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IMF Seeking Boost In Lending Cap By $250 Billion To $1 Trillion
In the latest sign yet that things in the world are roughly 25% worse than expected (give or take), the FT reports that the IMF will seek an imminent rise in its lending cap from $750 billion to $1 trillion to build safety nets that could prevent financial crises. “Even when not in a time of crisis, a big fund, likely to intervene massively, is something that can help prevent crises,” Dominique Strauss-Kahn, the IMF managing director told the Financial Times. “Just because the financing role decreases, doesn’t mean we don’t need to have huge firepower ... a $1,000bn fund is a correct forecast.” At this point it is glaringly obvious that without the explicit support of the various central banks and of such fake international but really US organizations as the IMF, the already prevalent liquidity crisis would simply destroy the world. The troubling theme is that instead of taking away incremental worries, we have now gotten to the point where one bailout, like a butterfly in China, merely requires 10 more down the road. Alas, instead of a virtuous Keynesian dynamic, this is anything but.
Some more on the IMF's feeble attempt at justifying the need for its exploding funding requirements, as well as its own attempt to validate that all is well:
South Korea, as this year’s president of the Group of 20 leading economies, is helping craft the plan. Seoul hopes to convince the G20 countries to back the increased IMF funding at a summit in South Korea in November. The G20 meeting in London in 2009 tripled IMF resources from $250bn. A US official said Washington was sympathetic to improved safety nets but needed more details on the Korean-IMF plan.
South Korean economists forged the plan because of their own bitter experience of their currency and stock market plunging in 2008. In spite of robust economic fundamentals, Seoul needed to be rescued from a dangerous liquidity shortfall by swaps from the US, Japan and China.
To avoid a repetition of this, markets need to know there are pre-arranged facilities at the IMF backing a country up, said Shin Hyun-song, adviser on international economy to South Korea’s president.
“This is meant to mitigate the type of liquidity spiral that we saw after the Lehman episode of 2008,” Mr Shin said.
He said a “global stabilisation mechanism” being discussed could involve drawing up a risk curve for nations, with the least risky enjoying a status akin to platinum or gold credit card holders. These would be entitled to financing such as the IMF’s flexible credit lines, already used by Mexico, Poland and Colombia. They could be deployed before a crisis struck and would impose practically no conditions.
Countries further down the curve would face tougher conditions. Loans to them would be called “precautionary credit lines”.
Still, Mr Shin added that tighter regulation would be needed to avoid the moral hazard of countries taking greater risks because of the safety net. He also said discussions would need to resolve how not to put certain countries in speculators’ sights by revealing that they only had second tier protection.
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Ahhh, soon we'll be talking about real notional money here.
Define real.
Exactly! FIAT currency is just thin air backed by nothing. Print 20,000 trillion while they are at it. Many people around the world have hundreds of trillions of dollars... in Zimbabwe money.
Well he did say 'notional'. :)
No one can bail out China!
The second type started to be popular at the later part of 2009. In essence, this type is a high interest loan (often 15% plus annual rate) to real estate developers. Since the real estate developers have difficulty to raise funds through offering, they began to work with the banks in order to sell these products. The 10 fold growth in trust products that Fitch referred to came mostly from these kind of loans.
The marketing of the products is not very honest to say the least (who said China doesn’t import anything from America), and many buyers believe that they are guaranteed by the bank. But in reality, they are lending money to high risk new real estate projects.
The shark loan industry is mostly underground, and it’s sources can be low interest loan from banks, cash from state owned enterprises, and private savings. The shark loan operator then lends the money out to real estate developers or other domestic private firms.
There are two major pourposes for shark loans. One is to flip flop the real estate, and another is to lend to private firms with maturing bank loans. As mentioned in previous posts, the common lending practice of Chinese banks has a maturity of one year, and so the borrowers need to renew the loans every year if the old loan are to be paid. So many private firms that can’t pay back their loans since the cash flow from their regular business will not be enough to pay back the principal, are borrowing from shark loan operators at extreme high interest rates with very short durations. They then turn to the bank, repay the old loan and get a new loan for the next year.
China’s Shark Loan Ponzi Finance- Understanding China’s Shadow Banking System
the link is a most interesting synopsis of the Chinese housing ponzi scheme!
Dan, Good find.
+10
“Even when not in a time of crisis, a big fund, likely to intervene massively, is something that can help prevent crises,” Dominique Strauss-Kahn, the IMF managing director told the Financial Times. “Just because the financing role decreases, doesn’t mean we don’t need to have huge firepower ... a $1,000bn fund is a correct forecast.”
::::::::::::::::::::::::::::::::::::::::::::::::
Paulson's bazooka lie as told by the IMF.
The financial crooks need a new playbook or PR agent.
