This Is How The IMF Just Lost Its Last Shred Of Credibility

Tyler Durden's picture

On Tuesday we brought you what will likely be the first of many calls for so-called “Helicopter money”, whose advocates suppose that the reason printing trillions in fiat currency has not yet brought about the desired effects in terms of stoking aggregate demand and promoting robust economic growth is that central banks have yet to go the nuclear route by simply mailing out free money to everyone. 

Here’s an excerpt from the Bloomberg View piece:

“Money isn’t a liability in the ordinary sense. Nothing is owed and nothing ever has to be paid back.”

As ridiculous as that sounds, it’s not exactly surprising in a debt-addicted world run by Keynesian central planners and indeed, it echoes recent calls by US lawmakers for the absolution of some $1.3 trillion in student debt.

Now, it appears the insanity has spread to the highest possible levels with none other than the IMF's deputy director of research suggesting that when governments are faced with too much debt, they should consider simply not worrying about it. 

In a new research paper, the IMF's research department says that as long as countries can fund themselves at a reasonable cost via capital markets, they should consider simply “living with high debt”:

While some countries face debt sustainability constraints that leave them little choice, others are in the more comfortable position of being able to fund themselves at reasonable—even exceptionally low—interest rates. For these countries, there is a very real question of whether to live with high debt while allowing the debt ratio to decline organically through growth, or to pay it down deliberately to reduce the burden of the debt…

Next, the Fund says that if there’s still room to borrow, paying down debt makes no sense:

If fiscal space remains ample, policies to deliberately pay down debt are normatively undesirable…

It only gets better when the suggestion is made that contrary to reality, paying down debt actually increases countries' debt burden:

Distorting your economy to deliberately pay down the debt only adds to the burden of the debt, rather than reducing it. 

But the real punchline comes when the team of economists moves to consider how heavily-indebted countries should respond to an exogenous debt shock:

With these preliminaries, we can turn to our question of interest: what happens if there is an exogenous increase in public debt?

 

It turns out that the optimal policy involves living with the debt forever.

 

The analytical framework implies that it is better to live with high debt than to pay it down.

Paging Greek PM Tsipras: may we suggest a new bargaining strategy in your negotiations with the IMF, because what we dubbed the Greek hell over the weekend, was really its heaven, at least according to the IMF.

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dexter_morgan's picture

Christine LaGarde........brings to mind thoughts of Bruce/Caitlyn Jenner for some reason

remain calm's picture

Lets quit the bull shit (foreplay, that is QE). Lets just give everyone a million dollars. 

y3maxx's picture

Lagarde and Jenner....A new era is of women who were guys, or guys in women's bodies?

Or is it, androgynous is the new "in thing".

FrankDieter's picture

What matters is dick size .

ThaBigPerm's picture

If "debt doesn't matter" and never needs to be repaid, then why carry the debt?  By that I mean the IMF and central banks should be happy to simply Jubilee/write-off all of the debt they hold.  Same as makes no difference.  Oh, wait.  They ain't-a-gonna do that, are they?

emptyandmeaningless's picture

This is about the world becoming debts slave to do IMF bidding.   Debt is the new crack. IMF is a dealer and the IMF is a puppet of its masters.

Soul Glow's picture

The chart clarifies things to even a layman - the IMF makes its money off of the backs of the governence of tax paying nation-states.

Antifaschistische's picture

You ZH'er s are all the glass is 1/2 empty kinda people....you have to look at the bright side.  2049 is going to be a great year for Greece!!!

AZLagun's picture

If debt does not matter, then why am I paying taxes?

Icelandicsaga...............................................'s picture

A hundred up votes for making my day .. brilliant analysis

Fun Facts's picture

Lagarde's got big dirty balls swingin from wall to wall.

and the International Maid Fuckers never had any credibility to begin with.

FrankDieter's picture

Did laGarde also have an appendicktomy ?

Kirk2NCC1701's picture

Nah, HERMAPHRODITE will be the Next Thing.

It doubles you the odds of getting laid/paid in some circles, I hear.

