IMF – the Irresponsible Money Fund

Before the Euro crisis the IMF was the model of financial rectitude. It lent sensible sums of money to distressed countries, imposing strict requirements for change on them to ensure it would be repaid and to help the country back onto the path of solvency and growth. It usually combined a fiscal squeeze, recommending lower deficits and lower public spending, with a monetary expansion, allowing the private sector to grow. Devaluing the currency was usually part of the remedy, to divert more work into exports and to cut the volume of imports.

That IMF had its critics. Some thought the medicine too acerbic. Some wanted the IMF to lend more on more generous terms. The IMF mainly lent to poorer countries, and was often part of a pressure by the world community to encourage healthy financial discipline by the borrowers.

All this has been stood on its head. The IMF now seems to be primarily a prop for the Euro and for the wider EU area of influence. It is amazing that three quarters of all the IMF’s current lending is to just four European countries. Three are Euro members, Portugal, Greece and Ireland. The fourth is war torn Ukraine. These countries remain amongst the world’s richer countries despite the damage the Euro and in the case of the Ukraine civil war has inflicted.

What is worse few think Greece can repay all its debts, including the IMF loans. There are question marks over how the Ukraine is going to manage, all the time civil war destroys economic activity, kills people and reduces productive assets to rubble.

The new IMF has allowed itself to be used as a prop and source of finance for the ailing Euro project and for the unsuccessful foreign policy of the EU. The IMF has swung from arguably being too tough on poor countries in need of help, to being too lenient on richer countries locked into a foolish monetary union which is damaging their output and jobs. How can the IMF defend its actions over Greece, as the extra loans have become part of the problem. Some in the Greek government do not even recognise the legality of many of Greece’s borrowings, let alone the wisdom of making the advances and the feasibility of repaying them.

I raised at the time of their first loans to Euro countries the question how could a traditional IMF programme work for a Euro member, when they could not demand looser money within a particular Euro state, and they could not encourage a devaluation of that state’s currency against the German currency because they shared the same money. Perhaps with the encouragement of the IMF the whole Euro zone is now following a looser money policy and devaluing its currency, but the great imbalances between the richer and poorer countries within the zone remains as they cannot sort that out by currency adjustments.

The IMF has become the Irresponsible Money Fund. It needs to be aware that many in the developing world will think this deliberate skew of IMF funds to the richer advanced countries is unjustified. Many IMF shareholder states will be even angrier if it turns out that some of the excessive sums advanced will never be paid back. The IMF owes us an explanation of how Ukraine will be stabilised and turned into a fast growing productive economy again. Above all we need to hear from the IMF how they think Greece can repay all her debts and enjoy proper economic growth, to try at least to recapture the 25% of output and incomes they have lost so far since 2007.

IMF Lending June 2015 in SDRs

Portugal 17.8bn
Greece 16.8bn
Ukraine 7.0bn
Ireland 3.8bn

Total 45.4bn
World total 60.8bn

The UK’s quota or IMF share is 4.51%. The UK’s share in the ECB where the losses on Greece could be much larger than the IMF ones is only 0.7% as we are not a Euro member. The main losses will fall to Germany, France and Italy, the largest members and shareholders in the ECB.

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83 Comments

  1. Lifelogic
    Posted June 7, 2015 at 5:35 am | Permalink

    Exactly as you say “The IMF has swung from arguably being too tough on poor countries in need of help, to being too lenient on richer countries locked into a foolish monetary union which is damaging their output and jobs.”

    Surely a condition of such lending should be that they get out of the damaging monetary union.

    Remind us how much Osborne (and Darling before him) have borrowed (secured on the back of future UK tax payers) to lend on to the IMF. What is total UK lending and/or guarantees to the IMF?

    • Lifelogic
      Posted June 7, 2015 at 5:44 am | Permalink

      Only 50 Tory MPs in Conservatives for Britain? Is that really the best they can do? How depressing, and even they seem still to cling to the absurd idea that Cameron may negotiate something substantive. Cameron has not even mentioned anything substantive that he wants as yet.

      http://www.telegraph.co.uk/news/newstopics/eureferendum/11657082/conservatives-plot-britains-eu-exit.html

      • Richard1
        Posted June 7, 2015 at 10:07 am | Permalink

        In Mr Cameron’s shoes I would play the negotiations as he is doing – keeping my cards close to my chest, outlining some broad objectives and making clear there needs to be something on the table the UK population will accept. Loud demands likely to force counter parties into a corner would not be sensible. Remember if a referendum was called today it would probably be 2/3 – 1/3 for In as in 1975. This will go to the wire. Interesting interview yesterday with Anders Fogh Rasmussen, a Danish minister in 1992. The Danes rejected Maastricht, the EU panicked, gave 4 important opt-outs and then the Danes accepted it – and aren’t in the euro with all its liabilities today. Perhaps that’s even what will happen in the UK. An awful lot could be baked in to an opt out from ‘ever closer union’.

        • Hope
          Posted June 7, 2015 at 11:12 am | Permalink

          Good post JR. The question is:why has Cameron allowed the IMF to support the Euro currency when its remit is to help ailing countries such as Greece? Countries outside the RU in the IMF might be out numbered by Europeans but they will not tolerate it forever. U.S. Only goes along because it wants the UK subsumed in the EU, as Obama made clear then back tracked a little not to be so obvious. Cameron continues to support the EU and Euro directly, bail out to Ireland and indirectly through the IMF and then pretends he is negotiating for better terms when he could have used levers for the fiscal pact etc, his counter parts must smile and think the UK public is stupid through his continued deceit- ie I will not pay the extra £1.7 billion demanded by the EU. He gives them our money then announces cuts at home! Ian Birrell, speech writer for Cameron, writes a good piece in the DT today about the hugely wasteful overseas aid.

        • Lifelogic
          Posted June 7, 2015 at 2:25 pm | Permalink

          You say playing his cards close to his chest, but this is not really a sensible analogy. We/the EU & everyone all knows what card he holds. The politics/power of the position is clear for all to see. There is no point (in gamesmanship terms) whatsoever in his not making clear some substantive demands now as it would make them hard to resist. The EU would not want him to seen not to get what is needed or risk him calling for out. So in the negotiation game his approach is foolish.

