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.
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.
Here is a video of my Federal Reserve and International Monetary speech from the FreedomWorks grassroots bootcamp over the past weekend:
Here is a rough transcript of the speech:
First of all, thank you everyone for being here. It’s inspirational that all of you have taken the time to travel to Washington, D.C. to attend a grassroots bootcamp. I’m going to switch it up a bit and talk about the Federal Reserve and the International Monetary Fund. Now I understand that monetary policy may not be the most exciting policy issue ever. It’s complicated and complex and that’s how the Fed and IMF like it. We owe it to ourselves to learn as much as we can about the Fed and IMF.
I’m first going to address the Federal Reserve. Monetary policy is an extremely important issue. I think we’re in huge trouble. I do believe that we will be facing a dollar crisis in the near future if we don’t return to sound money. Many notable Austrian economists such as Peter Schiff and Jim Rogers are saying we haven’t seen anything yet. Just so we’re on the same page, the Austrian school of economics is a free market school of economics. Some of its founders were from Austria but it has nothing to with the economics of the country Austria. These Austrian economists say that an even worse crisis is on the horizon.
I do have some hope though. The American people are waking up. Just a few years ago, no one with the exception of Ron Paul was really questioning the Federal Reserve in Congress. They all just let it do whatever it wanted and didn’t really pay attention to it. I’ve been in the anti-Federal Reserve movement since 2007 and I’ve seen it rapidly grow. It’s become mainstream to not just criticize the Federal Reserve but to want to end the Fed.
I’ll start with some basics. What is money? Sounds like a dumb question. But we all use money and think about it quite a bit. But we really take the time to ask some vital questions. How does this piece of paper have any value? Who controls the value of the dollar? We all should know that the value of the dollar loses value from time to time. Why is that?
Money is a medium of exchange. Long ago we had a barter economy where people would exchange goods for other goods. Someone with a sword would trade it for some bread. As you can imagine, this was very inconvenient finding someone to trade with. Overtime societies started using commodity money. Commodity money is a money whose value comes from the commodity out of which it is made. Money did not originate with government. For example, some societies used shells and beads as money. These are thought to have value. Historically, the free market has chosen gold as money. If you own gold, you can offer it to someone in exchange for a good that they have.
Today most of the money used in the world is fiat currency. The dollar is fiat money. It only has value because the government says so meaning that it is not backed by anything. Government saw people using money and wanted to get in on the action. They began printing their own money and forcing people by law to use it.
The history of paper money is long but in almost every single case, starting with China in 806 AD, paper fiat currency has failed. Government printed so much money which inflated the money supply and made the money worthless. Today, it is illegal to use anything but the paper dollar as currency. People are in jail right now for trying to start their own currency backed by precious metals.
So now that we have an understanding of money, who controls the value of the money we have in our pockets? The Federal Reserve. The same supply and demand rules apply to money. The more dollars we have in the circulation, the less value the money becomes. It’s scary that the Fed has monopoly control over our money supply.
Since the very beginning, the Federal Reserve has been the most secret and least accountable operation of the federal government. The CIA has more oversight than the Fed. The plan for the Fed started in 1910. A group of the most powerful banks and government officials held a secret meeting in Jekyll Island resort in Georgia and devised the Federal Reserve Act to serve their own self interests. They finally got the Federal Reserve Act passed on the evening of December 22, 1913 when many congressional members were home on Christmas break. That’s how America’s central bank the most powerful institution and the greatest intervention in the economy was created. These unelected bureaucrats can create as much money as they want out of thin air.
Our Founding Fathers understood the dangers of fiat currency. In 1775, the continental congress issued paper money called the continental. The currency was hyperinflated to the point of disaster. This is why the Founders banned paper money and permitted only gold and silver as money in the constitution.
Supporters of the Fed claim that the central bank is necessary to stabilize the financial system. But since the Fed came into existence in 1914, we have experienced numerous recessions and depressions. Members of the Austrian school of economics blame the Fed for these financial crises including the Great Depression.
The Fed has created a boom and bust cycle. It lowers interest rates to put more dollars into the economy which creates a false boom. This sends out misleading signals to consumers and producers. It is impossible for the Fed to continue the boom so an economic crash will ultimately happen. This is called the Austrian business cycle.
Leading economists in the Austrian school warned us about the current economic crash years ago but few people cared to listen. The Fed is the biggest taxer of them all. The Fed steals our money through inflation which is a hidden and immoral tax. Inflation is the increase of money supply in the economy. Since the creation of the Fed, the dollar has lost 97 percent of its value.The Federal Reserve printing money punishes those who safe money for the future. Instead of obvious ways to raise government revenue such as taxation or borrowing, the Fed simply prints as much money as it needs.
