The IMF Ironically Wants a Bailout

Originally posted at FreedomWorks.org.

The International Monetary Fund (IMF) is a fundamentally flawed institution that currently serves as an international bailout fund. The global bureaucracy has spent decades bailing out reckless foreign countries and banks, of which most recently are Greece, Ireland and Portugal. But now reports are circulating that the IMF needs a bailout of their own.

IMF head Christine Lagarde recently signaled that the Fund is running low on bailout money. According to the Telegraph, “the IMF has warned that its $384 bn war chest designed as an emergency bail-out fund is inadequate to deliver the scale of the support required by trouble states.” While no specific details have been released yet, hold on your wallets. As Cato Institute scholar Dan Mitchellcautions, the IMF “presumably will demand more handouts from member nations – with the United States on the hook for providing the biggest share.”

Many people do not realize that U.S. taxpayers actually pay the largest share of the IMF’s bills. The American mainstream media—with the exception of former IMF head Dominique Strauss-Kahn sex scandal coverage—has largely ignored the IMF. But as Cato Institute scholar Doug Bandow writes, “if the IMF was only spending other people’s money, then the U.S. might remain an amused bystander. But as the largest single contributor (16.67 percent, to be exact) to the Fund, American taxpayers are on the hook for a share of that organization’s lending, which ran more than $90 billion last year.” Americans would be wise to pay closer attention to what the IMF has done with our money.

Americans taxpayers should not be forced to bail out the IMF. Nor should they be forced to subsidize foreign banks and spendthrift governments. As economist Henry Hazlitt wrote, “the real solution is to dismantle the International Monetary Fund system.” The IMF is an unconstitutional international bureaucracy that has harmed taxpayers, threatened our national sovereignty and has propped up dangerous economic policies.

The Constitution certainly does not grant the federal government the authority to join international institutions such as the IMF. The international bureaucracy undermines our national sovereignty since our elected congressional representatives cannot even vote on these foreign bailouts. Unfortunately, the only American man with the power to veto IMF bailouts is Treasury Secretary Tim Geithner. Can Tim Geithner please be fired already?

All of the IMF loans and bailouts have inflamed what economists call moral hazard. The IMF has held out of the prospect of a bailout which has encouraged banks and governments to make more risky decisions. As Professor Philipp Bagus says, “risky countries, and, more importantly, their creditors, view the guarantee of bailouts as an insurance policy. Investors are less cautious about investing in developing economies as the IMF has implicitly guaranteed to cover their losses in the event of a financial calamity.”

The IMF should not get one more cent from U.S. taxpayers. We’d be better off if the United States would immediately withdraw from the international bailout fund which does not serve a legitimate purpose.

Another French Statist Named Head of the IMF

Originally posted at FreedomWorks.org.

It’s former French Finance Minister Christine Lagarde first week as the Managing Director of the International Monetary Fund (IMF). She is replacing the former IMF chief Dominique Strauss-Kahn (DSK) who recently resigned after being arrested in New York City for an alleged rape. Shortly after DSK was formally indicted, the IMF began its month-long politicized selection process behind closed doors. In choosing Christine Lagarde to fill the vacant leadership spot, the IMF is merely replacing one French socialist with another. The country has become a hegemon with now five out of the eleven appointed IMF chiefs from France. Was Christine Lagarde the right choice?

Christine Lagarde may have a cleaner record compared to her predecessor. But all signs point to the fact that Christine Lagarde will likely be more of the same. She’s the typical “eurocrat.” Lagarde has instigated for stricter regulations on hedge funds and favors the expansion of the European Union. As Cato Institute scholar Doug Bandow writes, “Christine Lagarde appears to be a standard French statist and has been deeply involved in organizing the succession of European bailouts.” In other words, don’t expect the bailout mission of the IMF to change with Lagarde in charge.

The real question is why does the IMF exist anymore? Following the resignation of DSK, the international bureaucracy should have finally shut its doors. For decades, the IMF has propped up shaky governments and politically connected banks. As Ron Holland explains,”the IMF and the World Bank have worked together to advance the monetary and political interests of the power elite for decades. They use a good cop and bad cop strategy. Basically the World Bank loans money to corrupt governments and politicians that loot and squander the funds. Then this is followed by the IMF to the rescue by insisting on an ‘austerity program’ of higher taxes and lower government spending to ensure the loans are paid.”

The IMF is a fundamentally flawed institution. Whoever happens to be the Fund chief makes little difference in terms of the big picture. The IMF bailouts of European welfare states will almost undoubtedly continue under Lagarde’s watch. The most recent IMF bailouts include Greece, Ireland and Portugal. It has been reported that Spain and Belgium may be next in line to be bailed out followed by Greece—again.

