IMF Eliminates Borrowing Cap On Rescue Facility In Anticipation Of Europe Crisis 2.0; US Prepares To Print Fresh Trillions In "Rescue" Linen

Tyler Durden's picture

Back in April, when we discussed the inception of the IMF's then brand new New Arrangement to Borrow (NAB) $500 billion credit facility, we asked rhetorically, "If the IMF believes that over half a trillion in short-term funding is needed imminently, is all hell about to break loose." A month later the question was answered, as Greece lay smoldering in the ashes of insolvency, and the developed world was on the hook for almost a trillion bucks to make sure the tattered eurozone remained in one piece (leading to such grotesque abortions as Ireland, whose cost of debt is approaching 6%, funding Greek debt at 5%). Well, if that was the proverbial canary in the coalmine, today the entire flock just keeled over and died: today the IMF announced it "expanded and enhanced its
lending tools to help contain the occurrence of financial crises." As a result, the IMF has as of today extended the duration of its existing Flexible Credit Line (FCL) to two years, concurrently removing the borrowing cap on this facility, which previously stood at 1000 percent of a member’s IMF quota, in essence making the FCL a limitless credit facility, to be used to rescue whomever, at the sole discretion of the IMF's overlords. Additionally, as the FCL has some make believe acceptance criteria (and with countries such as Poland, Columbia, and Mexico having had access to it, these must certainly be sky high), the IMF is introducing a brand new credit facility, the Precautionary Credit Line (PCL), which will be geared for members with "sound policies [which just happen to need an unlimited source of rescue funding] who
nevertheless may not meet the FCL’s high qualification requirements." In other words everyone. In yet other words, the IMF as of today, has a limitless facility to bail out anyone in the world, without a maximum bound in how much is lendable. One wonders who would be stupid enough to take advantage of the gullibility of IMF's biggest backers (the US), to borrow an infinite amount of money for any reason whatsoever... And just what all this means for the imminent explosion of the amount of money in circulation...Not to mention the brand new Ben Bernanke smokescreen of having a new justification to print a few trillion dollars when Europe unexpectedly collapses yet again.

In discussing the imminent need for its expanded "Crisis Prevention Toolkit" which also comes with 50cc's of adrenaline, ativan, a crash cart, and a defibrillator, Dominique Strauss-Khan (and that's Missus to you Bob Pisani), the corpulent bureaucrat said: “These decisions expand and reinforce the IMF’s crisis-prevention
toolkit and mark an important step in our ongoing work with our
membership to strengthen the global financial safety net. The enhanced
Flexible Credit Line and new Precautionary Credit Line will enable the
Fund to help its members protect themselves against excessive market
,” said IMF Managing Director Dominique Strauss-Kahn. What DSK did not mention is that it is precisely the mechanisms used by the Central Banking Cartel to rise the markets ever higher in light of increasingly deteriorating fundamentals, that are precisely what makes the markets excessively volatile, primary culprit of course being HFT, which is nothing but a government endorsed positive feedback loop.

There's more spin:

This strengthening of the Fund’s insurance-type instruments is aimed to encourage countries to approach it in a more timely fashion in order to help prevent a crisis and, also, help to protect them during a systemic crisis. Mr. Strauss-Kahn added that “the revamped financing toolkit rewards countries that implement strong policies. We expect that the availability of these credit lines to a broader spectrum of countries will contribute to a more stable international monetary system.”

So as the world drowns under trillions of excess debt, the IMF's solution is to throw quadrillions (or, technically, "as much as necessary") of new debt at the problem. And why not: when you have an out of control burning oil well, you nuke it (or so the legend says). And what works for geology surely works for unstable monetary systems, correct?

For the specifics of the actual adjustments as part of today's "repackaging" the IMF provided the following summary:

The enhancements approved today by the Executive Board include:

  • Doubling the duration of the credit line (FCL arrangements can now
    be approved for either one year, or two years with an interim review of
    qualification after one year, whereas they were previously either for
    six months, or one year with an interim review after six months);
  • Removing the implicit cap on access of 1000 percent of a member’s
    IMF quota, with access decisions based on individual country financing
    needs; and
  • Strengthening procedures by requiring early Executive Board
    involvement in assessing the contemplated level of access and the impact
    of such access on the IMF’s liquidity position.

The new PCL is available to a wider group of members than those that
qualify for the FCL. In practice, qualification is assessed in five
broad areas, namely: (i) external position and market access, (ii)
fiscal policy, (iii) monetary policy, (iv) financial sector soundness
and supervision, and (v) data adequacy. While requiring strong
performance in most of these areas, the PCL permits access to
precautionary resources to members that may still have moderate
vulnerabilities in one or two of these dimensions. Features of the PCL

  • Streamlined ex post conditions designed to reduce any economic
    vulnerabilities identified in the qualification process, with progress
    monitored through semi-annual program reviews.
  • Frontloaded access with up to 500 percent of quota made available
    on approval of the arrangement and up to a total of 1000 percent of
    quota after 12 months.