The Federal Reserve likes fiat paper currency because it enables them to bail out their friends. The Fed has never been audited. A true audit would reveal what the Fed has been doing behind closed doors. A few weeks ago the Fed was court ordered to release documents which showed that they have loaned to many foreign banks including a corporation part owned by the bank of Libya.
Thankfully, Ron Paul and Rand Paul have introduced the Federal Reserve Transparency Act of 2011. The bill number in the House is H.R. 459 and in the Senate it is S. 202. As Ron Paul says, the audit is just the first step to ending the Fed. The threat of an audit has Fed Chairman Ben Bernanke running scared. There is even greater momentum for an audit this year so it’s very possible that it could pass. It would be amusing to watch Obama come up with excuses to why he doesn’t support the Federal Reserve if the bill ends up on his desk. There’s no good reason why anyone shouldn’t support increasing transparency to the Fed.
There’s another monetary policy issue that needs our attention: The International Monetary Fund. It hasn’t gotten as much attention as it deserves lately and I think it’s because it’s a complicated issue. The IMF is an unconstitutional, outdated and needlessly international bureaucracy. The U.S. should withdraw from the IMF.
The IMF started in 1944 when a group of 44 nations met in Bretton Woods, New Hampshire. These governments developed the Bretton Woods agreement. This was a system of exchange rate management. The IMF would temporary loan to countries who were experiencing balance of payment problems. The Bretton Woods system fell apart in 1971 when the U.S. completely ended the Gold Standard.
The end of the Gold Standard meant dollar devaluation, instability and inflation. After Nixon ended the Gold Standard, this gave the IMF absolutely no justification to continue. Instead of closing down, it simply changed its mission. Today, the main mission of the IMF is to bailout powerful politically connected banks and spendthrift nations at the expense of taxpayers. The IMF is the last lender of resort, loaning to shaky governments that no rational bank would consider.
U.S. taxpayers have the largest stake in the IMF. Out of 187 member countries, the U.S. has the highest quota of about 17 percent. This means that we pay roughly 17 percent of the IMF total funding. Don’t be fooled by government officials who say that the IMF doesn’t cost us anything. Taxpayers subsidize the IMF to the tune of billions of dollars annually yet these subsidies are nowhere to be found in our federal budget.
The IMF is a prime example of our bailout culture. The IMF recently sent nearly $300 billion taxpayer dollars to Greece and Ireland. A bailout of Portugal is now in the works. Barack Obama remains committed to a second bailout of Greece. All of these welfare states lived far beyond their means and we were forced to pay for their mistakes.
The IMF has created moral hazard. This means that they have encouraged reckless behavior by holding out the prospect of a bailout to any nation or large politically connected bank that fails. The IMF bailouts have made financial crises much worse.
The IMF is a clear threat to our sovereignty. The former head of the IMF French socialist party member Dominique Strauss Kahn was recently in the news for allegedly raping a hotel maid in New York City. These are the kinds of people who are running the IMF. The IMF recently proposed a global currency in honor of the father of Keynesian economics John Maynard Keynes. Keynes proposed a global currency called the bancor decades ago. A global fiat currency would grant the IMF even more power while failing to stabilize the global financial system.
Who would administer the banchor? The IMF report suggests a global bank or the Federal Reserve on a global scale. Since the creation of the IMF, it has operated under a veil of secrecy. Since all major decisions require an 85 percent super majority to pass, U.S. treasury secretary Timothy Geithner has the power to veto any IMF bailout. We must put pressure on Timothy Geithner while simultaneous striving to withdraw from the IMF.
I think the most important part of these campaigns is education. I know it may be difficult to strike up a casual conversation on monetary policy but we have to. You’re probably going to be called names like a “kook” but we have to keep fighting the good fight. History will prove us right. These are complicated issues but we owe it to ourselves to educate ourselves. The Fed and the IMF doesn’t want you to understand these issues. I believe that freedom is at stake and I hope that you will join me in speaking out against our dangerous monetary policy. If you want to learn more, I suggest the following books End the Fed by Ron Paul, What Has Government Done to Our Money by Murray Rothbard and the Case Against the Fed by Murray Rothbard. Thank you.
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.
It is often said that Benjamin Franklin once wrote “in this world nothing can be said to be certain except death and taxes.” The dreaded Tax Day has finally arrived. Due to the District of Columbia observing Emancipation Day on Friday, Tax Day official lands on April 18th this year. This means that we are all forced to surrender our hard-earned money to the federal government by the end of the day today. Anyone who owes taxes has to pay up to Uncle Sam or ultimately end up behind prison bars.
