Copying a Bad Idea

Why is there an IMF? It seems a good question, so here is the short answer: in the post gold standard world, central bank-supported fractional reserve banking has enabled the emergence of such huge credit booms, that governments frequently get into severe trouble when a boom collapses and their countries' current account deficits are suddenly no longer funded by foreign investors. Then they feel forced to go hat in hand to the IMF.

It should be obvious that the solution to the problem is not to let a tax payer funded bureaucracy treat the symptoms, but to strike at the root by returning to a sound monetary system. The only truly sound monetary system would be a market-based one. By adopting such a system, one could do away with a great many bureaucracies and regulations in one fell swoop.

Note in this context that today's popular views on the gold standard – or rather, the views that are promoted by all those with a stake in the current system – are entirely wrong. Not one of the canards brought up against it has any merit (we're thinking of a few often used lines like 'there is not enough gold', or 'we would not have the flexibility that is needed for central banks to steer the economy' and similar nonsense).

 

Even the historical account regurgitated over and over again is completely distorted. The gold standard never 'failed'. It was deliberately undermined and sabotaged by governments in order to finance the waging of war. Once this was done, they kept at it because they wanted to have unrestrained spending at their disposal at all times.

The IMF is a kind of ugly afterbirth of the whole sordid process. We are saddled with fiat monies today, the adoption of which has imposed enormous costs on society, not only in terms of lost material wealth and progress, but also in terms of lost freedoms.

The reason why we bring all of this up is that the so-called 'BRICS' (Brazil, Russia, India, China and South Africa) want to set up 'their own IMF'.  In addition they want to install their own version of the World Bank, a mini-imperialistic venture if you will.

 

The BRICS countries (Brazil, Russia, India, China and South Africa) have made significant progress in setting up structures that would serve as an alternative to the International Monetary Fund and the World Bank, which are dominated by the U.S. and the EU. A currency reserve pool, as a replacement for the IMF, and a BRICS development bank, as a replacement for the World Bank, will begin operating as soon as in 2015, Russian Ambassador at Large Vadim Lukov has said.

Brazil has already drafted a charter for the BRICS Development Bank, while Russia is drawing up intergovernmental agreements on setting the bank up, he added.

In addition, the BRICS countries have already agreed on the amount of authorized capital for the new institutions: $100 billion each. "Talks are under way on the distribution of the initial capital of $50 billion between the partners and on the location for the headquarters of the bank. Each of the BRICS countries has expressed a considerable interest in having the headquarters on its territory," Lukov said.

It is expected that contributions to the currency reserve pool will be as follows: China, $41 billion; Brazil, India, and Russia, $18 billion each; and South Africa, $5 billion. The amount of the contributions reflects the size of the countries' economies.
[…]

The BRICS countries are setting up a Development Bank as an alternative to the World Bank in order to grant loans for projects that are beneficial not for the U.S. or the EU, but for developing countries.

The purpose of the bank is to primarily finance external rather than internal projects. The founding countries believe that they are quite capable of developing their own projects themselves. For instance, Russia has a National Wealth Fund for this purpose.

"Loans from the Development Bank will be aimed not so much at the BRICS countries as for investment in infrastructure projects in other countries, say, in Africa,” says Ilya Prilepsky, a member of the Economic Expert Group. “For example, it would be in BRICS' interest to give a loan to an African country for a hydropower development program, where BRICS countries could supply their equipment or act as the main contractor."

 

(emphasis added)

Good grief.

 

Of Missed Chances and Possibilities

It strikes us as eminently funny that this venture is being set up by the governments of countries that are part of an acronym ('BRICS') coined by a Goldman Sachs analyst a few years ago. Without that, they might not necessarily even have found each other on a map.

We can of course understand why these governments would want to do something like this: the IMF itself is in the hands of the Western nations. The US share is e.g. just large enough to enable the US government to veto all IMF decisions.

However, they would have done their own economies and the world a far greater favor if they had instead opted for the adoption of sound money. Contrary to the overindebted Western welfare/warfare states, most emerging market countries have not yet progressed beyond the point of no return in terms of their outstanding debt. In other words, it would still be comparatively easy for them to step away from the brink.

In the Western world is has simply become politically impossible to do anything but plow on with a system that everybody probably knows deep down is fated to eventually crash and burn rather spectacularly. It has become a question of 'sooner' (voluntarily) or 'later' (involuntarily),  and every official in power will instinctively opt for 'later' – i.e., not on his watch. No doubt the system has quite a bit of staying power, not least because it will take time to completely consume the accumulated capital of several generations. However, that only ensures that its eventual demise will be all the more catastrophic.

It is a pity that no-one on the planet is trying to set a different example – it would be great to simply be able to see what is possible in an unhampered market economy, to see the progress it would be able to achieve. It would probably overtake the rest of the world in terms of wealth creation in a very short time even if it were set up on a stretch of barren desert.

 

 
 

Emigrate While You Can... Learn More

 
 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

2 Responses to “Please, Not Another IMF …”

  • jimha:

    JimWillie says that gold is going to be incorporated into the BRICS bank.

  • BK:

    Heh, it is weird you ever hoped for something else.

    All these states are creatures of Pax Americana. Whey hate and fight the US to the various degrees, of cause, yet their aspiration is not to build something new (they do not know what and how), but to supplant the US, and grab the dominant role in the current world order. They dream about controlling the world fiat construct to utilize it fully to their own advantage. Hence all the simulacra and imitation.

