UK pledges extra $11bn to IMF

UK pledges extra $11bn to IMF to tackle crisis

The Daily Bell Issue 400 • Friday, September 04, 2009

"I know not whether taxes are raised to fight wars or wars are
fought in order to raise taxes."

- Thomas Paine

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The UK has promised an extra $11bn of standby finance for the IMF, which will be used to support countries that are struggling in the face of the economic crisis. This sum, on top of the initial $15bn pledged in spring could be drawn on within months since the IMF's original war chest is understood to be close to running dry after it has had to come to the rescue of various countries, including Iceland and Pakistan. Britain's contribution forms part of the cash from the European Union, which yesterday raised the amount it is pledging from about $100bn to $175bn. Nonetheless, the G20 is still understood to be some way short of the $500bn target, despite the pledge. It comes just days before the world's finance ministers will meet in London to discuss progress on the G20's agreement forged in the April summit, and the IMF shortfall is expected to be at the top of the agenda. An international clampdown on pay and bonuses within the financial sector will also be debated at the meeting on Friday and Saturday. Discussions there will pave the way for the G20 leaders' summit in Pittsburgh at the end of this month, where they will be keen to signal an agreement on a way forward for this highly contentious issue.

Dominant Social Theme: More is needed.

Free-Market Analysis: After all the expressions of concern and the breast-beating it comes down to this: The solutions being proposed by the "Gs" are mostly Anglo-American sponsored, at least to begin with. It is America that wields the world's reserve currency on behalf of the axis and the military power of the Anglo-American axis is, in turn, what backs the dollar. The rest of the world's leaders (even from France) obediently trot to these meetings and dutifully mumble what is necessary to say. But that doesn't mean they have to like it, or cooperate. And often they don't. It is called lip service. Here's some more from the article excerpted above:

"The bankers are partying like it's 1999, and it's 2009," said Anders Borg, the Swedish finance minister yesterday. "The bonus culture must come to an end and it must come to an end in Pittsburgh." Angela Merkel, the German Chancellor, said separately that "clear pay rules" must be drawn up at Pittsburgh. So far the French President, Nicolas Sarkozy, has taken the toughest stance among leaders and called for a "cap and tax" approach to bonuses. Leaders will want to emerge from Pittsburgh with an agreement that applies to the next bonus season. However, there are fears that the US will not support tough restrictions on bonuses, and that stricter European laws could undermine the banking industry there.

So part of the G20 is not apt to pony-up what is required financially. Meanwhile the US, and perhaps Britain, are unlikely to go along with what amounts to price-fixing of the Western financial structure. The schisms are definitely showing. From the point of view of the organizational engine of these affairs - the Anglo-American axis - the result of the financial crisis should be a good deal more international regulation managed by the IMF itself. This sort of solution would tend to reinforce the globalization of the current money system - likely under the Anglo-American aegis.

The financial system itself is in apparent disarray. But those who believe that the "South" - China and India - have now got the better of the "North" - America and Britain - are likely not appreciating the full reality of the situation. The Anglo-American axis is indeed an empire and the various military exercises around the world are proof positive that the stability of the current system is being reinforced by military means. It is impossible to sustain an empire based on military conquest alone, however. In fact, most mighty empires are based initially on free-markets that build a healthy base for what becomes an expansionary force.

Conclusion: No doubt the next G20 meeting will produce some sort of agreement between all parties, and everyone will go home to the sound of mainstream media trumpets. But the truth, in our humble opinion, is that the world's economy is in bad shape and likely not getting better. The Anglo-American monetary elite wished to take advantage of this situation to gain consensus that would allow the formal extension of the dollar-based economy around the world. This is not likely the route that the rest of the world sees as conducive to its own interests. We tend to believe that the Western monetary elite has overplayed its hand. The Internet has outed these sorts of approaches and the economic system is probably less tractable than leaders expected. The result is going to be a muddle that will fan resentment and generate ongoing confusion as it becomes clear that what went wrong has not been put right. What happens then may be interesting indeed.