IMF Tells Eurozone To Buy More, More, More Bonds And That It Needs A Bigger Boat, Er, Rescue Fund; Belgium Wants A Bigger Pie Too
It appears that one way or another, the IMF will provide a lot more American money to the European rescue. Reuters reports that according to the IMF the euro zone should have a bigger rescue fund and the European Central Bank should boost its bond buying to prevent the sovereign debt crisis from derailing economic recovery. "International Monetary Fund chief Dominique Strauss-Kahn
will present the report on the economy of the 16 countries using
the euro at a meeting of euro zone finance ministers and
European Central Bank President Jean-Claude Trichet on Monday." And presumably, and we are speculating here, if the Euro zone can not afford it, the IMF will be more than happy to step in. After all recall that on August 30, the IMF extended the duration of the Flexible Credit Line (FCL), "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." We would think that an infinite amount of money should be enough to rescue even Spain when the time comes. Which begs the question: with everyone expecting muni bonds to be the purchasing target of QE3, will Bernanke again fool everyone and instead opt for direct European bond monetization? After all, the destruction of dollar value is and always has been the Fed's primary imperative, and what better way to achieve this than to collateralize the greenback with Greek bonds?
And not surprisingly, Belgium which is next after Portugal, Spain and Italy, to go bankrupt, has joined the chorus demanding for far more money. From Bloomberg:
Belgian Finance Minister Didier Reynders said the euro region could increase the size of its 750 billion-euro ($1 trillion) bailout fund, breaking ranks with German Chancellor Angela Merkel and France’s Nicolas Sarkozy.
Reynders told reporters in Brussels yesterday that the current cash pool could be increased if governments decide to create a larger fund as part of a permanent crisis mechanism in 2013. “If we decide this in the next weeks or months, why not apply it immediately to the current facility?”
European officials are under pressure to find new ways to stop contagion spreading from Greece and Ireland amid concern the bailout package may not be large enough to rescue Spain if needed. While Sarkozy and Merkel rejected expanding the fund on Nov. 25, European Central Bank President Jean-Claude Trichet on Dec. 3 indicated governments should consider just such a move.
“The difficulty we have is like other countries in Europe: we need to solve the problem of contagion coming from Greece, Ireland and maybe now Portugal,” Reynders said. “We don’t have any real problem in Belgium for the moment like that.”
The worsening crisis this past week prompted Spain to push through more measures to trim its budget deficit just one week after saying such a step wouldn’t be needed.
But, but, neither Portugal nor Ireland had problems "like that" a month ago... How can this be? Could fat, corrupt, pathologically lying Euorpean career bureaucrats be, gasp, lying to us? And with Germany opposed to more funding, the only remaining source of capital is America, courtesy of the IMF.
This is what we said last time around the IMF pledged an infinite amount of US dollars to rescue Europe, precisely in anticipation of just such an event:
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 volatility,” 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.
Too bad the threat of the FCL did nothing to protect against market volatility. Which is why it is now time to put in action.