Germany Opposed To Unconditional IMF Safety Nets ... Germany is opposed to the setting up of 'global financial safety nets' under the aegis of the International Monetary Fund, a Deutsche Bundesbank official said Tuesday. The official told journalists that the mechanisms proposed by the G-20 group of nations, would create moral hazard by obliging countries to provide unlimited liquidity without conditions in times of financial stress. The comments come as the German delegation prepares to fly to Washington DC for the autumn meetings of the IMF and World Bank ... The IMF's willingness to provide loans under the PCL to countries which, in its own words, "may not meet the FCL's high qualification limits" appears to have raised hackles at the Bundesbank, which has consistently opposed any dilution of the IMF's principles of only lending against strict commitments to sustainable fiscal and monetary policy. The initiative to expand such "safety nets" is part of the G-20's efforts to make the international financial system more stable. It has been promoted by South Korea and has received some limited support from France and U.K. – WSJournal.com
Dominant Social Theme: The world needs a central bank and the IMF is ready to be one.
Free-Market Analysis: As we have written plenty of times before, it's startling to see how fast the Anglo-American power elite is willing to move now toward a more specific and comprehensive global governance. When we read this article, even just the beginning, it was obvious to us what was going on. And then we came to this sentence: "It means a de facto obligation to provide unlimited liquidity in euros...but the IMF is not a central bank for the world." Exactly. Is there a sub dominant social theme in the article. Perhaps so: "Pushback will continue but the IMF's expanded role is inevitable.
Indeed, the IMF is being cast in some places as an inevitable precursor to a world central bank. It need only graduate from SDRs to bancors and then expand its monetary authority. Of course we've covered this evolution in the past, but we didn't take it very seriously. The world moves slowly and is a complex place. But as we've seen (and commented on) over the past year, the Anglo-American elite seems to have shed any inhibitions about moving slowly or deliberately toward global governance goals.
It is in a race of some sort, though who or what it is running from or towards is not clear. But in picking up the pace in a kind of mad dash toward some unseen finish line, it is abandoning at least a century of deliberate, promotional construction designed to bring Western citizens in line with its goals. We've written we have no explanation. Let's say for argument's sake there are 6,000 in the ranks of the Anglo American familial elite. That still leaves six billion people that one needs to "bring along" presumably. But convincing people seems about the last thing on the mind of elite these days so far as we can tell. In aggregate, it gallops madly forward, careening out of control, oblivious to obstacles, increasingly leaving a trail of ruin behind.
The bluntest and most alarming presentation we've read recently regarding the IMF comes from Germany's powerful Spiegel magazine. This is ironic, given that the Germans, as we can see from our initial article excerpt above, are the lone power standing up to the IMF's efforts to remake itself (with fairly blinding speed) into a global central bank. But it is this article we will spend the rest of our time analyzing. It deserves all of our attention – and yours, though trying to describe this article leaves one almost without words. It is so fulsome, so slavishly admiring, so ... craven in its intention to please the powers-that-be that it is a truly remarkable example of a certain kind of journalism. It is available in its entirety (translated) online and we would urge anyone to read it. Here is how it begins:
Three years ago, the International Monetary Fund was irrelevant, an object of derision for all opponents of globalization. Under director Dominique Strauss-Kahn (above left) and as a result of the global economic crisis, the IMF has since become more influential -- governing like a global financial authority. It is also putting Europe under pressure to reform.
The building that houses the headquarters of the global economy is a heavily guarded, 12-story beige structure in downtown Washington with a large glass atrium and water bubbling in fountains. The flags of the 187 member states are lined up in tight formation.
Visitors walking into the office building find the cafeteria on the right, where many meetings are held. There, experts in their shirtsleeves, their jackets draped over the backs of chairs, drink lattes out of paper cups and talk countries into crises or upturns. A little farther down the hallway is the Terrace, the IMF building's upscale restaurant where the director receives official guests.
On a Tuesday afternoon in late September, as the first leaves are falling from trees outside, the director, wearing a blue suit and a blue tie, is sitting on a blue couch high up in his office at the headquarters of the International Monetary Fund (IMF), outlining his idea of a new world. Some of it already exists, in the form of a new world order established in September 2008 to replace the one that was collapsing at the time. The result wasn't half bad -- but it is robust?