          The only reason he is not making sensible substantive demands at all is that he clearly only want fig leafs and will come back with them like Wilson lying he was hugely successful.

          That is clearly the game he is playing. That and having a distorting question, a biased BBC and an unfair balance of funding.

          If we look at the last EU election and take UKIP votes, 50% of the Tories and say 20% of labour we get nearly 45% for out. I think that is a fairly good indication. The No side can certainly win – that is why he is ensuring a sloped pitch, BBC & slanted question.

          • Hope
            Posted June 7, 2015 at 6:53 pm | Permalink

            I think there will be an underestimation for out of the EU, we saw what the public felt during the EU elections. The outs need to raise nationalism like the Tories did. At the election.

            Cameron needs to answer why he allowed support from the IMF for the Euro currency and save French and German banks, instead of Greece which is the IMF remit? This in addition to bailing out Ireland. This was the job of the IMF not UK taxpayer. He has shown much evidence to keep the EU project going without anything in return and they are still not offering anything substantive. Transaction action tax, bank break ups, for what in return? JR, it is very surprising you trust him based on his record to date.

          • Hope
            Posted June 7, 2015 at 7:53 pm | Permalink

            Obama is quoted as saying today at he G7 that he looks forward to the UK remaining in the EU. A Good sound reason as any to get out.

        • Denis Cooper
          Posted June 7, 2015 at 2:41 pm | Permalink

          1. We know about this, because we know from the internal history:

          http://issuu.com/fcohistorians/docs/1_spreckley_report_-_part_1

          that is what happened last time; Wilson had barely moved into No 10 before civil servants had persuaded him not to ask for any treaty change, or indeed anything else which would actually make a real difference, and so he didn’t.

          2. On the second time of asking the Danes accepted the Maastricht Treaty exactly as it was when they had rejected it on the first time of asking, the only difference being a promise that protocols would be added to the treaties the next time they were revised. Likewise with the Irish and the Lisbon Treaty, which was not changed in any way at all before they voted again in the second referendum, they voted merely on the promise of changes being made later. And that is one way that Cameron might contrive to rush on to a referendum as soon as next May, by getting just a promise of changes rather than the changes being implemented before the referendum.

        • Lifelogic
          Posted June 7, 2015 at 4:48 pm | Permalink

          £17 million for the YES side and £8 million for the NO side, plus the biased question too it seems. Further more public bodies who are pretty much are pro EU will not be banned from spending on pro EU propaganda in the last 28 days either (or before that). Cameron can also choose the timing to suit the YES side and doubtless will do.

          I did say Cameron would never deliver a fair referendum.

      • alan jutson
        Posted June 7, 2015 at 10:52 am | Permalink

        Lifelogic

        I see before the second debate this Tuesday Mr Cameron, it is reported, has already said he wants to scrap the “Purdah” rules which presently stops government propaganda from so called official sources for the last 28 days before a referendum.

        Thus be sure that official documents will pour out during the last month of the campaign saying the EU has magical powers and we should stay in no matter what the cost.

        If Purdah was good enough for the Scottish referendum, why not for the UK one.

        • Lifelogic
          Posted June 7, 2015 at 4:50 pm | Permalink

          He does not want a fair referendum as it is too close for comfort. So there is a bias to the question, unequal funding and no purdah.

        • Hope
          Posted June 7, 2015 at 6:55 pm | Permalink

          The govt has scrapped the select committee for parliament and constitutional change. Rather odd bearing in mind the Tory manifesto.

      • Leslie Singleton
        Posted June 7, 2015 at 12:35 pm | Permalink

        Lifelogic–John cannot do more and he is doing his best but this gives the lie to the idea that The Conservatives are a Eurosceptic Party, even if, as they hope and as is to be hoped the 50 drifts up to nearer a 100. I have always thought that claim ridiculous.

        • Lifelogic
          Posted June 7, 2015 at 4:54 pm | Permalink

          I agree he is doing his best but I suspect it will not be enough. Without the slanted field I think we would vote out but Cameron had sloped the pitch. Hopefully they still will vote out (or Cameron will get so little that even he comes to his senses). Not that he is asking for anything.

      • turbo terrier
        Posted June 7, 2015 at 5:32 pm | Permalink

        LifeLogic

        At least it is a start!

        I never had a great deal of faith in CMD. I think the whole EU vote will be a wind up in that he with the BBC give the illusion that things will and have changed to get the Yes vote. To hear today that all cabinet ministers have to adhear to the plan what a joke that is.

        Things I know are rapidly changing but I thought we were still a democracy at the moment at least.

      • Denis Cooper
        Posted June 7, 2015 at 6:36 pm | Permalink

        Well, at least as the government only has a Commons majority of 12 it would take fewer than 50 rebels to force it to either:

        a) Accept a fairer referendum question and exclude all foreign citizens from voting, or

        b) Rely on the SNP or other opposition MPs to force through the unfair question and incorrect franchise presently laid down in the Bill.

        Reply The Coalition regularly relied on Labour to agree to EU powers and laws we did not like in the last Parliament.

        • Denis Cooper
          Posted June 8, 2015 at 9:34 am | Permalink

          I’m disappointed you haven’t risen to my reference to the SNP.

      • matthu
        Posted June 7, 2015 at 8:11 pm | Permalink

        And look who they will be up against: David Cameron, Ed Miliband, Nick Clegg, Ken Clarke, Tony Blair, Peter Mandelson, Michael Hesseltine, William Hague, Chris Huhne, Yvette Cooper, Gordon Brown, Sepp Blatter

        The best EU-sceptic poster would be a gigantic photo-montage of all these people saying vote YES one more time!

  2. Mike Stallard
    Posted June 7, 2015 at 6:01 am | Permalink

    Well written! thank you. If you put a Eurocrat in charge of the IMF, then – bingo! – where does the money go?

    I have a friend whose Mum and Dad live in Eastern Ukraine. In order to give their car to their son, who lives in Krakow, they had to travel right through Russia to get to the capital of their country – Kiev. They came back by bus (no sensible trains, no air) again through Russia because large parts of their native country are now war zones.
    These, my friend tells me, are people who are well-to do businesspeople who have lived all their lives in Ukraine and brought up their children there. Now they cower in a cellar.