    I can only predict that BRICs “IMF” would be much more disgusting, weak, and disorganized comparing to the current one. These creatures do not have Western skills to run fiat, and absolutely do not trust each other.

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • Strange Moves in Gold, Federal Reserve Policy and Fundamentals
      Counterintuitive Moves Something odd happened late in the day in Wednesday's trading session, which prompted a number of people to mail in comments or ask a question or two. Since we have discussed this issue previously, we decided this was a good opportunity to briefly elaborate on the topic again in these pages. A strong ADP jobs report for March was released on Wednesday, and the gold price dutifully declined ahead of it already, while the stock market surged concurrently. Later in...
  • Gold – An Overview of Macroeconomic Price Drivers
      Fundamental Analysis of Gold As we often point out in these pages, even though gold is currently not the generally used medium of exchange, its monetary characteristics continue to be the main basis for its valuation. Thus, analysis of the gold market requires a different approach from that employed in the analysis of industrial commodities (or more generally, goods that are primarily bought and sold for their use value). Gold's extremely high stock-to-flow ratio and the main source of...
  • Doomsday Device
      Disappearing Credit All across the banking world – from commercial loans to leases and real estate – credit is collapsing. Ambrose Evans-Pritchard writing for British newspaper The Telegraph:   Credit strategists are increasingly disturbed by a sudden and rare contraction of U.S. bank lending, fearing a synchronized slowdown in the U.S. and China this year that could catch euphoric markets badly off guard. Data from the U.S. Federal Reserve shows that the $2 trillion market...
  • The Balance of Gold and Silver – Precious Metals Supply and Demand
      Orders of Preference Last week, we discussed the growing stress in the credit markets. We noted this is a reason to buy gold, and likely the reason why gold buying has ticked up since just before Christmas. Many people live in countries where another paper scrip is declared to be money — to picture the absurdity, just imagine a king declaring that the tide must roll back and not get his feet wet when his throne is placed on the beach — not real money like the US...
  • The American Empire and Economic Collapse
      Dashed Hopes Despite widespread optimism among libertarians, classical liberals, non-interventionists, progressive peaceniks and everybody else opposed to the US Empire that some of its murderous reins may finally be pulled in with the election of Donald Trump, it appears that these hopes have now been dashed.   Liberty... some of it is still above water, but definitely not as much as there could or should be.*   While the hope for a less meddlesome US foreign policy...
  • Pulling Levers to Steer the Machine
      Ticks on a Dog A brief comment on Fed chief Janet Yellen’s revealing speech at the University of Michigan. Bloomberg:   “Before, we had to press down on the gas pedal trying to give the economy all of the oomph that we possibly could,” Yellen said Monday in Ann Arbor, Michigan. The Fed is now trying to “give it some gas, but not so much that we’re pushing down hard on the accelerator.” […] “The appropriate stance of policy now is closer to, let me call it...
  • Credit Contraction Episodes
      Approaching a Tipping Point Taking the path of least resistance doesn’t always lead to places worth going.  In fact, it often leads to places that are better to avoid.  Repeatedly skipping work to sleep in and living off credit cards will eventually lead to the poorhouse.   Sometimes the path of least resistance turns out to be problematic   The same holds true for monetary policy.  In particular, cheap credit policies that favor short-term expediency have the...
  • The Empire Needs an Emperor
      Unknown (sort of) Head of State BUENOS AIRES – Type Swiss President “Doris Leuthard” into Google. You will get about 450,000 results. Do the same with Donald Trump, and the number is closer to 396 million. That’s 87,900% more references. The world’s press is as fascinated by President Trump as it is indifferent to President Leuthard.   Doris Leuthard, President and energy minister of Switzerland. She has won her second presidential term this year. It basically...
  • Mea Culpa – Precious Metals Supply and Demand
      Input Data Errors Dear Readers, I owe you an apology. I made a mistake. I am writing this letter in the first person, because I made the mistake. Let me explain what happened.   The wrong stuff went into the funnel in the upper left-hand corner...   I wrote software to calculate the gold basis and co-basis (and of course silver too). The app does not just calculate the near contract. It calculates the basis for many contracts out in the distance, so I can see the...
  • The Cost of a Trump Presidency
      Opportunity Cost Rears its Head Last Thursday’s wanton attack on a Syrian air field by the US and its bellicose actions toward North Korea have brought the real cost of candidate Trump’s landslide victory last November to the forefront.   It didn't take long for Donald Trump to drop his non-interventionist mask. The decision was likely driven by Machiavellian considerations with respect to domestic conditions, but that doesn't make it any better.   Unlike...
  • India – Is Kashmir Gone?
      Everything Gets Worse  (Part XII) -  Pakistan vs. India After 70 years of so-called independence, one has to be a professional victim not to look within oneself for the reasons for starvation, unnatural deaths, utter backwardness, drudgery, disease, and misery in India. Intellectual capital accumulated in the West over the last 2,500 years — available for free in real-time via the internet — can be downloaded by a passionate learner. In the age of modern technology, another mostly...
  • French Election – Bad Dream Intrusion
      The “Nightmare Option” The French presidential election was temporarily relegated to the back-pages following the US strike on Syria, but a few days ago, the Economist Magazine returned to the topic, noting that a potential “nightmare option” has suddenly come into view. In recent months certainty had increased that once the election moved into its second round, it would be plain sailing for whichever establishment candidate Ms. Le Pen was going to face. That certainty has been...

Austrian Theory and Investment

Support Acting Man

Own physical gold and silver outside a bank

Archive

j9TJzzN

350x200

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com