U.S. taxpayers are financing the bailouts of spendthrift European governments. According to Cato Institute scholar Doug Bandow, “If the IMF was only spending other people’s money, then the U.S. might remain an amused bystander. But as the largest single contributor (16.67 percent, to be exact) to the Fund, American taxpayers are on the hook for a share of that organization’s lending, which ran more than $90 billion last year.” Why, again, are U.S. taxpayers are the hook for the bad economic policies of foreign countries?

The IMF is an unconstitutional and outdated international bureaucracy. The media coverage of the DSK scandal has brought much-needed attention to the Fund. But we don’t need another leader of the IMF. We’d be better off if the IMF closed down—for good.

Time to End IMF

Originally posted at FreedomWorks.org.

The head of the International Monetary Fund (IMF) Dominique Strauss-Kahn was arrested in the first-class cabin of an Air France jet bound for Paris on Saturday. The French socialist who is nicknamed the “le grand séducteur” or Great Seducer was charged with attempted rape, unlawful imprisonment and a criminal sex act. A New York grand jury formally indicted him yesterday on seven counts related to the alleged sexual assault of a maid in a fancy $3,000-a-night Midtown Manhattan hotel over the weekend. Everyone is innocent until proven guilty, and Strauss-Kahn does have at least two other women accusing the married socialist of previous sexual misconduct. But what he is clearly guilty of is working to advance the political interests of the power elite at the expense of everyone else as head of the IMF.

The good news is that DSK (as he is known to his supporters) resigned as head of the International Monetary Fund on Wednesday. Unfortunately, we’re still forced to foot the bill for the international bureaucracy. Dominique Strauss-Kahn and other privileged IMF bureaucrats have lived large on the U.S. taxpayer’s dime. U.S. taxpayers subsidize the IMF to the tune of billions of dollars annually. We have the largest stake in the IMF contributing roughly 17.09 percent of its total funding. Despite our payments to the IMF, our elected representatives in Congress have no authority to directly control the actions of the international organization. Unelected bureaucrats at the IMF have the ultimate power to dictate fiscal and monetary policy on a global scale.

As a self-proclaimed socialist, Strauss-Kahn claims to support wealth redistribution. He has said that “gaping income gaps threaten social and economic stability.” Dominique Strauss-Kahn seems to never let anything get in the way of his privileged lifestyle. He earned $420,000 a year in salary plus pension contributions and generous benefits. These job benefits included $75,000 annually to solely pay for his house in Washington, D.C. The European media has dubbed him to be a “champagne socialist” since he’s been known to ride around in lavish Porsches. Dominique Strauss-Kahn has a special arrangement to always fly first class. His IMF contract stated that “your travel on official Fund business…shall be in first class.” Strauss-Kahn was known to jet-set around the world in style while violating our national sovereignty.

How then can the American people trust the IMF with their hard earned money? As Congressman Ron Paul (R-Tex.) stated “these are the kinds of people who are running the IMF and we want to turn the world’s finances and the control of the money supply [over] to them?” The problems with the IMF go far beyond Dominique Strauss-Kahn’s lack of character. The international bureaucracy itself is an immoral and unconstitutional organization. It no longer serves its original purpose under the Bretton Woods system which ended in 1971. Instead of shutting down, it found a new role as an international bailout fund. The IMF regularly puts taxpayers on the hook to bailout powerful banks and profligate foreign nations. According to the Hoover Institution at Stanford University, “IMF loans are used to rescue wealthy, politically connected bankers, investors, and financiers at the expense of domestic taxpayers.”

Even worse, the IMF has a long history of fueling third-world dictators. IMF loans and bailouts are government to government transfers. A Joint Economic Committee study says that, “evidence suggests that the IMF knowingly makes loans to corrupt governments while recognizing that some of its loan conditions and procedures can create circumstances promoting additional corruption.” The IMF has given taxpayer funds to the Mubarak regime in Egypt and the Khadafi regime in Libya. It’s clear that these IMF loans have hurt the average citizen in these authoritarian nations.

The recent arrest of Dominique Strauss-Kahn is just another reminder of the corruption present at the IMF. The alleged behavior of Strauss-Kahn has diverted much needed public attention to the unethical international bureaucracy. Rumors are swirling that the Former Prime Minster of Britain Gordon Brown may seek to fill the vacant position. The IMF will remain a dangerous institution no matter who becomes the new head. With the U.S. federal government facing a record national debt, it’s time to stop sending money to this international bailout fund.