  3. Graspingatstraws
    Posted June 7, 2015 at 6:40 am | Permalink

    The IMF is purely a tool of US foreign policy. When you realise that their actions are entirely predictable. Washington wants the EU to continue so it’s current bought and paid for leaders will carry on looting economies for the benefit of banks. They want Ukraine’s illegal fascist government to continue attacking ethnic Russians and draw Russia into conflict with the EU. They use the IMF to weaken or destroy poor countries that look like they might improve the lot of their citizens at the expense of US corporations profits.
    Think of the EU as a forward office of the US State Department, the IMF as US Treasury loan shark and all working for the benefit of the “.1%” that are the true beneficiaries of war, chaos and economic slavery.

    • Denis Cooper
      Posted June 7, 2015 at 2:16 pm | Permalink

      Washington wanted the EU so that America would not have to send its sons to fight and die in a third European war, and instead western Europe could be a protective bulwark against the Soviet Union. That was why the CIA covertly funded the European Movement, as has been proved beyond any reasonable doubt. However if it could be so arranged that there were profits to be made by American companies then obviously that would be an added incentive.

  4. Michael Walzer
    Posted June 7, 2015 at 7:02 am | Permalink

    What are SDRs? What is the conclusion from the last paragraph? Does the UK get out of the IMF?
    A teacher would not give any high mark for such a fuzzy essay.

    Reply Special Drawing Rights – IMF currency. I am not recommending we leave the IMF but suggesting an change of IMF policy.

  5. Richard1
    Posted June 7, 2015 at 7:06 am | Permalink

    Extraordinary information thanks for setting it out. Can this all be down to the influence of euro enthusiast Madame Lagarde? It seems very odd other govts – the U.S. For example – haven’t objected. It is clear Greece cannot possibly recover within the euro zone without massive debt write offs and fiscal transfers from Germany and others which won’t be made. Even if they were it would just shore up the absurd leftist Syriza and prevent any real free market reforms. Greece needs to leave the euro, there will be automatic write downs of debt due to re-denomination. Being then clearly obliged to stand on their own feet the Greek people will shortly elect a government which will implement sensible reforms to make Greece viable and competitive again. Those who have made these loans and caused taxpayer losses in IMF and ECB shareholder countries should then be held to account.

  6. alan jutson
    Posted June 7, 2015 at 7:13 am | Permalink

    The failure is down to allowing politics to get in the way of financial commonsense.

    Short of fraud and outright theft, many governments in the World put politics before sound financial planning, their people eventually pay the price.

    Those who made the decisions usually retire and enjoy their new found wealth and huge pensions for the rest of their life.

    Is our Government making any representations to the IMF (as a member) with regards to their lending policy John.

  7. petermartin2001
    Posted June 7, 2015 at 7:30 am | Permalink

    The monetary situation vis-a-vis Greece and the EU is really no different to the State of Mississippi and the USA, or even Northern Ireland and the UK. If these regions need money then it’s down to govts in the USA and UK, in conjunction with their central banks of the Fed and BoE, to provide that money. These regions are part of the dollar and the pound common currency zones. There is no need for any IMF involvement. Neither is there any need for the IMF to become involved in lending to Greece and other eurozone countries.

    The ECB was, and still is, capable of creating as many euros as are necessary to fix any problems in the eurozone. They don’t need any outside help. The IMF should leave the problem to the eurozone and EU as whole. If any loans are required it should be to the whole of the eurozone. They would then be totally safe for the lender, but I cannot foresee any future eventuality which might cause them to be necessary.

    • Richard1
      Posted June 7, 2015 at 10:10 am | Permalink

      Yes the eurozone needs to create an economic union having created a monetary union.

      • Denis Cooper
        Posted June 7, 2015 at 2:08 pm | Permalink

        Or break up the monetary union.

        • Richard1
          Posted June 7, 2015 at 7:56 pm | Permalink

          Yes that’s the choice

    • Denis Cooper
      Posted June 7, 2015 at 2:07 pm | Permalink

      I agree that once the ECB had started to indirectly fund the budget deficit of the Greek government by financing purchases of its bonds on the secondary market there was no technical need to ask countries around the world, including some much poorer countries, to all chip in to help Greece through the IMF. So it can only be presumed that the contribution from the IMF that was really wanted by the EU was not money but its propaganda value, an injection of credibility and respectability . “Look, the IMF has agreed to help Greece, as it has helped other countries in trouble; so you can see that this is not just a problem for the EU, and it is really nothing to do with the euro, Greece is just another country which has got itself into difficulties and has had to turn to the IMF, even though that global organisation has a reputation for being very strict with those it helps”.

      • Hope
        Posted June 8, 2015 at 7:22 am | Permalink

        Was it not a question that the IMF lent to Greece to keep French and German banks afloat? They were using Greece as a route to unofficially help Franco/German banks?

        • Denis Cooper
          Posted June 8, 2015 at 9:39 am | Permalink

          Yes, but as Peter says the ECB could have done everything that was required, there was no practical reason to involve the IMF. But as JR said in his first sentence “Before the Euro crisis the IMF was the model of financial rectitude” – albeit it had critics for the severity of the measures it imposed in some cases – which meant that there was considerable propaganda value in getting it involved.

  8. Brian Tomkinson
    Posted June 7, 2015 at 8:07 am | Permalink

    That’s the best part of £1bn we can write off as our share of the IMF money paid to Greece. Add to that the 0.7% of an unspecified number in ECB loans. Primarily because the relentless EU drive towards the destruction of European nation states and replacing them with a country called Europe.
    In this process they seem to have effectively dominated the IMF (last two heads from France). The EU has not had its accounts signed off for 19 consecutive years. These things happen but nothing is done.
    Who is complicit?
    (words left out – wanting an investigation into where the money has gone and why)

  9. formula57
    Posted June 7, 2015 at 8:16 am | Permalink

    “Irresponsible” is indeed its new name and it seems to have abandoned “international” in favour of “European” which will not sit well with the rest of the world, especially as the funds lent to Greece were used in great part to bailout French and German banks.