There is nothing halfhearted in this voluminous portrait of Dominique Strauss-Kahn and the reinvention of the IMF. In the first four paragraphs descriptions like "global financial authority" and "new world order" and "new world" are strewn about with all the subtlety of an IMF bailout itself. The very next paragraphs read as follows:
'The Money Is The Medicine' ... These are important times for humanity. The crisis has forced everyone to see many things from a new perspective. Now the IMF is preparing for its annual meeting on Oct. 8. Can it live up to expectations, and can it police the new global economic order and keep global banks in check? "You have to imagine the IMF as a doctor," says Dominique Strauss-Kahn, the 61-year-old director of the International Monetary Fund. "The money is the medicine. But the countries -- the patients -- have to change their habits if they want to recover. It doesn't work any other way." He smiles benevolently as he says these things, his eyes disappearing behind small cushions of wrinkled skin.
Money is not medicine of course. The IMF, with its history of reducing middle classes around the world to ruin, is nothing like a doctor. After reading it, if one still believes in such a thing as freedom in the world, one wants to take a long bath. There is a brutal deliberateness about the language (assuming the translation is accurate), which must be calculated. From the next paragraphs:
The IMF, says Strauss-Kahn, warned the world about the collapse and about the American real estate bubble and its consequences, but "politicians don't want to hear bad news." And when the crisis arrived in the fall of 2008, as predicted, it took the old world -- Europe, which always takes six months to make a decision -- too long to react. That was the time when the world was laying the foundation for a new order.
The New World Order ... There are two telephones to Strauss-Kahn's left and two to his right. The room has high ceilings, beige carpet and white curtains. An old clock and books about Mexican painting stand on the bookshelf. The IMF's director is sometimes referred to as DSK, which makes Strauss-Kahn sound like a three-letter brand like IMF or USA, and yet he speaks English with a soft French accent. DSK leans back in his chair, weighing his words, glancing at the audio recorder and smiling. The new world order? Well, let's talk about it, he says.
There is no hesitancy here. If there was ever a literary coming-out party for elite intentions to create a one-world financial structure, it would seem to us to be this article. One hardly needs to read between the lines. Skimming from paragraph to paragraph is like being stabbed between the eyes. ...
Countries like China and India are becoming important, countries with rising markets that have long been stable and are clearly powerful. Whenever he is in China or other parts of Asia, says Strauss-Kahn, the leaders there tell him that they have written off Europe for now. "They say they want a strong Europe, but there is always one part of the world that is lagging behind. They say that in the past it was them, and now it is Europe. It's a shame, but the world can live without Europe."
The new world could be a frightening place. The IMF director says: "The Europeans still believe they are the center of the world, but in reality this is not clear any longer. Currently, the question is whether Europe will remain a participant in a game with many players -- that is not necessarily a given."
The Rise of the G-20 ... The United Nations will probably become less important; the organization is far too slow-moving and sluggish. And, if one understands DSK correctly on this point, the importance of the United States -- that egomaniacal country which is incapable of action -- will also decline. Of course, Strauss-Kahn would never speak in such terms, but he does point out that it was the United States that reacted to the 2008 crisis, not with a long-term view, but bank by bank. "They tried to solve Bear Stearns first, and then Fannie and Freddie, and really believed that each hurdle was the last one," he says.
What will become important, however, is the G-20, that coalition of the strongest economies, the center of power in a new world. The G-20 gave the IMF $850 billion (€620 billion) and the mission to solve the crisis. What followed, says, Strauss-Kahn, was "the biggest global coordination ever."
Does this mean that the IMF became the first post-crisis world government? ... Strauss-Kahn stretches when he hears the question, and pauses for 20 seconds before responding. He is an elegant man, a white-haired Parisian with three deep furrows in his brow, who smiles slyly and flirtatiously. He is a ladies' man, not particularly tall and even a little stooped.
Solving Global Problems ... Sitting in his cool office, a room that smells of fresh flowers, he says: "No, no, the government has to consist of elected people, and that's more like the G-20. But the reality is the G20 – or any other grouping – doesn't operate like a government. Their willingness to work together was very strong during the crisis, but frankly I think it's fair to say that it's decreasing. The more leaders and finance ministers believe that the crisis is over – even if they are mistaken – the more they are concerned about their own problems and less so about coordination and consensus."
In Strauss-Kahn's view, the IMF should become an administrative unit of sorts for the G-20, an agency that "tries to find solutions for global and national problems," and comes up with plans and create values. "In the end we aim at much more than just the right financial and economic policies. The ultimate goal, of course, is world peace through economic stability." This is the way Strauss-Kahn views his organization, and the astonishing thing is that hardly anyone, with the exception of a lone professor in Boston, disagrees with him anymore.
