Guest Post: Christine Lagarde’s IMF Action Plan: Reassure The Idiots

Submitted by Brandon Smith from Alt Market

Guest Post: Christine Lagarde’s IMF Action Plan: Reassure The Idiots

This past week, in a rather surprising attempt at public relations, new IMF head Christine Lagarde released an essay on the worldwide economic meltdown entitled “Global Action For A Global Recovery”:

http://blogs.reuters.com/great-debate/2011/09/26/global-action-for-global-recovery/

The gesture appears similar in nature to the Federal Reserve and Ben Bernanke’s sudden efforts to assuage negative public sentiment towards central banks using highly publicized media events designed to add a “human identity and touch” to the normally faceless and soulless global banking cartel. Giving Nosferatu a sentimental makeover while the country struggles entrapped by his icy bear-hug of death is no easy task; it takes finesse. Something which neither Ben Bernanke nor Christine Lagarde seems to have.

For those who theorized that Largarde’s ascension to IMF mascot was due to a nefarious plot meant to supplant former head Strauss-Kahn because of his overt pursuit of the destruction of the U.S. dollar, I would like to point out that though we have not heard much from Lagarde so far, what we have heard has been almost directly in line with the policies of Kahn, and the end of the dollar’s world reserve status is still very much on the menu for the IMF. All in all, it is highly probable that Kahn is just another perverted sadist (like most of the banking elite), and that the IMF had to move fast to nominate a woman to replace him before the words “banker” and “rapist” became interchangeable (as if they weren’t already). The overhaul was purely cosmetic. The threat that the IMF presents to our national sovereignty and financial future continues. Thus, a fresh propaganda campaign is clearly in order…

We are going to hear several carefully fashioned talking points concerning the economic collapse over the course of the final quarter of 2011, especially in light of the dismal end of the stimulus driven bull market that sustained public optimism since the derivatives implosion in 2008. Let’s not forget, three years ago mainstream economists and the Obama administration were calling for a near full recovery by 2011. Obviously this never materialized, and so, the game has to shift to a new dynamic to keep us all guessing. The deflationary boogieman will be resurrected to frighten taxpayers into taking on even more debt in order to feed the fiat machine, but this is going to meet extraordinary resistance. If you think the protests on Wall Street today are gaining momentum, just wait until Helicopter Ben announces QE3! The next logical step in the progression of banker planning is the call for “Globally Coordinated Action”; global initiatives tying numerous countries together in a unified effort to whitewash the crisis and solidify their real purpose of economic centralization.

National programs to throw fiat at debt have failed to do anything but create increasingly volatile inflation in prices. Consumer costs continue to climb in countries like the U.S., China, and the UK, despite deflationary symptoms in equity markets, which should supposedly counteract the poison of the printing presses according to Keynesians. If sovereign efforts to counter deflation using currency devaluation and propagation have failed at a fundamental level, then it hardly serves logic to suggest an international and simultaneous move to inflate and devalue would be much different. However, this is exactly what we will be offered in the coming months as a solution to escalating disaster.

Lagarde’s open call for global action has numerous underlying meanings as well as consequences, and her “plan” to confront what she refers to as a “dangerous new phase” in the economy is absurdly vague (or deliberately vague), but there is indeed a focused message behind all the smoke and mirrors. Let’s take a look at some of her double sided statements now…

“One of the main problems today is too much debt in the global financial system – among sovereigns, banks, and households, especially among the advanced economies. This is denting confidence and holding back spending, investment, and job creation. These countries face a weak and bumpy recovery, with unacceptably high unemployment. The eurozone debt crisis has worsened, and financial strains are rising. Political indecision in some quarters is making matters worse...”

Here, Lagarde presses the debt issue as if it is actually solvable within the confines of a government or central banking framework. It is not. In fact, even if all nations come together in peace, brotherhood, and creepy universal harmony, there is STILL nothing they can accomplish in practical terms that would block the trainwreck already in motion. Their one and only tool for economic intervention is the application of fiat. That-is-it. And, as we are seeing today, the bliss of fiat stimulus eventually fades. The only tried and true formula for surviving a deflationary storm is time, plus free markets, plus production, plus concrete savings. The IMF and its policies are in opposition to all of these elements.

In these circumstances, we need collective action for global recovery along four main policy lines: repair, reform, rebalancing, and rebuilding.

And there it is; “collective action”. You see folks, it wasn’t the IMF and their central banking cohorts around the world that fed the creation of the derivatives bubble and massive debt to GDP ratios using artificially low interest rates and highly questionable fractional reserve banking practices; it was our “addiction to sovereignty”. If only we could simply submit to the undercurrents of the collectivist stupor and start thinking of the “greater good”, the economy would be in grand form and we could all live on floating cities in the sky powered by magical fairydust dragons. Selfish individualists with their “personal liberties” and demands for self determination are the real cause of our global financial grief. Time to meld with the hive mind and be happy!

“First, repair. Before doing anything else, we must relieve some of the balance-sheet pressures – on sovereigns, households, and banks – that risk smothering the recovery. Advanced countries need credible medium-term plans to stabilize and reduce public debt…”

“There is a solution. Credible measures that deliver and anchor savings in the medium term will help create space to accommodate growth today – by allowing a slower pace of consolidation…”

If this sounds like a bunch of financial babble-talk, that’s because it is. Lagarde at no point offers any specific examples of what these “credible measures” are. She only goes on to say they will be “different for each country”. Ok. So then my question to you, Christine, would be this: How can you possibly implement a “collective” program of action to solve the debt crises of multiple countries when each nation’s necessary measures are different? Would you not just end up stepping on your own feet with solutions that are too broad?