    The Telegraph newspaper recently commented on the IMF’s betrayal of its own mission and said “Yet leaked minutes from the IMF board meetings showed that all the emerging market members (and Switzerland) opposed the terms of the first loan package for Greece. They protested that it was intended to save the euro, not Greece. “

    It also quoted the IMF representative of India, Arvind Virmani, as saying about Greece that “The scale of the fiscal reduction without any monetary policy offset is unprecedented. It is a mammoth burden that the economy could hardly bear. Even if, arguably, the programme is successfully implemented, it could trigger a deflationary spiral of falling prices, falling employment and falling fiscal revenues that could eventually undermine the programme itself” and notes that is exactly what has come about.

    The astuteness of Chancellor Osborne’s decision to ignore American hostility and join the new Asian Infrastructure Investment Bank is to be especially congratulated in the light of the irresponsibility of the IMF.

    (Telegraph article link – http://www.telegraph.co.uk/finance/economics/11654639/IMF-has-betrayed-its-mission-in-Greece-captive-to-EMU-creditors.html)

  10. ColinD.
    Posted June 7, 2015 at 8:17 am | Permalink

    The IMF policy has been stood on its head since Christine Lagarde took over. I suggest that this woman is more interested in supporting the EU than other parts of the world. Perhaps she is polishing her credential with a view to getting a top EU Commission job?

  11. They Work for Us?
    Posted June 7, 2015 at 8:17 am | Permalink

    Thank you for these revelations. They are clear evidence that when Mme Largarde is replaced that the post should not go to anyone connected to the EU.
    It would appear that a group of Conservative MPs including yourself and Owen Patterson has been formed in order to try to push David Cameron to seek real and actual reform of the EU and not to be allowed to use the propaganda of the state to campaign for a stay in vote come what may. Once again you deserve thanks from all of us. Do we need a temporary sort of office of budget responsibility on EU as the referendumk begins to loom?
    What is the real motive for some of our senior politicians to want to stay in the EU at all costs. Is it to remain as part of a cosy coterie of “the important people”, should we be formulating a conspiracy theory to explain the motives? Whatever it is, it will be at all our cost.
    As has been said before what is the end game of all of this (other than to drift along and not rock the boat)?

  12. Lifelogic
    Posted June 7, 2015 at 8:25 am | Permalink

    It is reported to day in the Sunday Times that:-

    The EU can spend millions to back the yes vote and also that serial pension mugger Osborne (following pension mugger Brown) is going to attack salary sacrifice. So you cannot put more into pension or other benefits and thus recover your child benefit or personal allowances (which Osborne also took off higher earners).

    Still Cameron is a low tax Conservative at heart – he claims. Cameron seems to have no intention of any serious EU negotiation or of conducting a fair and honest referendum.

    Just stop all the waste Dave – start with the Swansea Barrage, HS2 and all the greencrap grants then fire the circa 50% of the state sector that do more harm than good.

    • Lifelogic
      Posted June 7, 2015 at 8:55 am | Permalink

      http://www.telegraph.co.uk/comment/11657474/Insane-crazy-the-riddle-of-the-sands-in-Swansea.html

      We shall see what Amber Rudd make of it I am not very hopeful.

      • Richard1
        Posted June 7, 2015 at 10:09 am | Permalink

        She seems to be stopping onshore wind subsidies which is a major advance from the LibDem influence of the last govt.

        • Lifelogic
          Posted June 7, 2015 at 5:05 pm | Permalink

          But offshore, PV and the Swansea barrage make even less sense than on shore wind. They are clear economic lunacy, Can the Amber not do simple arithmetic or understand any science?

          Perhaps not as she read History at Edinburgh after Cheltenham Ladies’ College. Still better than Oxford PPE I suppose. But hardly someone who should be making any decisions on energy systems.

    • fedupsoutherner
      Posted June 7, 2015 at 10:15 am | Permalink

      the whole renewables thing is an utter disgrace but all encouraged and sanctioned by the EU. For this reason alone we should get out and pursue a more reliable and economic source of energy – one that could create thousands of real jobs and not those that are being subsidised by all of us. This tidal lagoon will cost energy consumers a fortune and we still need fossil fuel back up. Not long before all fossil fuel power station shut down because they cannot operate profitably.

      As for the IMF debacle. Sound like something that FIFA might be running???!!!

      I just hope the 50 or so Conservative ministers who are pushing for a NO vote, yourself included John, get a fair share of air time to let the public know what is really going on. All the things that get highlighted on these pages must be put out the a wider audience. Perhaps then, we might get a sensible decision.

      • Denis Cooper
        Posted June 7, 2015 at 1:33 pm | Permalink

        I was amused by the claim from some feminists that the FIFA corruption scandal wouldn’t have happened if a woman had been in charge.

        • Lifelogic
          Posted June 7, 2015 at 5:17 pm | Permalink

          That is the trouble these people just cannot decide if women are just the same as men (thus any variance in proportions is evidence of clear huge “discrimination”) or the genders are entirely different – better at communication, languages, empathy, multitasking, co-operation, team work, non confrontational etc.

          The reason so few girls choose to study maths, physics, computer studies at A level, play chess etc. and far more study languages, humanities is (they suggest) even more “discrimination”.

          Woman’s hour is hilarious as the dance irrationally around these issues.

          The BBC can hardly discuss anything in Engineering or Science without finding a woman exemplar to explain it all to us. All BBC scientists and staff seem to have to be on message Climate change too.

    • turbo terrier
      Posted June 7, 2015 at 5:47 pm | Permalink

      Life logic

      You are really hitting all the right pressure points with me.

      The way that the governments bow in homage to all this greencrap begs belief.

      Apart from about a 100 in Westminster who have view akin to our host how many of the rest even know let alone understand the full implications of what they are doing.

      Q: How many turbines of all types are installed on shore throughout the UK?

      A: We don’t know.

      Just about sums it up. The RE Lobby is running this country.

      Stop the lot and stop it now. Then once we know actually what the country has and its true cost then and only then decide on a course of action.

      Heard today from a teacher who had been invited along with lots of others to the NATS centre at Prestwick. They informed the group that they recieve £1m per wind farm for coping with the distruption with their radar.

      I wonder where and what budget that comes out of. Never heard of this being raised in the house at PMQT. Funny that.

      This ain’t rocket science.

      It is all perceived to be just about as bent as FIFA and the IMF.

