Thursday, October 23, 2008

IMF Rising

. Thursday, October 23, 2008

Another phase of the global credit crisis has begun; developing nations are running to the IMF for emergency aid.   And finance ministers across the world don't see many other options for how to survive a crisis created by developed credit markets.  Capital flight, wide-swinging currency fluctuations, tightening private market credit - we've seen this all before.  


Now the IMF has begun talks to increase their lending capabilities to as much as $1 trillon.  Considering the bank has $200 million in collateral, they'll need quite a bit of supplemental cash.  Perhaps most telling of how weak the US economy is, the IMF has failed to even approach the Fed for support.  Instead, the bank is in talks with Japan and oil-producing companies.

So, is the IMF poised for a renaissance?  Gordon Brown certainly hopes so (interesting that Brown chaired the IMF's policymaking committee for several years).  The IMF's leader, Dominique Strauss-Kahn, stresses that the Fund will eliminate many of the loan conditions that made leaders such as Hosni Mubarak of Egypt refer to the IMF as the International Misery Fund.  However, new conditions have not yet been outlined and a recent study in the Harvard Medical Review found that IMF lending in the post-communist European Bloc directly led to decreased health conditions in recipient nations.  

Check out this map of Eastern European Countries and their debt load (source: www.economist.com):





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