All right. We'll stop. What have we learned from the beginning of this truly remarkable article? (We hesitate to call it an article, for it's more of an encomium a kind of ritualized praise-offering of the sort troubadours used to prepare for royalty.)
First ... Europe is too slow and fragmented currently to compete in a world of dashing powers like India and China. Second ... same thing with the United Nations, according to Strauss-Kahn (and the IMF is an arm of the UN). The United States itself, divided between its republican past and its authoritarian future has also given offense and is characterized as "egomaniacal." Third ... the legislative body of choice, this article seems to indicate, is going to be the G20, and the IMF will seek validation and credibility from it (along with funds) before proceeding on its mission which is to become the G20s "administrative unit."
Reading this article, it is possible to visualize the Anglo-American elite as straining ponderously to take flight. It is attempting to shed in one convulsive effort, the painstaking paraphernalia with which it has encumbered itself in the past. The days of patiently building world government through the EU or the UN are OVER. The decision has been made. The G20 is now the vehicle of choice and the IMF will interpret its G20 mandate as it wishes to under the auspices of the kindly Strauss-Kahn who wants nothing more than to build "peace through economic stability."
It is truly remarkable. Reading it (and it is a very long article) is like watching a beautifully crafted knife being withdrawn from its sheath with agonizing slowness and deliberateness. When you are finished, the knife is revealed to you in its all its gleaming fullness. It lies there in front of you, winking with malevolence. A little more:
Sitting in his office, surrounded by the scent of flowers, Strauss-Kahn prefers to talk about Europe's sad future. "The European institutions," he says, "were absolutely necessary and very useful for many reasons, but only in quiet times. ... The crisis exposed very clearly the way the EU is working. There is, in my view, too much concern about domestic safeguarding and domestic problems rather than concern about the EU itself.
The result of that is that the recovery in Europe is lagging behind while the recovery in Asia, South America, the US and Africa is rather strong. I'm afraid that if the European countries don't take the bull by the horns, they will be the part of the world with sluggish recovery. After building the Union and creating the euro, the European Union now needs to take a third step, which is more economic policy coordination and more fiscal policy integration, and so more centralization. But the system moves very slowly."
He reaches toward the table, but there isn't any water there. Everyone at the IMF drinks too little water and too much coffee. ... Then he says: "You can't have a monetary union without a reasonably coordinated fiscal policy. And you cannot make it work when neighbors make deals: If you're nice to me, I'll be nice to you -- just as France and Germany did when they exceeded the 3 percent deficit limit. Europe needs rules, surveillance and sanctions. Sanctions should not be the suspension of voting rights. Who cares about voting rights? They have to be financial sanctions -- payable not during a crisis, of course, but a few years later."
In the end, DSK raves about China, Asia, dynamism and speed.
We bet Strauss-Kahn raves about China. There's a country for you, only about half a century out from starving 50 million of its citizens deliberately. For Strauss-Kahn of course the efficiency of authoritarianism is far preferable to the tattered republicanism of the "egomaniacal" United States. But the real threats in this article are reserved for Europe, which he says over and over in various ways must become more "integrated" and "centralized" so that the system does not move so "slowly."
Here's how the authors describe how the article came about: "SPIEGEL's journey of discovery into the world of the IMF lasted 10 weeks. It began in Washington, and then led to Hungary, Greece, Oslo, Brussels, Boston, New York City and back to Washington, where the Fund is headquartered, on the corner of H Street and Pennsylvania Avenue. In the beginning, the IMF didn't even bother to refuse interview requests. The organization doesn't simply open itself up to visitors; it has been criticized too much in the past. Then, Strauss-Kahn decided to open the doors, and from that point on there were no more barriers or taboos. The only rule was that most interviews were to be conducted off the record, and quotes had to be submitted for authorization."
In normal Western journalism, as we are aware of it, no one submits quotes for "authorization" let alone a media complex as authoritative as Spiegel. You fact check quotes (it's done all the time) but you don't read them back verbatim. And you certainly don't "submit them." That's just another part of the oddity of this article from our perspective. All we can think of is that, having decided to go through with it, the IMF, Strauss-Kahn and his shadowy elite handlers decided to make a full blown statement of intent.
Conclusion: Whether the article is a kind of emphatic trial balloon or a full-on proclamation of where the world is now headed – and at breakneck speed – time will tell. But what an article it is! And from our point of view a most disturbing one.
...my handle backwards is how I feel about current world affairs...