And since the NAB, announced with much fanfare, capped out at $500 billion, and since almost 6 months since then have passed, the IMF is now determined to create its own version of Moore's law, by doubling the amount of borrowing availability under its biggest credit facility every six months. To wit, Bloomberg reports: "Talks are ongoing with member countries to raise the IMF
lending capacity to $1 trillion as part of G-20 discussions.
" The $1 trillion will subsequently be doubled to $2 trillion in January 2011, then $4 in June.... and you get the exponential lidea.

Also further confirming that at the end of the day it is the US that will foot these unlimited expenditures (Bernanke's inflationary wet dream has to start somewhere after all), "John Lipsky, IMF first deputy managing director, told reporters on a conference call today that the institution has enough money to fund the new credit lines. At the same time, he said he is confident that member countries will continue to demonstrate a commitment for the IMF to have the resources to make the new credit lines “credible and usable.” You hear that USA? Oh wait, it was your idea all along, we get it now. 

In other words, Europe - prepare: uncle Sam is coming to bail you out once again. Just please give him a reason: our banks demand it, and let's not forget, it is your patriotic duty to bail out US bank balance sheets via semi-hyperinflation. Tonight's move in the EUR and the CHF are a damn good (if on the surface counterintuitive) start.

Lastly, for those lazy readers who always scroll to the very bottom looking for a video clip summarizing all previously said, you are in luck. Here is the IMF's Reza Moghadam condescending, and blatantly lying to all who care, as to what the purpose of tonight's "Crisis Prevention Toolkit" expansion is.


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MarketTruth's picture

Simply A Reminder:

"In the absence of a gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good and thereafter decline to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as claims on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to be able to protect themselves.

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard." -- Alan Greenspan, 'Gold and Economic Freedom' in 1966.

d2thdr's picture

Very true. Does Greenspan regret what he wrote(though it is very true)?

Cognitive Dissonance's picture

This was written during Greenspan's "innocent" stage of life, when he felt truth and virtue was worth more than a paycheck. Happily he outgrew this stage and progressed to "full whore" soon after.

Ironically in his twilight, he has morphed into the final stage of life, that of "old whore". In this last glorious blooming, where with little to lose he can return to those care free days of his youth, he is once again speaking about fiscal sanity and of protecting the weak from the selfish and arrogantly powerful.

At least until he is sent to sleep with the hot tub fishes.

Gwynplaine's picture
Gwynplaine (not verified) MarketTruth Aug 31, 2010 9:25 AM

People converting their bank deposits into precious metals and hard goods... isn't that already occuring?

For real irony, check out Greenspan's article "The Assault on Integrity" (no, I'm not kidding).  It's still in print for those interested.  Search "Capitalism: the Unknown Ideal".

buzlightening's picture

Been doin that since jan'08!  Average physical silver price on hand under 14 bucks an oz!!  In bankster gangster land 100% possession is the law among the theiving lawless rat bastards!    Guns/ammo purchased in '08 inflated by 67%!  Food/water storage as I go looking for rock bottom bargains freeze dried; whatever inflated to who knows how much!!  Certainly won't find me standing in line for food stamps, welfare check, or goon government subsidized tent city housing coast to roast!! 

Buck Johnson's picture

I totally agree with you reggie, spot on.  They are doing everything on both sides of the pond to keep the appearance of market cohesion and financial stability to the public.  But many of the insiders and the govt. know that European Union should be dissolved and go back to each having their own currency and also the US govt. is insolvent and will silently default on debt.

tom a taxpayer's picture

Dam bursting!

Run for your life!

IMF = International MuthaFuchas

midtowng's picture

We're having fun now!

This is looking increasingly like the blow-off top in the failed, global fiat currency experiment.

 An entire generation of the world's wealth is destroyed for bankers and politicians? Oops! Sorry about that. We'll do better next time. Trust us.

LeBalance's picture

"is destroyed for bankers and politicians?"

is *transfered to* the bankers and politicians?

..there, fixed it for you..

doolittlegeorge's picture

at first and both surprisingly and interestingly so.  not even the government can afford that however "along any time line" since as ZH so ably proclaims "you'll be dead if you do."

The Rock's picture

hmm, let's see... the IMF (International Murderers' Fund) is supposedly in a FiCkLe (FCL) PiCkLe (PCL)?

And the IMF is now determined to create its own version of Moore's law ---> Shall we call it "Zimbabwe's Law"?

Does doubling the amount of borrowing availability every 6 months eventually become a doubling every 24 hours?

Al Gorerhythm's picture

Aren't these the wiz kids who just offloaded 403 tons of gold!!!???? WTF?!

Brilliant, just brilliant.

doolittlegeorge's picture

to whom did they off load it to?

kridkrid's picture

"proverbial coalmine in the canary"... I hope I'm not about to be that guy who says, "ummmm... it was the Japanese who bombed Pearl Harbor, not the Germans".... missing the reference, but shouldn't this read "proverbial canary in the coalmine"?