Our tax dollars go to fund many senseless programs. According to a report released by Sen. Coburn (R-Okla.), taxpayers paid for poetry in zoos, studies on the video game World of Warcraft and Super Bowl commercials last year. No one should be forced to pay for any of these projects. Advocates of these projects should pay for them privately instead of looting taxpayers. As wasteful as these projects may be, they did go through our legislative process at the very least.
The dirty secret is that our tax dollars go to fund many things not even approved by our elected representatives. The International Monetary Fund comes to mind. Last year, the International Monetary Fund (IMF) sent $145 billion to Greece and $122 billion to Ireland. Neither of these bailouts was subject to congressional appropriations. This has opened up the floodgates to massive bailouts of European welfare states. Many people do not realize that U.S. taxpayers are the largest contributors to the IMF. We pay roughly 17 percent of the IMF’s total funding.
Recently, Portugal officially requested a $116 billion bailout from the European Union and the International Monetary Fund. The IMF has agreed to provide the country a bailout but the international bureaucracy is still hammering out the details of the loan. Rep. Cathy McMorris Rodgers (R-Wash.) states that “while the IMF refuses to provide a reliable number, we estimate that America’s contribution to a Portuguese bailout is equal to writing a check worth $600 for every man and woman in Portugal.”
Just like Greece and Ireland, Portugal is a country that spent well beyond its means for many years. Socialist José Sócrates has been the Prime Minster of Portugal since 2005. Portugal’s debt as a percentage of GDP will rise to 87.9 percent in 2011 and 88.1 percent in 2012. It’s no wonder that Portugal’s economic growth has averaged less than one percent a year in the past decade.
Why should U.S. taxpayers be on the hook for the mistakes of Portugal’s socialist government? U.S. Treasury Secretary Timothy Geithner met with José Sócrates over the weekend. With the highest voting share in the Fund, the U.S. is the only nation with the power to veto all major IMF decisions. Timothy Geithner is the one man who has the authority to put an end to the international bailout madness. We need to put pressure on him to veto these reckless IMF bailouts, which only encourage reckless behavior.
Government and banks are more willing to take risks if they know the IMF will grant them a bailout if they fail, something economists call “moral hazard.” The international bureaucracy has institutionalized too big to fail on a global scale. We ought to allow socialist countries to fail in order for them to correct their mistakes. The IMF would hurt Portugal in the long run by subsidizing their poor economic policies. It has been reported that Spain, Italy and Belgium may be next in line to seek funding. On Tax Day, it’s an unfortunate reminder that our tax dollars go to fund unconstitutional international bailout funds.
Please see below for my new video on the IMF. It’s my first video so I would greatly appreciate any feedback with suggestions or advice. I am hoping this is just the first of many videos to come. I have lots of ideas so stay tuned
The head of the International Monetary Fund (IMF) Dominique Strauss-Kahn is a member of France’s Socialist Party. As one of the 187 member countries, U.S. taxpayers pay roughly 17 percent of the IMF’s total funding. Dominique Strauss-Kahn even unsuccessfully ran for president of France on the Socialist ticket in 2007. Rumors have been circulating that the socialist may be challenging current French President Nicholas Sarkozy in 2012.
Dominique Strauss-Kahn has made his political views clear. In April 2010, the IMF released a report called the “Reserve Accumulation and International Monetary Stability.” The report was full of extensive IMF jargon. However, it’s worth a read to discover what the IMF is scheming. The report reads:
A more ambitious reform option would be to build on the previous ideas and develop, over time, a global currency. Called, for example, bancor in honor of Keynes, such a currency could be used as a medium of exchange—an ’outside money’ in contrast to the SDR which remains an ‘inside money’.
The international bureaucracy has proposed a global currency to honor the father of Keynesian economics- John Maynard Keynes. As an influential economist of the 21st century, Keynes was the antithesis of free markets and limited government. He believed that massive government intervention in the marketplace would somehow lead to prosperity. In 1940, John Maynard Keynes first developed the idea of a supranational currency, called the bancor, to be the world’s key currency. When asked about the long-term effects of his economic policies, Keynes famously replied “in the long run we are all dead.”
A global currency would grant even more power to the international bureaucracy while failing to stabilize the global financial system. The IMF fully intends to push for a dollar alternative. Just last week, the IMF released another report praising the idea. In a recent speech, Socialist Dominique Strauss-Kahn said there is “a sense that money sometimes flows around the globe in too-volatile a fashion and that countries need a more stable, more predictable external environment in order to prosper.”