  13. Leslie Singleton
    Posted June 7, 2015 at 8:34 am | Permalink

    You could, as they say, not make it up. And to think that Frau Merkel used to scoff at the then possibility of the EU needing IMF help; indeed at one point she proclaimed that the very idea was out of the question and would not be allowed

  14. ChrisS
    Posted June 7, 2015 at 9:11 am | Permalink

    I am a great admirer of Christine Lagarde but putting her at the head of the IMF was a huge mistake. What could George Osborne have been thinking of when he nominated her ? The outcome was entirely predictable – it has been like putting a child in charge of a sweet shop :

    Billions have been recklessly diverted to prop up the Euro and particularly Greece when it was obvious to everyone without an economics degree that there is no hope of ever recovering the money.

    There were far more pressing financial needs in the third world but as a consequence of the failure of the IMF to help, China has stepped in and bought influence by financing and building new infrastructure, particularly in Africa and South America.

    As for the UK, we may only be into the IMF for 4.55% of their total loans but on the £16.8bn lent to Greece, that exposure is £757m which is almost £12 for every man woman and child in the UK.

    The 0.7% of the £250bn in EU bail out money that we are responsible for may seem even more insignificant but in fact it’s much worse : It’s £27 for every man, woman and child in the UK and we will almost certainly not see any of it repaid.

    Perhaps we should help their economy in a more creative way and all go on a Greek Island holiday. We could get our money back by demand a couple of vouchers for free meals.

  15. miami.mode
    Posted June 7, 2015 at 10:00 am | Permalink

    Those people who take an interest in this sort of thing such as posters to this site know full well what has gone on and what is going on. The problem is getting the message across to those that do not know, and don’t forget that George Osbourne was one of the leading lights in backing Christine Lagarde to lead the IMF. It was a total love-in between the two of them so I doubt there will be much criticism from our government.

    It’s politics John exactly as we know it.

  16. acorn
    Posted June 7, 2015 at 10:01 am | Permalink

    John Maynard Keynes did not trust financial markets to operate within the Bretton Woods system, so he invented the IMF. He designed it to manage the system of fixed exchange rates and low capital movements. The IMF monitored semi-pegged exchange rates; currency convertibility and was to be lender of last resort for countries facing short-term balance-of-payments crises.

    Now, Bretton Woods is long gone; we have few pegged currencies and massive trading of floating fiat currencies. Massive capital flows around the planet that dwarf BoP numbers. All in much larger quantities than the IMF could ever contemplate getting involved with.

    Time to close it down and the World Bank with it. There are far too many of these “supra-national” outfits going about the planet. The EU being but one of them.

    • Stephen Berry
      Posted June 7, 2015 at 3:15 pm | Permalink

      This is right, ‘acorn’. The IMF was invented to help the management of the Bretton Woods monetary system. The entire Bretton Woods structure was pushed through by the Americans with the headquarters of the IMF and World Bank located in Washington to remind people who was running the show. (A little like having the European Central Bank located in Frankfurt, in fact.)

      After the collapse of Bretton Woods there was no particular reason to keep the IMF going at all, but following the theory that no international organisation which serves the Davos crowd can be abolished, the IMF carried on regardless. In particular, it became an agent of Western and American foreign policy. It now clearly sees itself as an organisation which should buttress the EU and this means helping to ensure the Euro does not fold. This helps explain why, as John points out, the IMF is giving so much money to Eurozone countries The Ukraine figures highly because it is a target country for EU expansion and bringing it into the Western orbit would also weaken Russia.

      The behaviour of the IMF has not gone unnoticed elsewhere in the world. Other countries want to lend money, gain influence and win friends. The Chinese, much to the annoyance of the US, have launched their own Asian Development Bank and there is always the BRIC bank. I see that Putin has offered membership of this to the Greeks.

      What does this mean for the UK? The Indian PM on his recent visit to China said the 21st century would be the Asian century and he must be right. In the coming EU referendum, the case for ‘out’ must make the positive case that the future growth in the world economy will occur mainly in Asia, not in a sclerotic and bureaucratic Europe obsessed with carbon targets. Of all European countries, the UK should be the best able to position itself for the new century. Exit from the EU and a declaration of free trade with the whole world would be a mighty sign that the UK embraces this new future.

    • petermartin2001
      Posted June 8, 2015 at 12:37 am | Permalink

      Yes there is really no reason for two World banks. Whether we need even one is debatable – but the World Bank and the IMF could easily be merged for starters.

      Developed countries like the UK, USA Japan etc don’t need the IMF. Their currencies can just float. The respective source of pounds, dollars, Yen are the countries which issue them. The IMF cannot issue them so why would the UK need to borrow ££ from them?

      They don’t. It’s a pity the Labour Government of James Callaghan didn’t understand that in the 70’s. Calling in the IMF, when there was no need, was a huge political blunder !

      • Denis Cooper
        Posted June 8, 2015 at 9:58 am | Permalink

        I’m not sure that’s entirely correct, Peter. While it’s true that if a country has its own currency then its government can arrange for the issue of as much of that national currency as it likes that doesn’t mean that anybody outside its jurisdiction has to accept it in payment.

  17. Denis Cooper
    Posted June 7, 2015 at 10:07 am | Permalink

    I find that back in February it was being said that the verdict in the French trial of Dominique Strauss-Kahn………… would be delivered on June 12th, next Friday. It may be recalled that he was the managing director of the IMF until May 2011 when he was forced to resign over allegations of criminality, and in July 2011 he was replaced by Christine Lagarde.

    It may also be recalled that she was the French Finance Minister in early May 2010 at the time of the first illegal bailout of Greece.

    Why do I say that it was illegal? Not least because Christine Lagarde herself cheerfully admitted it, in an interview with the Wall Street Journal in December 2010:

    “We violated all the rules because we wanted to close ranks and really rescue the euro zone.”

    “The Greek and Irish rescues – €110 billion and €67.5 billion, respectively – and the creation of the bailout fund were, Ms. Lagarde said, “major transgressions” of the Lisbon Treaty that is the European Union’s governing document. “The Treaty of Lisbon,” she says, “was very straightforward. No bailing out.””

    Now in contrast she is telling the Greek government:

    “We have rules, we have principles. There can be no half-baked program review.”

