Share This Article

Facebook LinkedIn
Twitter Reddit
Print Email
Pinterest Gmail
Yahoo
Money Morning
×
  • Invest
    • Best Stocks to Buy
    • Stock Forecasts
    • Stocks to Sell Now
    • Stock Market Predictions
    • Technology Stocks
    • Best REITs to Buy Now
    • IPO Stocks
    • Penny Stocks
    • Dividend Stocks
    • Cryptocurrencies
    • Cannabis Investing
    • Angel Investing
  • Trade
    • How to Trade Options
    • Best Trades to Make Now
    • Options Trading Strategies
    • Weekly Trade Recommendations
  • Retire
    • Income Investing Guide
    • Retirement Articles
  • More
    • Money Morning LIVE
    • Special Investing Reports
    • Our ELetters
    • Our Premium Services
    • Videos
    • Meet Our Experts
    • Profit Academy
Login My Member Benefits Archives Research Your Team About Us FAQ
  • Invest
    • Best Stocks to Buy
    • Stock Forecasts
    • Stocks to Sell Now
    • Stock Market Predictions
    • Technology Stocks
    • Best REITs to Buy Now
    • IPO Stocks
    • Penny Stocks
    • Dividend Stocks
    • Cryptocurrencies
    • Cannabis Investing
    • Angel Investing
    ×
  • Trade
    • How to Trade Options
    • Best Trades to Make Now
    • Options Trading Strategies
    • Weekly Trade Recommendations
    ×
  • Retire
    • Income Investing Guide
    • Retirement Articles
    ×
  • More
    • Money Morning LIVE
    • Special Investing Reports
    • Our ELetters
    • Our Premium Services
    • Videos
    • Meet Our Experts
    • Profit Academy
    ×
  • Subscribe
Enter stock ticker or keyword
×
5 Ways to Beat the Fed (and Crush Inflation)
Twitter
Tags: U.S. taxpayers

Why the New IMF Chief Will Cost U.S. Taxpayers Billions

By Kerri Shannon, Associate Editor, Money Morning • June 29, 2011

View Comments

Start the conversation

Comment on This Story Click here to cancel reply.

Or to contact Money Morning Customer Service, click here.

Your email address will not be published. Required fields are marked *

Some HTML is OK

The International Monetary Fund (IMF) has made another mistake - a mistake that'll cost U.S. taxpayers a lot of money.

The organization's executive board yesterday (Tuesday) selected French Finance Minister Christine Lagarde as its new leader. A U.S. pledge of support Tuesday morning secured Lagarde's approval. She already had backing from European countries and major emerging markets Brazil, Russia, and China.

But with Lagarde in the driver's seat, the IMF is likely to continue lending billions of dollars to struggling European countries that are drowning in debt.

Those billions come from member countries that hold a financial stake in the IMF - and the United States is the single-biggest stakeholder.

This means that thanks to the IMF, U.S. taxpayers will keep funding countries that contribute little to the global economy.

"The IMF is a waste of money - your money," said Money Morning Contributing Editor Martin Hutchinson. "We'd be better off without the IMF and its terrible record of funneling resources down ratholes."

Here's why Lagarde will perpetuate that terrible track record.

Feeding the PIIGS

The IMF has been a fervent supporter of forking over money to troubled economies. Last year the IMF approved a record $91.7 billion in emergency loans, and is behind one-third of the European bailout packages. The group so far has pledged $110 billion to help troubled Eurozone economies, which need much more to survive.

Sign up for SMS so you never miss special events, exclusive offers, and weekly bonus trades.

Lagarde has served as French finance minister since June 2007, and her political proximity to the financially unstable PIIGS - Portugal, Ireland, Italy, Greece and Spain - means she's likely to continue their support started under former leader Dominique Strauss-Kahn.

"Lagarde is by French standards free-market, certainly more so than Strauss-Kahn," said Hutchinson. "The problem is she has much too strong a political drive to funnel more resources into the EU crisis. The EU PIIGS are not actually poor countries, and in the case of Greece, the problems can't be solved by pouring in more money."

Lagarde, who as finance minister played a key role in orchestrating aid for Greece, Ireland and Portugal, has already said she adamantly opposes a Greek debt-restructuring - meaning more bailouts ahead.

And the PIIGS aren't the only financial drain. The IMF tradition to lend has sent U.S. taxpayers' money to other failing economies.

"It has a big position in Ukraine, where it was partly responsible for replacing a pro-market government with the current anti-market government," said Hutchinson.

With Lagarde sharing the bailout mentality of Strauss-Kahn, and with plenty of money to lend, the IMF's generous handouts will continue.

"The real IMF problem is that we gave it huge infusions of capital under Strauss-Kahn, so it now has the capability to waste much more money," said Hutchinson. "Where the money will be wasted next is not yet clear (other than the PIIGS), but it will go to prop up unproductive systems, not to speed the growth of productive ones."

Emerging Markets: U.S. Taxpayers' Last Hope

Hutchinson said the new IMF chief ideally would've been from an emerging economy, especially a well-run one "where they understand the value of a buck and won't listen to soppy hard luck stories from leftist corruptocrats."

Lagarde's only rival, Mexico's Central Bank Governor Agustin Carstens, was backed by several Latin American nations, but couldn't rally enough support to topple Europe's dominating presence on the IMF board. Mexico, Canada and Australia were the only members of the IMF voting board in Carstens' favor.

