory that certain banks were “too big to fail,” the United States government transferred $2.5 billion to save the Bank of New England in the early 1990s. That was as nothing compared to what would come later.  Beginning with the Latin American debt crisis of 1982–86, the government undertook to bail out, either directly or through augmented payments to the International Monetary Fund, American banks and investors who had lent large sums to insolvent Third World governments and firms. As if to confirm the validity of the theory of “moral hazard,” the Mexican bailout of 1994 ($40 billion) was followed closely by the IMF “rescue” of the collapsing currencies of East Asia—South Korea, Thailand, Malaysia, and Indonesia ($120 billion). And so it goes. Historian Scott Trask, Mises Institute

Earlier I posed the question as to where the money comes from to pay the IMF.  The answer is the same place it comes from to pay the Federal Reserve; from the printing presses provided by the Treasury.  Does anyone really think a nation with a total debt of over $12 Trillion can afford to pay $100 Billion to the IMF in the middle of a financial meltdown and two wars if it didn’t have a printing press?

So what about the future of Greece. What does the IMF have in store for them?

What Does IMF Involvement Mean for the Future of Greek Citizens?

“This is a defining moment for Greece,” said Poul Thomsen, who heads the IMF negotiating mission to Athens. “The global economic crisis exposed Greece’s weak fiscal position. Revenues have declined significantly, while spending, especially on wages and entitlements has risen sharply.

“What the government has committed to is a tough, front-loaded program that will correct things for the future, although it will take time. Indeed, it will be a multi-year effort,” Thomsen explained. “The authorities have already begun fiscal consolidation equivalent to 5 percent of GDP and further legislative action is expected this week. There is also an emphasis on fairness, with measures to protect the most vulnerable. The authorities are asking the Greek people to share the burden fairly across all levels of society,” he added.

A nice rosy synopsis….written by someone from the IMF of course.

In January, Greek Prime Minister George Papandreou came out and said they wouldn’t need IMF help and the poor would be taken care of.  As we now know, the IMF was called in to help.  What are the odds the citizens of Greece who are poor will be unaffected as a result?

Congressman Ron Paul summarizes the effect of the IMF programs of the past on the poor;

{They are] supposed to help the poor people of the world and redistribute wealth.  They have redistributed a lot of wealth, but most of it ended up in the hands of wealthy individuals and wealthy politicians. But the poor people of the world never get helped by these programs.

Living proof of this comes from Ross P. Buckley, The Rich Borrow and the Poor Repay: The Fatal Flaw in International Finance, World Policy Journal, Volume XIX, No 4, Winter 2002/03:

According to UNICEF, over 500,000 children under the age of five died each year in Africa and Latin America in the late 1980s as a direct result of the debt crisis and its management under the International Monetary Fund’s structural adjustment programs. These programs required the abolition of price supports on essential food-stuffs, steep reductions in spending on health, education, and other social services, and increases in taxes. The debt crisis has never been resolved for much of sub-Saharan Africa. Extrapolating from the UNICEF data, as many as 5,000,000 children and vulnerable adults may have lost their lives in this blighted continent as a result of the debt crunch.

The IMF’s Real Purpose

Ron Paul goes on to reveal the real purpose of the IMF and please note, this was written in 2004.  Ron Paul has always been on top of things and it’s time people start listening to what he has to say;

The IMF provides a perfect illustration of the both the folly of foreign aid and the real motivations behind it. The IMF touts itself as a bank of sorts, although it makes “loans” that no rational bank would consider – mostly to shaky governments with weak economies and unstable currencies.The IMF has little incentive to operate profitably like a private bank, since its funding comes mostly from a credulous US Congress that demands little accountability. As a result, it is free to make high-risk loans at below-market interest rates.  The real purpose of the IMF is to channel tax dollars to politically-connected companies. The huge multinational banks and corporations in particular love the IMF, as both used IMF funds – taxpayer funds – to bail themselves out from billions in losses after the Asian financial crisis. Big corporations obtain lucrative contracts for a wide variety of construction projects funded with IMF loans. It’s a familiar game in Washington, where corporate welfare is disguised as compassion forthe poor.  In fact, IMF loans often do far more harm than good. At best IMF borrowers are governments of countries with little economic productivity; at worst the money ends up in the hands of corrupt dictators. Either way, most recipient nations face huge debts they cannot service, which only adds to their poverty and instability. IMF money ultimately corrupts those countries it purports to help, by keeping afloat reckless political institutions that destroy their own economies. Source: LewRockwell.com

The icing on the cake can be found in what the IMF is doing in helping the poor countries mitigate climate impact; giving them $100 billion.  That’s right, the IMF is giving poor countries $100 billion to help deter the effect of global warming.  Which U.S. corporations do you think will benefit from this move?  You can’t make this stuff up!

How about the IMF use that money instead to teach nations self- sufficiency? Would they ever consider such madness?

Yes, there are consequences to high priced government employees, unions and the like, resulting in living beyond one’s taxable means.   It would be the same for any individual who maxes out their credit cards where there choices are defaulting on the cards, or borrowing from someone to stay afloat a little longer.  But without a change in how one got there to begin with, the same problem will occur down the road.  As for Greece, relying on the Angel of Death represented by the IMF is no plausible solution.

So, how do you feel about bailing out Greece at the expense of our own nations needs, knowing full well it benefits a select few and will result in a worse off situation for the citizens of Greece?

Ron Paul concludes:

The IMF and other complex schemes only serve to obscure the real issue: Why should US taxpayers be forced to send money abroad? Certainly the Constitution provides no authority for foreign aid. In historical and practical terms, redistribution of wealth from rich to poor nations has done little or nothing to alleviate suffering abroad. Only free markets, property rights, and the rule of law can create the conditions necessary to lift poor nations out of poverty.

It’s time to hold your congressmen and women accountable folks.  It’s time to say “I’m Fed Up!”