Also, how can central banks or governments possibly “anchor savings”, even in the medium term, in the face of so much debt? Stimulus definitely isn’t the answer, as we have seen over the past few years, so what else is there?

“With respect to the United States, I welcome President Barack Obama’s recent proposals to address growth and employment; actions like more aggressive principal-reduction programs or helping homeowners to take advantage of low-interest rates would also help. And, in Europe, the sovereigns must address firmly their financing problems through credible fiscal consolidation. In addition, to support growth, banks must have sufficient capital buffers…”

Been there. Tried that. Next…

“And, in Europe, the sovereigns must address firmly their financing problems through credible fiscal consolidation. In addition, to support growth, banks must have sufficient capital buffers…”

Loosely translated: Lets feed banks even MORE fiat at the expense of taxpayers.

“The second issue is reform, with the financial sector a high priority. On the positive side, we have broad agreement on higher-quality capital and liquidity standards with appropriate phase-in arrangements. But substantial gaps remain and must be addressed through international cooperation in order to avoid regulatory arbitrage…”

Really? What standards would those be? Because all I’ve seen so far is the same corrupt shell game banks were playing back in 2008. Robo-mortgages, toxic assets rated AAA, insider trading, blatant manipulation of securities, and the deliberate misreporting of assets and liabilities, all still in existence. You see, the problem was never the need for global reform. The problem has always been the need for governments and agencies like the SEC to actually do their jobs and enforce the many regulations already in existence. When Lagarde talks about “reform”, what she is really calling for is even greater centralized control of finance along with vast new universal regulations to the point of economic totalitarianism.

“The third target of collective action, rebalancing, has two meanings. First, it means shifting demand back to the private sector when it is strong enough to carry the load. That hasn’t happened yet…”

Do you ever wonder if elitists use deliberately cryptic language and inconclusive statements in order to sound more intelligent than they really are? Well I’m here to tell you, yes, yes they do…

What kind of “demand” is Lagarde referring to? That’s hard to say. Demand for materials? Demand for credit? Demand for labor? Demand for finished goods? Government isn’t carrying the load in any of these areas, and neither is the private sector, so, where is the rebalancing supposed to come in? What load? Where the hell am I and who are you people?!

“Rebalancing also involves a global demand switch from external-deficit countries to those running large current-account surpluses. With lower spending and higher savings in the advanced economies, key emerging markets must take up the slack and start providing the demand needed to power the global recovery. But this rebalancing, too, has not happened sufficiently, and if the advanced economies succumb to recession, nobody will escape…”

Loosely Translated: BRIC nations should start buying more stuff, but not just any stuff; western stuff. The problem, at least in the case of the U.S., is that we barely manufacture stuff anymore, definitely not anywhere near the levels required to sustain an export (stuff) based economy. On top of this, we have no “savings” to speak of, and I’m not sure where Lagarde stumbled over that idea. With no savings, and no stuff, the U.S. is not only already in a recession, but a depression, and eventually a hyperinflationary collapse. It’ll take a lot more than demand from China or Brazil to pull us out of this hole.

The rebalancing that Lagarde muses about is simply impossible in the short term, and impractical in the medium term. Where are most American owned factories? On foreign soil. It took decades to dismantle American industry, and it will take decades to rebuild it. So, where are developing nations going to buy all that extra stuff if the West isn’t producing anything? They’ll buy it from each other, of course! China has already strengthened economic bonds with numerous developing countries that manufacture their own goods and has even stopped using the dollar in trade with Russia, so why bother with the U.S. at all? Of course, Lagarde is already well aware of this, which is why one of her first pursuits as head of the IMF was to recommend China and other BRIC’s be considered for inclusion in the organization’s new world reserve currency; the SDR.

“The fourth policy imperative is rebuilding. Many countries, including those with low income levels, need to rebuild their economic defenses – for example, by strengthening their budget positions – to protect themselves against future storms…”

By golly that’s genius! Stop spending beyond your means and you too can avoid unsavory bouts of fiscal Armageddon. I can see why the IMF’s views on economic restructuring are taken so seriously in the mainstream. I mean, this is cutting edge financial analysis, people!

“In these circumstances, the International Monetary Fund – with its 187 member countries – is uniquely positioned to foster collective action. Our policy advice can help shine a light on the pressing issues of the day – growth, core vulnerabilities, and interconnectedness. Our lending can provide breathing space for countries in difficulty. And, looking beyond the crisis horizon, the IMF can also help construct a safer and more stable international financial system.

This is no time for half-measures or muddling through. If we seize the moment, we can navigate our way out of this crisis and restore strong, sustainable, and balanced global growth. But we need to act quickly – and together.”

As inspiring as that closing note was, I can’t help but question the motives of Lagarde and the IMF, rather than be reassured. They do have a long and well documented history as global loan sharks; parasites that slither in to snap up the debt positions of faltering nations then slowly bleed them dry until they and their natural resources become wholly owned subsidiaries of Diablo Inc. The assumption of some Americans is that while that may be true in the case of downtrodden African nations or war torn Central American cultures, it would never happen to us. If you hold that view, then you aren’t very bright, but let’s set this fact aside for a moment. Instead, ask yourself, why should we even take the chance? Why invite a known ghoul into your living room on the gamble that he’s eaten enough of your neighbors to satisfy his hunger?

The message of Lagarde’s letter to we serfs is clear, and is repeated over and over again in subtle language; if sovereign nations do not conform to IMF oversight, there will be catastrophe. If we do not relinquish full control of our economies over to a collectivist dynamic, we as a people will be held responsible for any damage eventually done to any portion of the greater system. Lagardes solution to the chaos ahead? Even more centralization of power. The very con we have been warning about since the disintegration began.