D. Strauss-Kahn / T. Geithner
IMF says worth exploring borrowing from markets … The International Monetary Fund said it was worth exploring ways that the global institution could borrow from financial markets at short notice to raise additional funding for its lending programs. In a paper that looks at progress by the Group of 20 major economies in reforming the global monetary system, the Fund said building confidence in the IMF’s ability to respond to crises may warrant looking at alternative ways of fund-raising, including turning to markets. – Reuters
Dominant Social Theme: The world’s economy is a disaster. The IMF is the logical choice to lead the way to a brighter banking future in a consolidated, centralized, world economy. It says so itself.
Various speculations immediately come to mind. The first is that IMF executives are expecting something big, probably the default of Spain. The idea would be that the EU, which has been struggling with gnats such as Portugal, Greece and Ireland, simply could not handle a default the size of Spain. The IMF has been faithfully at the side of the EU, madly indemnifying Southern PIGS as they fall; but even the IMF could not handle such a bankruptcy, or so we speculate.
Of course, Spanish officials have recently issued a series of statements indicating that Spain is solvent and will remain so, which in our view means a default is almost certainly on the way. Over the weekend, EU officials claimed, as well, that the EU had turned the proverbial corner and that recessionary trends were giving away to recovery. Again, from our point of view, this almost certainly means that the EU is slumping into dire straits, maybe a depression.
Yes, the IMF may be looking ahead. It receives funds via its 150-plus member countries, but these funds will not be enough if Spain collapses, especially given the other demands the IMF is facing. A special levy could be undertaken, but a more innovative approach would be to tap the larger financial markets.
This would have several pleasant side effects. (Never let a crisis go to waste.) First it would further establish the IMF as an independent body rather than a lending facility. The IMF is actually subsumed under the UN, and subsidiary bodies such as the IMF and the WHO do not traditionally offer independent securities. To do so places the subsidiary in a new light; suddenly it is seen as an independent actor on the world stage, an entity that can raise its own funds and therefore determine its own course of action.
Free-Market Analysis: Can you hear the whispers coming out of the shadows? Over the past months, we have covered the IMF’s increasing efforts to position itself as the world’s future central bank and one-world currency issuer. We can see from the above article in Reuters – a chief mouthpiece of the power elite along with the Economist magazine – that the campaign is in no sense winding down. Now the IMF casually, oh-so-casually, floats the idea that it might tap global markets for funding.