Throwing Good Money At...

TOOTHLESS LOAN SHARKS

By William Westmiller
09/17/98

The International Monetary Fund wants another 18 billion dollars from American taxpayers. What are we buying? Promises of good intentions. Intentions proven hollow after nearly every previous loan to Russia, China and the Far East. The financial wizards moan and wail that it's essential to maintain "liquidity" in the world monetary system. It sounds so complicated and confusing that we're inclined to leave it in the hands of our financial wizards. After all, what do the average Joe and Jane know about spending a few billion bucks? Jane and Joe should be indignant. The IMF scheme isn't complicated, but it is certainly foolish.

The IMF is a huge piggy-bank holding "contributions" from dozens of governments around the world. The more we chip in, the more our wizards have to say about how it's spent. Since the US taxpayers chip in the biggest chunk, US wizards have more voting power than foreign wizards. "Chipping In" is a very technical term meaning "give away", but the wizards have agreed to call it a "loan". That way, the money isn't really gone, just on vacation. The money in this huge piggy-bank is loaned to countries who have proven that they can't handle money. When a country prints and spends money with abandon for years on end, it quickly becomes good-for-nearly-nothing. This is called a "liquidity crisis". The IMF steps in to reward this "good deed" with our good money. It's the Emmy Awards for incompetent foreign financial wizards.

The really exciting thing about the IMF club is that, when they loan money, they get to tell the incompetents how to fix the problem, or else. Or else, what? Or else, they'll "loan" more money after discovering that their "fixes" didn't work and that the debtor governments mostly ignored the conditions anyway. Some IMF conditions may actually make sense: spend less, tax more, invest in business, expand the free market, privatize government industries, etc. The Russian wizards say "sure, why not?" and are promptly handed 20 billion bucks. Joe and Jane canguess where the Russian oligarchs put the money: spending more, taxing less, paying off supporters, increasing bureaucrat salaries, and handing over government industries to their best friends. Now, a few years later, they're back for a new "emergency loan" of only 18 billion dollars. A vast improvement.

Of course, the wizards in Washington don't call this a con game, they call it a "moral hazard". They fret over the possibility that bank robbers will not be discouraged by the fact that they've left the bank vault unlocked all night long. It's just so terribly unfortunate that the bank robbers weren't persuaded to be good citizens by these kind efforts to help them, so we just have to be a little more helpful next time. Drop the money on the curb when there's a policemen's picnic in progress. That'll teach them a lesson!

The motive for the IMF exercise is right out on the table. The wizards have grown tired of tinkering with national finances and now want a hand in international transactions. They don't want to talk about their convoluted procedures, loan conditions, or abject failures. It's all kept secret, closely confined to the inner circles of wizardry. Take their word for it. There are no options. It has to be done for the benefit of the world and it has to be done now. Among their newest proposed games is a "transaction fee" on money exchanges. This teeny tiny tax will reduce the influence of nasty individual investors who confound the best laid plans of wizards by pulling their money out of failed foreign ventures and schemes. Bad Joe and Jane!

The miracle of Wall Street is that millions of Americans appraise the risks and benefits of tens of thousands of investments around the world every day. They make individual decisions and suffer the consequences, or enjoy the benefits, of their decisions. The IMF wizards collect a big salary and hire thousands of gophers, but there are no consequences - to them - for their bad judgement and fraudulent con game. The financial consequences for American taxpayers could be worse than the S&L Bailout.

The premier case in favor of the IMF is that it is the world "lender of last resort". Jane and Joe do their best to be financially responsible. But their neighbors may have no tangible assets; no equity, no history of prompt payments; and no other options. They might chose to go their personal "lender of last resort": the loan shark. The IMF is the big daddy of loan sharks, catering to nations who have a credit rating worse than Attila The Hun. The only difference is that the IMF can't break legs. The only options for the IMF wizards is to send more good money after the bad, or write-off the loss. The IMF always has been and always will be a bottomless hole forresponsible taxpayer's money. The only reasonable policy is to call in our IMF loans, recover what we can, and return it to Joe and Jane.

c1998, William Westmiller
California Coordinator of the Republican Liberty Caucus
Past Candidate for the Republican Nomination for (24CD) Congress
Former National Secretary, California Chairman, Libertarian Party
goodmon.c04 ~850 Words