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Why is the IMF Giving More Funds, When the G20 Won't?

Phoenix Capital Research's picture




 

So… the IMF is going to bail out Europe.

 

In case you missed it, the headlines just broadcast that the IMF will be expanding credit lines to Europe.

 

Didn’t the IMF already do this for Greece? How’d that work out? It didn’t. In fact, after two bailouts, quite a bit of debt write-downs, AND a default, Greece is still broke and on the verge of collapse.

 

And now the IMF is going to pull a similar stunt with Europe?

 

What’s really odd about this whole move is that the IMF, which is ultimately backed by the US, Japan, and other nations, is doing this when the G20 Countries themselves won’t:

 

No new Euro zone money for debt crisis at G20

 

The Euro zone won verbal support but no new money at a G20 summit on Friday for its tortured efforts to overcome a sovereign debt crisis, while Italy was effectively placed under IMF supervision.

 

Leaders of the world's major economies, meeting on the French Riviera, told Europe to sort out its own problems and deferred until next year any move to provide more crisis-fighting resources to the International Monetary Fund.

 

"There are hardly any countries here which said they were ready to go along with the EFSF (Euro zone rescue fund)," German Chancellor Angela Merkel told a news conference.

 

http://www.reuters.com/article/2011/11/04/us-g-idUSTRE7A20E920111104

 

So the IMF move is just a backdoor bailout that the Powers That Be are hoping the public won’t notice. None of the IMF backers were willing to commit money at the G20 meeting last month… so why are they willing to do so via the IMF now?

 

Regardless, the whole European situation is really quite simple. The markets have lost faith in various EU countries and so are no longer willing to lend to them at current rates. As a result of this, various EU sovereign bonds are tanking, which in turn pushes interest rates higher, which in turn makes it more difficult for these countries to service their debts.

 

You cannot solve this problem by bailing out Europe. You cannot make an insolvent nation solvent by lending it more money. It just doesn’t work. Greece has proved that. And Greece is ultimately a minor player in this mess (GDP of  $304 billion vs. Italy’ GDP of $2.05 TRILLION).

 

So now that Italy and Spain are imploding, somehow the IMF is going to save the day?

 

Folks, no one can save the day. Not some unelected Central Banker, not some new political leader, not even the IMF or ECB. The problems Europe faces are based on simple math.

 

The problems are that there’s too much debt. And the only options for dealing with too much debt are:

 

1)   Default/ restructuring

2)   Mega-inflation (a type of default in of itself)

 

More defaults are coming. It’s no longer a question of if, but when. And when we start seeing nations like Italy default, we’re going to see some REAL FIREWORKS in the markets.

 

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Good Investing!

 

Graham Summers

 

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Tue, 11/22/2011 - 21:56 | 1905042 eaglefalcon
eaglefalcon's picture

frustrated about the seemingly endless tricks the PTB can pull.  I you tell someone:"in 10 years your income will drop 75%" they can accept.  But if you tell someone, "your job, your pension, you bank account will be gone tomorrow", he's gonna shoot you.  How sad that the PTB can slowly boil the proverbial frogs.  We need hyperinflation and economic collapse now 

Tue, 11/22/2011 - 21:50 | 1904871 earleflorida
earleflorida's picture

*Basel* =>  http://www.bis.org/bcbs/

"Bank of International Settlements [**BIS]" is the central bank of the world est.1931 (note date?)

http://www.bis.org/about/index.html?l=1

**BIS [grand master/bilderberg] = {#1 IMF_ subordinate & #2 WB_  sub-subordinate }

PS.  U.S. Senator Sanders [I/Vt] & U.S. Rep. Paul [R/Tx] were able to get alot of info from the 'FOIA' regarding bernanke, and greenspan bailing out european countries, and their banks - all on the U.S. Citizen's dime with "ZIRP" for interest of free money, very little or no collateral,... to the tune of $16Trillion!!!

PS2  Guess who sits on their BOD's, and various Committee's?

nice read

thanks 

Tue, 11/22/2011 - 18:54 | 1904557 Everybodys All ...
Everybodys All American's picture

Anyone seen DSK? 

Tue, 11/22/2011 - 18:16 | 1904448 Stack Trace
Stack Trace's picture

I thought this IMF announce was a rumor de-jour meant to ramp stocks at a key support level on the S&P and nothing more. Seems like details are weak to vague and nothing has even been approved.

 

Again this market is CORRUPTED and BROKEN. Period. I was able to re-establish some of my positions today after that bogus bomb of a rumor but lost a little profit and some trading overhead but hey..what the hell. At least I regained my profitable position and watched this lame attempt at a ramp FAIL epically.