"I would have preferred Carstens, or better still a successful emerging markets leader like former Colombian President Alvaro Uribe or Singapore's Central Bank Chairman Goh Chok Tong," said Hutchinson.

Many emerging-market leaders and economists have criticized Europe's consistent position as IMF leader, especially as the global economy has shifted toward emerging market growth.

"The Europeans have really further undermined the legitimacy of the IMF," Simon Johnson, a Massachusetts Institute of Technology professor and former IMF chief economist, told The Wall Street Journal. "It doesn't feel like an evenhanded international organization. It seems like much more of an organization run by the U.S. and Europe."

Lagarde has said she will implement a 2010 agreement that adjusts IMF representation according to the size of countries' economies, which would boost the stakes of China and Brazil and weaken the influence of advanced European economies. If this goes through, then emerging economies may be able to rally together in the next vote and support a non-European candidate.

Until then, expect your money to continue funding weak, and in some cases doomed, economies.

"For investors, there is not much to be done - other than avoiding the shares of the major international banks, which will undoubtedly be presented with much of the bill for this useless institution's activities," said Hutchinson. "That bill will ultimately find its way to us - the put-upon U.S. taxpayers."

News and Related Story Links:

  • Money Morning:
    Emerging Markets Battle Developed Countries to Deliver New IMF Managing Director
  • Money Morning:
    Ebenezer Scrooge: The Ideal IMF Successor
  • The Financial Times:
    US backs Lagarde to head IMF
  • The Wall Street Journal:
    U.S. Endorses Lagarde for IMF

Join the conversation. Click here to jump to comments…

Login
guest
guest
5 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
E. Keith Owens
E. Keith Owens
11 years ago

call me stupid or naive but I was never as tuned in to Hamshers complexity as you guys have stated revealed ..So youre saying she is not really some lefty liberal but a centrist democrat?.And dont make the mistake of confusing her with a progressive?.I visit FDL once in while and have even signed a couple of petitions but I did not realize Hamsher was this nefarious democrat but then sometimes I have trouble with the labels and who they stick to..

0
Reply
Werner
Werner
11 years ago

"We'd be better off without the IMF and its terrible record of funneling resources down ratholes."
I am in full agreement with you, wishing however to extend the "we" to the "whole world". The US have backed Christine Lagarde's candidacy in bargaining their presidency of the world bank, another inistitution we would be better off doing without.
As to funneling resources down ratholes, its indeed a pity, but the biggest rathole to come, the US

0
Reply
Werner
Werner
11 years ago

will still have to be financed. Do not forget the the US contribution is made out of borrowed – not to say stolen – money from all over the world, money which the US will never be able (or willing) to repay.
Whoever the lenders are to whoever is the borrower, let them face their responsibility and write off what ought to be written off!

0
Reply
billbob
billbob
11 years ago

As if we need another outlet for our dwindling cash. One of these days, we may have to consider
getting out of things like IMF, UN & NATO and take care of ourselves.

0
Reply
Carole55
Carole55
11 years ago

Who said we need to be the world's gatekeeper and financial giftgiver for every nation and environmental quirk???? I firmly believe that we need to maintain a presence in these organizations – we should always be represented. But enough of the freebies and giveaways when we have such massive challenges right here at home! We need to bring our soldiers home and let's focus on our own needs for a change, such as sorting out our ridiculous entitlement programs (keeping Social Security and Medicare since they've been funded by our money), adopt and enforce a governement budget, reduce our government to a minimum ….It's time to relinquish our domineering ways and adopt a more laissez-faire approach. Pardon me for rambling, and thanks for listening.

0
Reply


Latest News

May 27, 2023 • By Garrett Baldwin

postcards from the florida republic - may 27

May 26, 2023 • By Garrett Baldwin

Here's Your (Surprising) Best Bet in a U.S. Default

May 26, 2023 • By Shah Gilani

earnings
The Five Things You Need to Know Before Buying Any Stock
Trending Stories
ABOUT MONEY MORNING

Money Morning gives you access to a team of market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.

QUICK LINKS
About Us COVID-19 Announcements How Money Morning Works FAQs Contact Us Search Article Archive Forgot Username/Password Archives Profit Academy Research Your Team Videos Text Messaging Terms of Use
FREE NEWSLETTERS
Total Wealth Research Power Profit Trades Profit Takeover This Is VWAP Penny Hawk Trading Today Midday Momentum Pump Up the Close
PREMIUM SERVICES
Money Map Press Home Money Map Report Fast Fortune Club Weekly Cash Clock Night Trader Microcurrency Trader Hyperdrive Portfolio Rocket Wealth Initiative Extreme Profit Hunters Profit Revolution Warlock's World Quantum Data Profits Live Trading Alliance Trade The Close Inside Money Trader Expiration Trader Flashpoint Trader Darknet Hyper Momentum Trader Alpha Accelerators Weekly Profit Cycles Brutus Alerts Resource Traders Alliance

© 2023 Money Morning All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning.

Address: 1125 N Charles St. | Baltimore, MD, 21201 | USA | Phone: 888.384.8339 | Disclaimer | Sitemap | Privacy Policy | Whitelist Us | Do Not Sell or Share My Personal Information

wpDiscuz