Tyler Durden's picture

causation implies correlation

simone's picture

Causation is not necessary for correlation.

jeff montanye's picture

causation implies correlation doesn't mean causation is necessary for correlation:  all correlations are "bigger" than just those produced by causation.  nevertheless events caused by other events are themselves correlated.

simone's picture

Correlations do not determine root causes.

hedgeless_horseman's picture

We've crossed that bridge after we came to it?

natkins's picture

Disagree, events caused by other events are not necessarily correlated.

ToNYC's picture

They Shoot Horses Don't They?

CashCowEquity's picture

Gold is going to 15,000 per oz and Silver to $250 per oz now...

DoChenRollingBearing's picture

At some point don't be surprised with those prices for Gold and Silver.


So many lies and liars out there.  Whom to trust?  Gold, Silver, and maybe guns & ammo.  And get good with your spiritual situation (religion).

Everything keeps getting weirder by the day.  Diversify and get prepared...


merehuman's picture

Its still a circus. The merry go round was to fast for me.

I fell off.

FEDbuster's picture

I'm just sitting here watching the wheels go round and round,
I really love to watch them roll,
No longer riding on the merry-go-round,
I just had to let it go

John Lennon, Watching the Wheels

RockyRacoon's picture

DCRB, things are looking really weird, eh?  Kinda like the folks who say we really don't want to be here when/if gold gets to $10K -- I'm thinking they may be right!

Spooky stuff.

Tense INDIAN's picture

i think Silver is going much higher than that.....Amero is going to be backed by Siver ...and we all know the silver price suppression by JPM.......

Ahmeexnal's picture

But...but...but the USD is backed by cocaine!

Now that's a strong currency, ain't it not?

Turd Ferguson's picture

Perhaps we could locate the wayward Mr. Zhou by searching the offices of the IMF. With their ever-expanding role, they could really use a man of his many talents.

THE 4th Quadrant's picture

Just discussing that very topic earlier today. Someone has a reward waiting for buying all of that junk....

[Do you know of any islands purchased by a squid]

Hall 9000's picture

"The IMF last year already had to rebrand the flexible credit line after it failed to attract a single country. Mexico, Poland and Columbia have since applied and qualified for a total IMF commitment of about $US72 billion. They each renewed this year although none had drawn on the credit lines."

Shameful's picture

Good on them.  I was sorta hoping the dollar would outlive the Euro by a few months, but all the fiat currencies have to die someday I guess.  It's not like we are going to pay it back, it just further rockets us to publicly acknowledged insolvency.  Can't wait till the IMF has to borrow from the US, to bail out the US.

midtowng's picture

The dollar will be the last fiat currency standing, but not for very long. And it will probably be replaced by another global fiat currency system.

hugolp's picture

And it will probably be replaced by another global fiat currency system.

This sounds scary because it sounds possible. We will have coordinated bubbles all around the world, and then, when the bubble go bust, global crisis at the same time. Its going to be so much fun.

THE 4th Quadrant's picture

The new currency is not going to be a currency per-se. Instead debit/credit cards will succeed the old paper & coin system. Bye bye black money.

aerojet's picture

I don't see how that would be a likely possibility given that so much of what pols and oligarchs do is somehow dirty, it would seem like cash would be a preferred method of payment.  I also look at how much of the US runs on the cash economy and doubt that cash is going anywhere anytime soon.  Fast food joints will take credit/debit cards now, but most of their intake still has to be from cash purchases.


FEDbuster's picture

Imagine the 41 million in the USA on food "stamp" debit cards could be joined by billions in worldwide food stamp program.  Not sure how that would work when the American family of four receives more in food stamps in one month than most around the world EARN in pay for a full year, but the masters will work out something equitable for all the slaves.  My guess is Americans will have to aquire a taste for rice and beans six days a week.

SheepDog-One's picture

Right, 4tfQuad, anyone thinking a Phoenix currency like Amero or Boncor will be backed by anything has to be nuts. Theyll be 'backed' by your slavery. If you do good work for Our Beloved Leader, then you might get a few credits put on your chip. There will be no 'savings'.

doolittlegeorge's picture

"coordinated bubbles"?  scary or hilarious?  who needs a canon when all you need is a pea shooter.

DoChenRollingBearing's picture

Shameful, as always great to read your comments again.

Because of a tsunami of bearing orders arriving in Peru (without notice or documents), I had to send a BUNCH of money to suppliers overseas.  While that hurts me "here" (less money) it may help me there (if I exfiltrate to Peru).

Keep your options REAL OPEN re your own life.  Be aware, cautious and even semi-paranoid.

Let us know in the ZH community what you think of any foreign places you explore!

doolittlegeorge's picture

sometimes you can explore foreign places without getting off the couch, too.

Pondmaster's picture

Nova Scotia - great - main drawback , its an island . Moderate winters . Not over populated 

BurningFuld's picture

Hummm  An Island with a land bridge. (?)

living on the edge's picture


I have never been to Peru but I am scratching my head as to why move there. Please enlighten me. I have been researching Belize and Costa Rica but I really need to visit first hand to make a decision. Your thoughts!