How would the global currency work? In the IMF report it says:
One option is for bancor to be adopted by fiat as a common currency (like the euro was), an approach that would result immediately in widespread use and eliminate exchange rate volatility among adopters (comparable, for instance, to Cooper 1984, 2006 and the Economist, 1988). A somewhat less ambitious (and more realistic) option would be for bancor to circulate alongside national currencies, though it would need to be adopted by fiat by at least some (not necessarily systemic) countries in order for an exchange market to develop.
Who would print and administer the “bancor?” A global bank modeled after the Federal Reserve. The report continues:
A global currency, bancor, issued by a global central bank (see Supplement 1, section V) would be designed as a stable store of value that is not tied exclusively to the conditions of any particular economy. As trade and finance continue to grow rapidly and global integration increases, the importance of this broader perspective is expected to continue growing… The global central bank could serve as a lender of last resort, providing needed systemic liquidity in the event of adverse shocks and more automatically than at present. Such liquidity was provided in the most recent crisis mainly by the U.S. Federal Reserve, which however may not always provide such liquidity.
It sounds like a conspiracy theory. But I urge you to check out the report for yourself on the IMF’s website. The International Monetary Fund (IMF) is a threat to America’s sovereignty. As Dominique Strauss-Kahn said about the European Union, “the centre must seize the initiative in all areas key to reaching the common destiny of the union, especially in financial, economic and social policy. Countries must be willing to cede more authority to the centre.”A global currency and bank would be a huge step towards a global government.
Last week, the International Monetary Fund (IMF) announced plans to bailout Ireland. Since U.S. taxpayers pay 17 percent of the IMF’s funding, we are the world’s largest contributors. This means that American taxpayers will be on the hook again for billions of dollars to prop up failed economic policies overseas. With the largest share of voting power, the U.S. government has the authority to veto any IMF bailout. For the sake of American taxpayers, Congress should reject any effort to bailout profligate European countries.
Earlier in the year, the U.S. government sent 145 billion taxpayer dollars to Greece. The economic fiascos in Greece and Ireland are remarkably similar. Both countries spent more money than they could reasonably afford. In Commentary, Jim Glassman writes:
Greece has been behaving as if it were truly rich. The secret was borrowed money. At the end of 2009, the country had a public debt equivalent to 114 percent of its GDP… Meanwhile, Greece consistently violated the EU’s rules for minimum deficit and debt levels. The Greeks, however, lived better and better, with an official retirement age of just 58.
Unfortunately, Ireland’s government also made a series of irresponsible and costly decisions. On the heels of the financial crisis, Ireland responded by increasing the size and scope of government. The Carnegie Endowment for International Peace points out that “European monetary policy…was far too loosefor Ireland.” Just as we saw in the US, Europe’s loose monetary policy caused the supply of credit to explode followed by a foreseeable crash. This bust is an inevitable consequence of excessive credit creation by central banks.
The best solution is to let the market self-correct. This may be a costly and sometimes painful process but increased government involvement will ultimately worsen the problem. However, Ireland wrongly responded to the crisis by “injecting” more money into the economy and purchasing trouble assets. As the Carnegie Endowment further discusses,
These measures obviously took a heavy toll on government finances. At 13.9 percent of GDP, estimated financial sector stabilization costs through 2009 are the highest of any advanced country.
In many ways, Ireland and United States reacted in similar ways to the financial crisis. The US has recently passed a series of poor economic policies—TARP and the “stimulus”—that have failed to produce long-term recovery. We may be following in Ireland’s footsteps.
As the graph below shows, Ireland has spent money at unsustainable levels for the past few years.
Instead of massively cutting spending, Ireland is asking the European Union and IMF—thus American taxpayers— for about 95 billion Euros or $130 billion. Even still, fixed-income strategists at Lloyd TSB Corporate Markets Charles Diebel and David Page state that “the markets currently have virtually zero confidence that the bailout in Ireland will solve the European crisis.” They’re right. Since a taxpayer bailout would encourage reckless behavior, it will actually make fiscal problems worse in the long run.
It is hard to justify that those European countries with foolish economic policies should be rewarded overseas taxpayer funds. The Wall Street Journal reports“the concern is that by rescuing a country that for years flouted fiscal discipline, the European Union would be encouraging such behavior rather than discouraging it.” If Ireland receives a bailout, it is reported that Portugal and Spain may be next in line to seek funding.
We cannot allow this to continue any longer. Congress should veto all proposed international taxpayer bailouts that only reward poor economic decisions. Ireland needs to take full responsibility for their actions. Not force us to pay for their mistakes.