If there is a Deity up there (Q, Ra, Elohim...) please douse this dog-vomit & bat excrement pile with the Mother of All CME's.  Make sure you hit the US and EU hemisphere though.

NoDebt's picture

They'll just need 2 million the next year.  4 the year after.  8 the year after that and so on.

SilverRhino's picture

Translated to realspeech : 

"Better to live as a slave than to aspire to be free"

Captain Debtcrash's picture
Captain Debtcrash (not verified) SilverRhino Jun 3, 2015 11:37 AM

Well its not possible to pay down total credit market debt in a debt based monetary system without it destroying itself so if you want to keep the system we have, in a sense, she is right.  Granted it will destroy itself anyway once that total debt outpaces the debtor's ability to repay it, which is a mathematical certainty.  So if these ivory tower punks want to come up with a solution; how about develop a system that is sustainable and doesn't perpetually have to grow. 

Bumpo's picture

Exactly, if you pay off your debt, they can't make any money. That's the magic of compound interest! By the way, if you want to teach your kid something useful, teach them the rule of 72. Divide your interest payment into 72 and that's how many years it will take to double your initial loan. This is used in figuring out lots of things, like population growth. If you have a city of 1 million people, and projected growth is 3%, 3/72 = 24, or in 24 years your population or loan will double. I saved up and bought a house with cash. It took me 15 years, but It's paid for, no Vig. Of course, gold went up 5 times during that period =D

Simplifiedfrisbee's picture

She is indeed correct. A low interest monetary policy is the dream of all debt creators to juice up the economies of the world with debt instruments. This is purely evil and they are completely unaware just how corrupt their policies are. 

stewie's picture

You give them too much credit by saying they are "unaware".  We call it corruption, they call it "The Game".

Moe Howard's picture

They are quite aware. Just like the heroin dealer.

Nunyadambizness's picture

I disagree--I think they are ABSOLUTELY aware of how corrupt their policies are.  Follow the money...

Model T's picture
Model T (not verified) Bumpo Jun 3, 2015 1:31 PM

I think we're getting ready for ano ther up-leg in t he metals. Anyone looking out ten years from here would be well served to get into physical Silver; it's not going t o back up from here.

crazytechnician's picture

Captain , yes she is correct , you are right. All of our money comes into existance through loans and credit , if that gets paid down the economy will shrink at the same rate. Plus , there will be bigger losses because of the compounding interest. Just another reason for bitcoin , the solution , it is not loaned into existance and does not exist as debt anywhere on any balance sheet , a very elegant solution to this problem , plus it does not rely on infinite expansion because it's infinitely sub-divisible.

Moe Howard's picture

Bitcoin? If you bought one a year ago [at $667], you lost $422 dollars in value. That does not sound like an "elegant solution" to me.

crazytechnician's picture

I feel for anybody who bought and held at those prices but anybody using it as a fast world-wide medium of exchange would not have been affected whatever the price is.

Moe Howard's picture

Then inflation in $ is meaningless as well? Just spend it fast. Ha ha.

crazytechnician's picture

bitcoin price is very speculative , if there is high demand then price increases , when demand drops so does price. I expect demand to increase massively over the coming years due to increased functionality and uses of the underlying protocol. bitoin the currency is just the first 'app' for it's blockchain.

Kirk2NCC1701's picture

I don't mean it to sound nasty, but... You're so Old School (polite for 'gullible' or 'naive').

Why on earth would you still assume that they are in any way interested in anything "Sustainable"?

Hint:  The Only damn thing they care about (and always have) is... WEALTH TRANSFER: From the Bottom 95% to the Top 5% (in general), and to the 0.1% specifically.

Unless a person just can't or refuses to get over their Old School paradigms, it's... NEOFEUDALISM.  FEUDALISM 2.0, bitchez.

Hype Alert's picture

I must be like really old, because I remember when just "being" in debt was a bad sign.  Save for a rainy day?  Screw that! 