Exactly. The request for a 33% increase in "the fund" is simply an attempt by South Korea and others to avoid having to once again negotiate swaps with the US, China, and Japan. Many countries in the G-20 would wish that there was a large, cheap, and pre-approved credit card which they could count on. This, of course, would remove the ability of the US, China, and Japan to evaluate the circumstance which actually causes South Korea or other to draw down the funds. France may be one of those countries in the near future, or a creditor of French banks, for example Spain or Italy. Straus-Kahn is preparing to run for president of France, of course. What utter nonsense. The US oversight of this nonsense is second-rate and highly politicized.
What are we doing?- insuring countries against losses?
We are insuring their banks against losses. And the taxpayer's pick up the premium.
Cue Kevin Bacon - "Remain calm... all is well."
End the IMF. These evil men will destroy us all trying to save themselves.
DSK candidly sez: "You can not believe what hookers and blow cost in the Cote D'Azur."
I guess they aren't including the US. One trillion isn't enough to cover us for one year, much less the rest of the world. Where's Klugman when you need him? Come on IMF, grow a pair- we need much more than one trillion... :)
In addition to this IMF announcement,those idiots at the Bank Of England are now accepting a wider range of collateral as of this morning.
I'll be sending them some chewed tobacco.
To the IMF & BOE....."I SPIT(Chewed Tobacco) ON YOUR GRAVE".
http://www.youtube.com/watch?v=yKCys3sd8Bw
Isn't that roughly 33% worse than expected?
indeed.
should be interesting when next year the math behind it all makes it 247% worse. Exponents are such interesting things. Eventually it'll be so progressive the machines printing 1's and 0's will go tits up.
Anyone read 'I was an economic hit man'... the author worked for the IMF, or world bank, I forget which. If half what the author said is true the organization he works for should be jailed in mass.
Author said that several high profile 'accidental deaths' happened after the leader of a country refused a loan on terms that were very detrimental to the general population. The leader of the country was always offered a substantial bribe, deposited in a Swiss bank account. If the leader failed to accept terms offered by the lender a seperate squad, specializing in accidental deaths, was called in.
These azz hats at the IMF are no different than the mafia...extortion, but on a very large scale.
Now they want a billion dollar slush fund? Hey, have the Fed print up a billion for all 7 billion people on earth...we could have a new hyperinflation event to write about! We are getting tired of reading about Weimar Germany and Zimbabwe.
http://en.wikipedia.org/wiki/Confessions_of_an_Economic_Hit_Man
Confessions of an Economic Hit Man is a book written by John Perkins and published in 2004. It provides Perkins' account of his career with consulting firm Chas. T. Main in Boston. Before employment with the firm, he interviewed for a job with the National Security Agency (NSA). Perkins claims that this interview effectively constituted an independent screening which led to his subsequent hiring by Einar Greve[1], a member of the firm (and alleged NSA liaison) to become a self-described "economic hit man". The book was allegedly referred to in an audio tape released by Osama Bin Laden in September 2009.[2]
I found Perkins book sounded like it was written by a wannabe. Although he was describing topics that I believe had some truth, I was never convinced that he really saw any action himself. I never sensed the expertise he professed to have.
Image to go with today's IMF story:
http://data.blogg.de/1090183/images/John_Maynard_Keynes.jpg
July 19, 2010, 8:09 AM EDT
The International Monetary Fund and European Union ended talks with Hungary at the weekend without endorsing the budget plans. The EU demanded “tough decisions, notably on spending,” to meet deficit requirements. The IMF said the planned tax will have a negative impact on lending and growth.
http://www.businessweek.com/news/2010-07-19/hungary-refuses-further-aust...
Ireland's debt downgraded by credit ratings agency• Moody's cuts Ireland's sovereign bond rating by one notch
• Move will add to fears over Europe's debt crisis
The agency cut Ireland's sovereign bond rating by one notch to Aa2 this morning, citing weaker growth prospects and the high cost of rebuilding the country's crippled banking system. It added that the outlook was stable.
http://www.guardian.co.uk/business/2010/jul/19/ireland-debt-downgraded-r...
Last time I checked....the IMF is but a leech off the truly productive....
Or does one suppose that one printing press differs from another ?
Even the IMF ....does not get it....
Welcome to more real world usage of "Economic Folklore"....
That should have been limited to "Classroom Entertainment"....
Just like the European stability fund - how do you re-package a bunch of sub-prime credits and turn it into a AAA SIV?
Virtually all of the world's major governments are running a deficit - most a massive one. How do you borrow more to bailout the weakest?
As another poster said - mathematically this will end very badly.
"In the latest sign yet that things in the world are roughly 25% worse than expected"
25 is 33.33% of 75, so things are worse by ~33.33%
I'm trying to understand what a mass default of sovereigns would look like, and aside from the hysteria I don't see that it would be so bad. The people with the most assets would lose the most in such a contraction, and you'd get maybe 98% of all businesses collapse and probably over 90% of all loans defaulting, but other than that it would be just one long vacation with a bit of crime here and there.. probably also some tanks in the streets.. all the while politicians glance nervously over their shoulder expecting a coup or an angry mob.
When will the IMF start sacrifing it's gold to this Bilderberg fantasy...
They sold 212 tons to India just this year.
Give it time, it's only a hedge.