Tue, 11/22/2011 - 21:37 | 1904983 Buck Johnson
Buck Johnson's picture

It is a rumor, it was thrown out there to prop the market up in Europe (funny it moved it up a little and it came back down).  And that's because these rumors and inuendo's aren't working anymore, you can cry wolf only so much.  So the IMF is goint to "bail" them out, with who's money and how much of it.  Italy will need hundreds of billions, Spain will also and the other countries will need some.  So who will come up with a few trillion euros or dollars to stop the hemoragging?  With whats going on in the US with the debt committee and an election year, it won't happen.

Tue, 11/22/2011 - 18:16 | 1904440 Paul67
Paul67's picture

When your Money ‘is’ Debt you are in a no win scenario.

 

The ‘only’ solution is for ‘all’ nations to go back to a debt free sovereign currency, the supply of which is regulated via a super majority law.

 

All nations that wish to trade will maintain a foreign currency reserve account based on trade volume with each nation.  Currency reserves above this annually adjusted level will be returned to the sovereign after a year unless traded or used to purchase goods/services within that nation.

Tue, 11/22/2011 - 16:36 | 1903995 topshelfstuff
topshelfstuff's picture

Don't confuse the US' 17% with any IMF "Currency" back-up A.K.A. the SDR. The 17% is just Veto Power for the US, since a Vote requires 85% for passge.

The SDR on the other hand is a combination of the 4 countries using QE. I posted earlier on this. This is the break-down:

http://www.imf.org/external/np/tre/sdr/sdrbasket.htm

EURO = 37.4%
USD   = 41.9%
YEN   =  9.4%
UKPound = 11.3%

Tue, 11/22/2011 - 17:21 | 1904205 samslaught
samslaught's picture

There has been QE for the pound, dollar, and Yen, but I haven't seen any monitization of the Euro?

Tue, 11/22/2011 - 16:31 | 1903957 Mark123
Mark123's picture

Simply using IMF when governments are scared of being seen as a bail out supporter by their half-wit citizens.  Now we can all be angry with the IMF, but still go and vote for a Republican/Democrat and feel we are living in a democracy.

 

pathetic does not even begin to describe it.

Tue, 11/22/2011 - 16:30 | 1903950 TradingJoe
TradingJoe's picture

It's all about the big bazooka, no one gets it that the bazzoka is to the DOWNSIDE!

Tue, 11/22/2011 - 16:25 | 1903917 cbaba
cbaba's picture

The only reason is to steal their GOLD. If they accept money with their Gold as a collateral, then its a great deal, print dollars at no cost, lend it and steal their GOLD.

Why anybody can't see this, is it so difficult ?

 

Tue, 11/22/2011 - 16:11 | 1903851 LouisHill
LouisHill's picture

They are doing it because all the Treasury Secretary had to do is accept an IOU from the IMF.  No vote needed.  When the IMF losses creditability they will probably try and get the BIS to come up with it's own version of funny money.

Tue, 11/22/2011 - 16:08 | 1903833 imsaul0968
imsaul0968's picture

For those of you who invest in an IRA or for long term goals, theres a better approach than buy,hold,hope. Stocks follow the economy so analyzing the economy, specifically the factors that are "leading indicators" and having exposure to equities only when the economy is headed in the right direction and avoiding equities in favor of safe haven baskets is a much more logical approach. And missing the major drawdowns is the only way to help ensure meeting your goals.  If you are interested in investing in a portfolio that tactically invests in equity and safe haven baskets via ETF's automatically, please email me at:

eclark@breakaway-partners.com

and I'll add you to the weekly market commentary & portfolio update distribution list.  Its free to add you and you can follow along our model and our views.  We have been RISK-OFF since 6/30 so have missed all this wicked volatility. Currently invested in short duration treasury baskets as flight to safety drives interest in our debt. 

Tue, 11/22/2011 - 16:22 | 1903905 El Viejo
El Viejo's picture

Do you really think that people locked into an inflexible 401k visit this site?

Tue, 11/22/2011 - 22:09 | 1905102 Melin
Melin's picture

I'm here to say they do.  As I understand it, I'm "locked into" a potpouri of available mutual funds dictated to me. They're referred to as "my choices." 

Tue, 11/22/2011 - 16:02 | 1903807 falak pema
falak pema's picture

When the flood gates cede then the tough get going; Lagarde is now taking over the role of Hercules in Augean stables. Will she go towards FED supremacy or Merkel resistance, in the fight between german and Us Oligarchs in this common disaster called the financial ponzi, is hard to tell; Geithner/Bernanke what have you given her as mandate and how far can she go in your name? As Merkel will make her no gifts its Deutschland's future which is at stake. 