    I’m always sceptical about conspiracy theories, but there do seem to be some strange coincidences in the way that the head of the IMF was removed and replaced by one of the participants in the illegal scheme to bail out Greece in May 2010.

    All of this is in the public domain, if not in the public consciousness.

    • Denis Cooper
      Posted June 8, 2015 at 10:02 am | Permalink

      Comment missed for moderation here, JR, but I expect it will come up again at the end of the week when the verdict is made public. If it emerges that there were never any serious grounds for the removal of the previous head of the IMF then I expect it will be questioned why that was done and by whom.

  18. Kenneth
    Posted June 7, 2015 at 10:19 am | Permalink

    Mr Redwood, I remember you warning of the risk of lending to Greece via the IMF when it happened.

    It’s not just the IMF but own treasury that needs to answer questions.

    One question comes to mind: what advice was given to the Chancellor about the risks involved in making this advance?

    • Lifelogic
      Posted June 7, 2015 at 2:28 pm | Permalink

      Indeed.

  19. SallyC
    Posted June 7, 2015 at 10:27 am | Permalink

    For IMF read USA.

  20. The Prangwizard
    Posted June 7, 2015 at 10:56 am | Permalink

    Defining the IMF as the Irresponsible Money Fund, yet wishing to stay with it and hoping for reform it is at best misguided. We have seen in the FIFA scandal that staying with and tolerating a corrupt organisation or with one that has endemic flaws and with a potential for corruption is a mistake for anyone. It gives encouragement to those who are steering the wrong path. Time and again we have seen that it prolongs the life of such organisations and people and more harm is done.

    It is similar with the EU. And why is Cameron so keen to push his begging bowl in front of the Chinese for their money – they will demand things we can never get back. His views and those of many are a betrayal and a disgrace. Is he so weak, foolish and desperate and without pride? Is everything for sale? Is every bidder no matter (who ed) welcome?

    I can’t imagine you have friends who you know are on the wrong side of the law and yet eat and drink with them.

    We are judged by the company we keep; it should apply as much to nations as it does to individuals.

    Reply China is a serious trading and investment partner whose investment in the UK is welcome.

    • The Prangwizard
      Posted June 8, 2015 at 4:29 pm | Permalink

      I find it worse than intriguing that you feel it essential to spring to the defence of China. Would you have done the same for Russia had it been her? Is it the case that China is good because she has lots of money and wields power we cannot match? I believe they already have a hold on our nuclear power industry and now this.

      Maybe you could explain the difference between the two with reference to China’s aggression in the South China Sea and Russia’s action in Crimea. Why no sanctions against China? There is surely a moral position to be explained quite apart from the risk to our national interests.

  21. Ian wragg
    Posted June 7, 2015 at 11:36 am | Permalink

    Well done for starting the OUT campaign. I’m sure you know what an uphill task you have set yourself.
    Will we ever be enlightened as to what the negotiations include as I don’t see any effort to repatriate any competences from Brussels.
    It seems to me that we are standing to lose a significant amount of money via the IMF and ECB plus the bilateral loan to Ireland. Never mind we can always reduce the defence budget further to pay for this profligacy.

  22. CHRISTOPHER HOUSTON
    Posted June 7, 2015 at 11:50 am | Permalink

    IMF; The Fed; BoE; ECB; OBR; TUC; CBI; The City; The Street; The Stock Market; School; University; Parliament; The Whore House.

    Many people have become institutionalised. They grow up, perhaps, thinking certain acronyms such as IMF are an authoritative and integral cog even a powerhouse of everything we are.
    Quite alarming. These institutions many hold in high regard are maybe with the exception of the Whore House just rooms, boxes, containing tables, chairs with an odd assortment of people in-ing and out-ing sometimes coming to collective conclusions which each individual does not necessarily own. They are interactive moving parts of a machine; hence, the often inhuman decisions counter-intuitively violating human common-sense which they reach.

    So,the IMF machine lent money to the Greek machine which immediately shredded it ( that’s what it was designed for. ) and the IMF machine is designed to ignore the obvious and keep the financial money-package-juggling process airborne.

    Most if not all the political and financial acronym machines in the UK, Europe and America will mechanistically advocate and prolong the Greek Tragedy. Will produce every statistical financial nonsense to keep the EU machine groaning and rolling on to a broken bridge they are designed to ignore.
    A systemic error. No-one to blame.

  23. Aatif Ahmad
    Posted June 7, 2015 at 12:11 pm | Permalink

    Actually, it never recommended loose money policies for poor countries. It’s standard prescription was to raise interest rates as well as cut public spending. This is what it prescribed during the Asian financial crisis, mainly to prevent sharp devaluations and the consequent insolvency for domestic borrowers who had borrowed in foreign currency.
    Countries like Malaysia suffered less badly because they rejected the advice given by its empty suit academic economists.

  24. majorfrustration
    Posted June 7, 2015 at 12:51 pm | Permalink

    Standby for a request from the IMF to its members for more capital. With French Presidents of the IMF over the last ten years what do you expect – first rule of the IMF is to bail out French banks. Simples

  25. Johnny Norfolk
    Posted June 7, 2015 at 2:15 pm | Permalink

    Taken over by the left/liberal wets.

  26. Stuart B
    Posted June 7, 2015 at 2:35 pm | Permalink

    Truncate our commitment to the IMF, invite Greece to join the Commonwealth upon Brexit and Grexit, and start to set up contingent bilateral investment deals. Give them back the Marbles as an earnest!
    It’s Sunday afternoon, it is patently obvious I’m no economist, but I’ve always felt we owe them something, for the way we left them in the sewage in ’46.

  27. Margaret Brandreth-J
    Posted June 7, 2015 at 4:33 pm | Permalink

    Just imagine with the UK on board the EU’s debt burden would be significantly eased.To marry into a debt ridden family is not attractive.We can love them from afar and strengthen our own prospects.

    • petermartin2001
      Posted June 7, 2015 at 10:18 pm | Permalink

      Margaret,

      The EU, or the eurozone, as a whole, doesn’t have an undue debt burden or a debt problem.

      They have a we-don’t-understand- how-to-run-a-common-currency problem!

