Thursday, 1 August 2013

07:32 – In what must be a complete coincidence, the morning paper reports that North Carolina authorities have shut down the abortion clinic in Asheville, which was the only one of the state’s 17 abortion clinics that met the new ambulatory surgery facility standards required to remain open. The religious nutters who control our state legislature have gotten their own way, in effect outlawing abortion. Let’s hope their contemptible “victory” doesn’t last long. I’ve already emailed Mr. Obama to suggest that he issue an Executive Order that any hospital that receives direct or indirect federal funding must provide timely, inexpensive abortions on demand or lose that federal funding.

The IMF is not supposed to throw money down ratholes. Its brief is to provide temporary, short-term loans to countries that find themselves in financial difficulties. One guiding principle for the IMF is that it is not supposed to lend any money unless and until the borrowing country’s debt burden can be put on a sustainable footing. On that basis, the IMF has violated its own rules by lending money to Greece and Portugal, neither of which has a sustainable debt burden.

Since before the first Greek bailout, it’s been clear to any rational person that Greece’s debt burden is unsustainable, and that any “loans” made to Greece were in fact gifts because no reasonable person could ever have expected them to be repaid. It is not within the IMF’s remit to grant gifts to bankrupt countries. The IMF proudly proclaims that every loan it has made has been repaid, but it’s been pretty clear for at least two years now that that record is at serious risk. One cannot get blood from a turnip, and Greece is definitely a turnip.

There have, no doubt, been heated private discussions within the IMF over the last couple of years about just this issue. Why should the IMF be loaning money to a bunch of deadbeats who have neither the intention nor the ability ever to pay it back? Well, Brazil, representing itself and 10 other Central- and South-American countries, has finally gone public.

Although the article doesn’t touch on it, the IMF violating its own lending rules is only part of Brazil’s problem. The other part of it, and probably the more important, is that Brazil and a lot of other countries wonder why the IMF is involved at all. Their point, and it’s certainly a valid one, is that the eurozone crisis is not an IMF problem; it’s a eurozone problem. The eurozone is much wealthier than many of the countries whose contributions to the IMF are being used to bailout eurozone countries. Why should poor countries subsidize bailouts for the wealthy eurozone? Good question, and the only reasonable answer is that they shouldn’t. The eurozone crisis is an internal eurozone problem. The IMF and other international bodies should not be involved, nor should non-eurozone EU countries, and the US certainly should not be involved, either directly or indirectly as the major funding source for the IMF. The eurozone created this mess; cleaning it up should be their problem, as should paying all the bills for that clean-up.

The fact that the managing director of the IMF is a former French finance minister probably explains a lot. Without Ms. Lagarde’s influence, I think it’s unlikely that the IMF would have intervened in the first place. It’s high time for her to withdraw the IMF from this mess. For a start, the IMF should provide no further funds to the eurozone. The next step is to require the eurozone itself immediately to repay all outstanding debts to the IMF owed by eurozone members.