Are you bitch of US oligarchy or Solomon of Euro/US divide? And what magical powder do you bring to turn unsustainable debt into philosopher's stone of prolonged growth?

Asking this question is pushing the system over the intellectual cliff; but that is theoretical and when you own the money line you can twist reality to reflect theory...but for how long?

Tue, 11/22/2011 - 15:46 | 1903755 New American Re...
New American Revolution's picture

That's right.    The FED is already feeding the IMF, they have to, that's why the currencies are moving in sync, that and ridding the FX markets of all those meddlesome speculator-class traders.   And a big thank you goes out to Jon Corzine for having shred whatever dignity he possibly thought he might have left by taking those traders on a Missouri boat ride.   THANK YOU JON!!!

Tue, 11/22/2011 - 15:49 | 1903751 Zero Govt
Zero Govt's picture

What’s really odd about this whole move is that the IMF, which is ultimately backed by the US, Japan, and other nations, is doing this when the G20 Countries themselves won’t

Oh the Joy of having an insidious, unelected, untouchable bureaucracy to hand... free from market forces and democracy

IMF, WB, UN, WHO, EU  ...RIP

Tue, 11/22/2011 - 16:09 | 1903830 falak pema
falak pema's picture

zero, come back to earth and be an anarchist who can tell the difference between private Oligarchs who manipulate statist surrogates sucking their sticky fingers and REAL statist dictators. Otherwise to put it prosaically you won't be able to tell shit from shine hole; a blonde from a brunette. That is worse than confounding cheddar with Comté. 

Tue, 11/22/2011 - 15:44 | 1903745 sabra1
sabra1's picture

nothing to do with saving, has to do with taking!

Tue, 11/22/2011 - 15:33 | 1903684 NotApplicable
NotApplicable's picture

IMF = Good Cop

G20 = Bad Cop

Why is this so hard?

Tue, 11/22/2011 - 23:01 | 1905340 FlyPaper
FlyPaper's picture

Is the IMF using its "special drawing rights" - which, as I understand it, is a term for the IMF "making up money" on its own, to be reimbursed by "made up money" from the IMF participants.    Wink Wink.   

Doubt it has anything to do with Good Cop, Bad Cop.   The IMF reports to no one; the G20 has taxpayers at home who only think that what the IMF does is independent.

Its not.

 

Tue, 11/22/2011 - 23:06 | 1905360 mayhem_korner
mayhem_korner's picture

 

 

Anyone notice that "SDR" rhymes with "FDR".  After all these years, the New Deal's gone International, MF.  :D

Tue, 11/22/2011 - 13:45 | 1903110 SwingForce
SwingForce's picture

US is 17% of quota, Ben Bernanke & Tim Geithner are governors.

http://en.wikipedia.org/wiki/International_Monetary_Fund

Tue, 11/22/2011 - 15:35 | 1903693 NotApplicable
NotApplicable's picture

Funny, I'm old enough to remember when governors were actually used to limit things.

Tue, 11/22/2011 - 15:52 | 1903773 Zero Govt
Zero Govt's picture

Oh the good old days eh? ..when we had conservative banks and bankers

when did we swap them for these betting addicts and Weimar trash paper junkies precisely?

Tue, 11/22/2011 - 16:21 | 1903856 saiybat
saiybat's picture

The repeal of Glass-Steagall and tax payer backed gambling funds incase they lose on their bet. It's the same as one of us peasants walking into a casino and leveraging $1000 in our pocket x100 to make a bet in roulette for $100,000 and if we lose we get paid back plus interest. In other words ponzi paper where the top get to reap the benefits of out of control speculation but the peasants get fucked; and the peasants are forced to use this ponzi paper fiat currency shit. The whole system is a ponzi and a pyramid scheme.

Then there's the bought off politicians that go along with it and spending ponzi credits on everything they can think of or just to get kickbacks.

 

Tue, 11/22/2011 - 22:19 | 1905136 Melin
Melin's picture

The problem is government in the economy, not the lack of government meddling or regulations.

Separate the Economy and State.  We won't be free until they're out of our voluntary trades.  If fraud is committed (or suspected with evidence), then, the government is required and invited to step in and do its job. 

Get the government out of our lives.  Let's live free.

Tue, 11/22/2011 - 20:46 | 1904844 11b40
11b40's picture

Precisely correct, and the date was December of 2000, as Clinton was leaving office and Bush was coming in.  Both parties are guilty as sin in this, but it was engineered primarily by that old turtle head, Phil Gramm....whjo went on to become a SVP with UBS.  His wife, Wendy, was on the Board of Enron.  What a lovely couple.

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