      • petermartin2001
        Posted June 7, 2015 at 10:30 pm | Permalink

        PS I might just add that your marriage analogy isn’t far off the mark. A successful marriage is a lot like a currency union. Each partner has to stop thinking in terms of his or her money and instead think of it as their joint money.

        I’m not saying its impossible to have a successful relationship without having joint accounts etc but it’s much harder. Especially if one of the partners is much richer than the other. I can’t quite imagine leaving my wife at home when I went on a holiday which I could afford, say, but she couldn’t!

        • ChrisS
          Posted June 8, 2015 at 9:02 am | Permalink

          As ever the problem with the EU and the single currency is that the voters of the important EU countries, ie those few including the UK, Germany and France, that are using their taxpayer’s money to bankroll all the others, are completely at odds with the politicians.

          Using the marriage analogy, it’s like one partner having almost their entire family against the marriage yet they push on regardless.

          In the EU’s case, German taxpayers do not want to see their money continuing to disappear into the black hole that is ClubMed and the French, like the Brits, are dead against loss of Sovereignty and rule from Brussels. Yet that’s exactly what they are going to get if the politicians continue to ignore the people and persist with the dead duck that is the Euro.

          As for the other countries, there is a perfect analogy with FIFA : a majority of the voting countries, all who have an equal vote, are net recipients of oodles of cash from the minority and will never vote for the gravy train to end.

          The analogy is even closer : The EU accounts may not be quite as corrupt as FIFI, but, like the members and staff of FIFA. everyone working for the Brussels machine including European Parliament members have a vested interest in keeping the whole rotten show on the road.

          We need to break free of it once and for all.

      • Edward2
        Posted June 8, 2015 at 7:21 am | Permalink

        We do have a debt burden Peter, as long as we continue to honour the terms of our loans in that we have agreed eventually to repay it.
        Or are you suggesting the UK and other EU nations just make plain to all those who lend them money that they are going to refuse to repay?
        This would make the next requests for loans a bit tricky.

        Presumably we would then try the Zimbabwe option when we cannot borrow and just print.

        • petermartin2001
          Posted June 8, 2015 at 10:29 am | Permalink

          Edward2,

          The UK national debt is 90% of GDP. Its not a huge amount historically. Those debts are owned by those who hold any govt securities like gilts or even National Savings. There’s no question of anyone not being paid out on the assets they own. Even that £10 note in your wallet is a govt liability. So we need govt to assume those liabilities. They are our financial assets.

          Govt doesn’t seek out loans like we might if we were buying a house or a car. Govt doesn’t need to raise loans or taxes to spend. Think of what has to happen at ‘time zero’ when Govt is establishing a new currency. It can’t borrow any money and it can’t raise money from taxation for the simple reason that no-one has any. It must first spend the money into existence.

          So logically the spending must come first. Taxation follows later to control inflation. Bond issuance follows later to establish the level of long term interest rates in the economy.

          • Edward2
            Posted June 8, 2015 at 3:28 pm | Permalink

            At point Genesis, the Government doesn’t actually “spend” money it just creates money either by printing or by allowing banks lines of credit or by other electronic means.
            But even then it has to take care that this initial supply equals an amount that balances the effective wealth of the nation.
            Otherwise the paper currency will have no backing due to a lack of confidence in it and people will use other mediums of exchange or other methods as stores of value..
            So I think you are confusing both the initial and subsequent control of the money supply with Government spending.

            To say our debt burden is unimportant or even “a financial asset” is not in my opinion correct.
            And I do not agree with your claim that “Govt doesn’t need to raise loans or taxes to spend”.

          • petermartin2001
            Posted June 9, 2015 at 11:31 am | Permalink

            Edward2,

            I forgot to mention taxation. At point Genesis (as you put it) Govt has to simultaneously spend and impose taxation in the units of the spending. Otherwise it doesn’t work.

            Imagine a colonial power arriving in a pre-monetary society – the first step has to be the imposition of power by military force. The next step is to impose a tax, say on the native dwelling huts, payable in a new currency. If the tax isn’t paid the hut is burnt down. Of the course the native people can only get the currency by working for their new colonial masters which is the object of the exercise.

            The colonialists don’t really want or need their tokens back.

            That’s how it worked then and that how it still works. Maybe we don’t get our huts burnt down but we get sent to jail if we don’t pay our taxes.

          • Edward2
            Posted June 10, 2015 at 12:03 am | Permalink

            Is that what our ancient monarchs did when we moved from bartering to coins of the realm?
            I dont think that is what they did Peter.
            Your huts analogy is interesting but irrelevant.
            I still feel you mistake a tendency to balance long term with being in perpetual balance.
            As well as mistaking adjustments in money supply with Government spending.
            But it is an interesting economic theory.

  28. Tim L
    Posted June 7, 2015 at 6:32 pm | Permalink

    John,

    Wherever I post this question I get no direct answer.

    Poland has said it again today; Even if the uk is outside the EU we have to pay for access to the single market.

    I can understand Norway does so, but given that we have a trade defeceipt the Polish claim is surely incorrect and we would simply trade on the same terms as the rest of the world.

    After all, no other country outside the EU pays for access, but they would be subject to their regulations. Just as the EU will have to meet uk regulations.

    Reply If we leave they cannot make us pay an access charge!

    • Denis Cooper
      Posted June 8, 2015 at 10:05 am | Permalink

      We should push for the EU to pay us for access to our lucrative home market.

      • Tim L
        Posted June 8, 2015 at 4:23 pm | Permalink

        Denis,

        Seems to be rather sensible, when you say it out loud.

  29. Jon
    Posted June 7, 2015 at 6:43 pm | Permalink

    Think we may end up with our own Greece in the monetary Union being Scotland. I doubt we will cling on to such a great extent as the Eurozone. I think 10 years from now Scotland will be independent. Either by choice or by a Greece like mismanagement of their finances ans the UK kicks it out of the monetary union.

    • Jon
      Posted June 7, 2015 at 6:55 pm | Permalink

      And as per the blog, the IMF and World Bank will take less of an interest in Scotland falling out of teh Sterling Union. Yes Eurozone politics has infiltrated the IMF and World Bank.

