Thursday 19 January 2012

The IMF Delusion

Leading French lady and President of the IMF, Christine Lagarde, has been on manoeuvres this week trying to bounce the IMF into supporting the Eurozone. A new £300 billion of funding to help 'satbilise' countries across the World. Clearly this is aimed at her home Country and the Euro.

Sadly though, the US Congress would have to vote on a huge chunk of this extra commitment; as would the UK Parliament - chances of success of agreeing to a French led bail-out - zero.

It is desperate to see this being floated as an idea as the Countries of Europe continue to avoid the obvious route of breaking up the eurozone and using devaluation as away out of the debt crisis. At the rate we are going the debts are going to take 100 years to pay-off which is not practicable at all.

Even if the US does bail-out Europe, it will be through the Federal Reserve lending to European banks.

No end to the crisis in sight, which means big risk of further dislocations in the markets and in the World economy.


Anonymous said...

100 years to pay off debt ? Where did that time scale come from ?
I'd be interested to see the figures, per year, for last 100 years on 'time to pay off debt'. Else statements like that actually mean nothing. Or to put it another way, what is the projected time to pay off debt in 2017 ??? Is it 95 or still 100 or more ?

Steven_L said...

They never pay it off, it just increases and increases. Then when the leverage gets too bad and they can't increase it anymore they start printing.

Budgie said...

We have given £10bn in loans and guarantees direct to Eire. We have given £30bn to the IMF, with a further £10bn in the pipeline. All to support the euro. Already.

Money to the IMF is not hypothecated despite Osborne's claim that we will only support countries but not currencies. We know the Coalition will give more yet, and we know that Osborne will lie about it as he is already doing.

The Coalition's £50bn euro lifeline is money we have not got that our children will have to repay (£40,000 student debts for example).

Whilst I watched the incompetence, hubris and nemesis of Brown with amazement, I do not think I have ever been so angry at the antics of a government as this Coalition den of thieves.

Bill Quango MP said...

Saw the ex-Mrs Huhne, Vicky Price, on SKY.

"Well..economists kept asking for over 18 months for details of a plan B from the EU. The plan A, everyone will pay their debts and the economies will recover, looked increasingly unlikely."

"And what was that plan B?"

"I don't know. We're still waiting."

She must have been reading this blog.

Electro-Kevin said...

Budgie - I expected to be in rags and subsistence farming by now.

Could it be that George Osborne has staved off some of the worst effects ?

I share your anger about the EU btw.

Laban said...

Let me get this right. The ECB is lending huge amounts of dosh at 1% to any Euro central bank that wants it, taking pretty much anything as collateral. Central banks buy Eurozone debt at, say, 3%, and park it with the ECB as collateral for yet more 1% cash (who gets the 3% - the ECB?). Bond yields fall and Euro banks rebuild balance sheets.

a) where did the ECB get all that cash from to lend at 1% - is it creating it ?

b) if so, aren't they effectively printing ?

c) can this happy process continue indefinitely, or can it all go horribly, wheelbarrow-inflationary wrong ?

d) if it can go wrong, what's the mechanism by which it unwinds ?