Angelo Misterioso's picture

yep - TPTB went after the predatory lenders in order to clear out this space and have no competition for what they do - they "lend to own" and now TPTB own 99% of Americans - the 99'ers are debt slaves (but possibly with a wonderful new car and college education but no job...)

remain calm's picture

So what, just do it. Lets not hide from it, and lets stop giving it to the banks. Just give it to everyone. Why should cheese dick Jamie Diamonds and his cronies get all of it. Lets just march on Congress and demand it. I am tired of Private equity, Hedge funds and bankers killing it. I want mine. Lets vote them out unless they give us cash.

NoDebt's picture

I know it sounds just super, but you wouldn't like the consequences.  Believe me, that isn't how you fix it.  That is how people are duped into backing the Free Shit Army.  You're doing it right now.  And with DECADES of history behind the "Great Society" and the "War on Poverty" I have to ask if you think that has improved anyones' lives?  If that didn't work why do you think this would work?

You can't print prosperity.  You can't even print wealth equality.  Printing free money has never solved anything.  I would think that would be self-evident by now.

Slomotrainwreck's picture

Printing free money has never solved anything. 

 

... but never hasn't happened yet.

El Vaquero's picture

It would bring down the system, but the system is going down, and the longer it takes the worse it will be.  I know damned well that a helo drop won't "fix" the system, and I say do it.  Break the system. 

remain calm's picture

We aren't going to like the current outcome. So, Why let the bankers. PE, and hedge funds guys have all the money. Give it to everyone. The outcome is going to be the same regardless. You are not naive to think they are going to change and fix the problems....they are not. So let me have mine. You don't want yours, I will take.

NoDebt's picture

OK, I will talk to the world's central banks and ask them to give all of us a million dollars.  That's more likely to happen than real reforms are at this point anyway.

I concede the point.

TheReplacement's picture

Zactly.  Think of it as free gold/silver after you exchange the fiat for tangibles.

Marco's picture

I'm living in a world where a working class family will not become totally dependent on charity and can continue to maintain a pretty fucking great lifestyle when the main breadwinner becomes infirm ... how many times in world history has that been true? Peons haven't ever had this good a piece of the pie. The economic structure which allows this to exist might not be sustainable, but resource wise we've sustained it for half a generation ... so to say it's unsustainable out of principle is pretty stupid IMO.

If social darwinism and a return to charity based social safety nets is the best alternative you guys have to offer me I'll applaud government for kicking this can as far as they can ... and when push comes to shove I'll vote for some fascist before I'll vote for you lot, most people with me ... that's why FDR did what he did, he saw the rising tide of fascism and the inability of a purely capitalist society to hold it back any more. Universal suffrage happened, the fatalist/classist peons of yesteryear aren't coming back.

Keep us happy or see what you get ...

NoDebt's picture

A simple "thank you" would have sufficed.

TuPhat's picture

Your revisionist history will not get you far on ZH.

Marco's picture

So you have faith in your fellow citizens that they will vote for someone promising the invisible hand will save them in a crushing depression rather than some strong man?

I don't see this in history ... or current events.

11b40's picture

Sadly, you correctly describe my fellow Americans.

El Vaquero's picture

The further the can is kicked, the greater the number of people who will become utterly dependent on the systems sustained by kicking the can.  But the can cannot be kicked forever.  Your choices are to pick a bad future for a lot of people and a worse future for a lot of people.  Take your pick. 

Marco's picture

My low wage work no better prepares me for shit hitting the fan than wellfare ... a collapse of the economy as we know it isn't going to hit harder tomorrow than today.

El Vaquero's picture

Yes, it will.  The more resources we consume, the less we have to fall back on to come up with a different way of life.  The longer we wait, the more children who are born into this world will be adversely affected.  The more debt that builds up, the more dependent on the system people will become due to the nature of interest payments sucking up all of their disposable income.  The longer we wait to face reality, the more reality is going to want to rip our faces off.

TheReplacement's picture

Fuck you.  YOU keep ME happy or see what YOU get. In case you don't understand:

FUCK YOU, PAY ME! 

BigJim's picture

 ...that's why FDR did what he did, he saw the rising tide of fascism and the inability of a purely capitalist society to hold it back any more.

Lulz, FDR was a fascist!

Jesus, the know-nothings are thick around here tonight.