  30. fedupsoutherner
    Posted June 7, 2015 at 9:26 pm | Permalink

    Just heard on the 10pm news that all Tory MP’s are expected to support the IN vote. How bizarre. Only just thinking that the SNP stance on SMP’s having to support the policies of the SNP with no arguments smacked of Stalanism. Never thought we would see this in Westminster. I thought we were living in a democratic country. Just what is Cameron about??? I hope that those ministers against staying in the EU will continue to fight for all those who want OUT!

    Reply You misheard – the issue is whether Ministers have to, not MPs

  31. Ken Moore
    Posted June 7, 2015 at 11:20 pm | Permalink

    A bit off topic but it’s not just me left cold by John Redwood’s bizarre and ill judged comments to the Bruges group.

    Your call for us to ‘trust the prime minister’ on the evening that we learn that ministers will be whipped into supporting the ‘re-negotiated’ deal is beyond belief. JR what were you thinking – years of reasoned debate showing us the a brighter future and now you want to throw your lot in with this chancer.

    JR (singing the same tune as Ken Clarke before the 97 election)- “We can work with you and help you make that case, but we are not going to make that case if we argue about ideological purity, if we have factional struggles and disagreements and if we try and re-enact the last election and say things would be better if the result had been different.

    I seem to remember it was your ‘factional struggle’ and ‘disagreement with Major ‘ that could have saved us from the horrors of the ERM. Now is the time for heated debate, arguments and straight talking. NOT a cosy consensus.

    For years you rightly said that bad policy, not internal arguments caused the Conservatives to be unelectable.
    Why do you want to narrow the debate so that all the sceptics support Mr Cameron’s policy to ‘dock’ the Uk into the Eu permanently. Bring on the arguments the sceptic side has a better case not just a pack of lies!.

    Debate and argument are okay if the right conclusion is achieved – and that conclusion is that Cameron’s non -renegotiation deal is a sham.

    Mr Redwood said: “If we get a solution which opts us out of those part of the treaty that are federalising and centralising that would be a win.

    Does this mean you are now okay with the present situation and would be happy if treaties were merely amended to prevent any further transfer of powers?. What about the huge costs of membership and the core requirement to permit freedom of movement ?.
    That sounds like an unbelievably woolly and ambiguous definition of ‘a win’ for the convenience of Mr Cameron and your party it seems.

    Reply Try reading what I said! I voted against Nice, Amsterdam, Lisbon and have not become a convert to them. I want change to our relationship which means removing those parts of the treaties which prevent us making important decisions in the UK about things like borders, welfare, energy etc

    • Ken Moore
      Posted June 8, 2015 at 11:39 am | Permalink

      Thank you Mr Redwood.

      You did indeed vote against all those treaties that you would now it seems be happy to merely amend and tinker with if the leadership gets it’s way.
      Who was it that said ‘Europe is not an ‘al a carte menu’.
      Has that sentiment in Europe gone away ?. Perhaps it has receded a little until the Uk comes up with the result they want then it will be business as usual.

      In your speech you could have dismissed Mr Cameron’s re-negotiation as a sham and stated your aim that you wish to see the Uk returned to being a sovereign state. But you did no such thing which seems odd and in-consistent stance to me.

      You could have said, that in your heart you know that renegotiation can’t possibly give us back our country and sovereignty – why are you wasting precious time and energy on a lost cause with your wait and see approach …. on a strategy that we all know in our hearts cannot possibly work?.

      I’m not aware of any detail in your speech about what would constitute sufficient changes to the UK’s relationship with the EU to make you vote to stay in. Perhaps you would be kind enough to elaborate on exactly what this could be and why this would be better than withdrawal.?

      One observer remarked at the meeting that ‘Mr Redwood’s tactics for the OUT side consisted of not frightening the voters with vulgar non-pc talk about immigration or , indeed, being brutally honest about anything relating to the EU’ do not fill me with hope.
      We can only look forward to a very insipid and staged campaign if this is what the ‘Eurosceptic’ side have in store.

      Reply The negotiation is an important part of the process prior to the referendum. The issue is not are we pleasing the 13% who voted UKIP, but can we win the 50% plus we need? The negotiation gives us the chance to explain the problems and to reveal the extent of the Treaty commitments which need changing. I am not your problem! The question is simply – Can Mr Cameron restore our democracy by negotiation, and if not can a majority be persuaded we are better off out. If you are right that there is no chance by negotiation then it should be easier to vote for out, as more people will come to understand the difficulty we are in.

      • Ken Moore
        Posted June 10, 2015 at 2:32 pm | Permalink

        Thank you Dr Redwood,

        I don’t think it is as easy as saying that UKIP represent only 13% of public opinion – UKIP have grown fast not by saying or doing unpopular things .

        Just 37% voted Conservative – of those many are unhappy with David Cameron’s ‘Blue Labour’ style but opted for the least bad option. Many voted Conservative (and turned their back on UKIP) simply out of fear of a SNP/Lab government.
        You seem to be saying that talking the language of UKIP is a vote loser and will wreck the referendum NO campaign – that seems odd when the Conservatives only seem to do well when they pledge to tackle immigration (and welfare abuse) and offer hope of a solution through Eu exit.
        If talking the language of the left was a recipe for electoral success DC would have won by a landslide in 2010 & 2015.

        Copying Blairs politically correct government style has inflicted many self inflicted wounds on the party.

        Of course looking through the BBC looking glass of rigged audiences it is easy to get the impression that UKIP’s robust stance on immigration etc. is unpopular – but this is not the reality I see.
        It is the ‘conspiracy’ of silence that has spawned UKIP (and with a number of honourable Conservative Mp’s) that ultimately led to pressure for the in/out vote.
        I wish you would join with your UKIP brothers and sisters, put past battles aside and go all out now for an exit from the Eu racket. I don’t care who heads the out campaign – if they speak clearly without fear and just tell the truth and set the facts before us out honestly they will get my vote.

  32. mike fowle
    Posted June 8, 2015 at 7:17 am | Permalink

    In the excellent film: “Too Big to Fail” after Hank Paulson allows Lehman Brothers to collapse, Christine Lagarde (then a French minister) rings him up to say, how could you be so foolish….

  33. Jon
    Posted June 8, 2015 at 7:55 pm | Permalink

    Just want to say that is shocking and should be in the media, the front pages. The IMF is part of the empire building of the Euro zone at an astonishing level.

    etc ed

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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