The United States is the largest contributor, accounting for about 25 percent of the fund.
Is that including Obama generous donation in our name back in the spring?
Oh come one you know that doesn’t count as that transaction was called an “exchange of assets,” which means the U.S. gave the IMF the $108 billion and the IMF gave the U.S. a promissory note… and all IMF members are eligible; Iran, Zimbabwe, Sudan, Venezuela and Burma are all candidates for Mr. Obama’s generosity.
“We’re going to provide the International Monetary Fund $108 billion that we don’t have. So we’re going to borrow $108 billion from the Chinese; we’re going to give it to the IMF; and we’re going to expect our kids and grandkids to pay for it.” - stated one very tan, almost orange, House Minority Leader
Heard over lunch that indeed the US is supplying some of the IMF money. ABC news I think. No idea how much.
~Matt
there’s some misunderstanding about how the imf lends money, and how it gets its funds (there’s also typically a misunderstanding about why the imf lends money, but that’s a whole other story :)).
us contributions are not made through budgetary means, but instead via central bank purchases.
i can already hear the crazy austrian school republican ron paul inflation wackos saying “OMG THE FED PRINTS MONEY TO FUND IMF BAILOUTS, THIS PRACTICE MUST END BECAUSE IT’S DESTROYING THE ECONOMY!”
but this is only the case if the recipient country doesn’t repay the lone.
and since the imf is the first creditor to get repaid in a debt restructuring, the money is fairly safe (hell, even argentina paid back its entire imf loan even though it fucked private investors).
some other specific comments -
It’s also hard to have a “national currency” for “Europe” when one of the major players in “Europe” (Great Britain) doesn’t play along, for one.
this isn’t an issue whatsoever. the fact that britain is outside of the euro has no detrimental effect on europe. the only country that is impacted from this is britain itself - and that impact is largely positive, i’d argue (the exchange rate can act as a shock absorber during downturns, like the one it’s experiencing now , and it also ensures that the UK’s exchange rate doesn’t become overvalued in real effective terms).
Anyway, I don’t think governments should bail anyone out but the OP was talking about how the Euro was dead and I was just drawing parallels to the situation in the U.S not too long ago.
two things about your statement:
- as i recently stated in a different thread,
the problems greece faces have been portrayed - incorrectly by the conservative media outlets such as cnn and fox - as a fiscal crisis. they are not.
therefore, comparing fiscal deficits is of little use.
i’ll actually just the rest of my post from that thread because it explains why, and actually addresses your argument in its entirety.
the the answer is no. us current account deficits, external debt, international investment position, and REER/ES currency misalignment are much lower. i haven’t checked, and i’m always a bit suspect of the macrobalance approach to judging currency misalignment, but i’m willing to bet it’s lower for the united states as well.
unfortunately, cger analyses are not publicly available (as far as i know), but you’re welcome to search the imf’s website as the policy may have changed.
anyway, i don’t have excel on this computer, so you’ll need to run the numbers yourself. here are some of the links you’d probably want to look at:
-
data from the most recent imf weo (april 21, 2010)
-
greek gross external debt
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greek international investment position
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united states gross external debt
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us international investment position
if you actually look at the data i’ve linked to, you’ll note that greece is in a much worse position.
so what does this all have to do with the euro?
while the united states’ currency (US$) can fluctuate so as to help reduce external imbalances (us$ depreciates = more competitive exports, less competitive imports → which will typically lead to smaller current account deficits, all else equal), greece does not have the same option because the euro is strongly anchored to the german and french economies.
as a result, the only way that greece can regain competitiveness and improve its current account balance (which is always talked about as a side-point in many news articles – but in reality is one of the main issues!) is for there to be a massive downward shift in the price level (and hence wages) in order to reduce and hopefully eliminate any over-valuation in its real effective exchange rate.
i can’t tell you by who or where or when it was done, but there was an excellent piece of economic analysis explaining how the euro imposes significant negative economic costs (in terms of a lower standard of living, lower income per capita, much longer recession, etc.) on eastern & southern european countries that have adopted or are attempting to adopt the euro.
unfortunately, the europeans - being the dicks that they are - suppressed the analysis. i’ll leave it up to you to guess who conducted the analysis.
luckily for us, however, a closely related analysis was conducted by an economist that works at bruegel, a european think tank that focuses on economic issues, and in particular provides some excellent analysis on eastern & southern european economic issues.
here’s a paper that was originally written about latvia, but really the essence of its analysis applies to greece and many others (romania, bulgaria, hungary, slovakia, slovenia, lithuania, estonia – pretty much all of the not-very-developed countries that have currency pegs, or that have adopted the euro :)). you should read pages 1-10 if you’re actually serious about discussing this topic.
ironically, there’s another paper written by the same author (zsolt darvas) that was released on december 31st '09, entitled
The EU’s Role in Supporting Crisis-Hit Countries in Central and Eastern Europe
talk about timely 
- the size of the eurozone - that is to say, the number of countries that utilize the euro - will contract within the next 5 years (at least, i’m willing to bet several thousands of canadian dollars to this effect)…
and for pretty much the reasons that darvas outlines (namely, the economic impact of adopting the euro has been quite negative for eastern & southern european countries).
this is the genesis of the thread title: i think the euro makes sense for all of the highly developed western european countries (belgium, france, germany, luxembourg), but not for most of the others (in some ways, i don’t even think that italy should be part of the eurozone).
it doesn’t make sense for the semi-developed european economies like greece, spain, ireland, and all of the other eastern & southern european countries. once these states finally come to their senses and embrace defaulting on their debt (seriously), they’ll ditch the euro.
the proposed bailout package will do nothing to avert this scenario (leaving the eurozone, and then some combination of defaulting on debt & devaluing currency). it will only delay it and add to the misery in the long run.
Agreed. This bailout is just delaying the inevitable contraction of the eurozone, for one. And that’ll be the least of the issues the EU’s going to have to deal with.
Especially with 2-3 other countries getting close to the same situation Greece is in currently.
It’s funny how their system works. The workers/savers are asked to fund those who act irresponsibly and people call them names for being upset in having to fund everyone else and their over the top social agendas and public sector workforce… It seems like an awesome system bound for greatness. Perhaps we should adopt something similar…
“It’s funny how their system works. The workers/savers are asked to fund those who act irresponsibly and people call them names for being upset in having to fund everyone else and their over the top social agendas and public sector workforce… It seems like an awesome system bound for greatness. Perhaps we should adopt something similar…”
Replace European Countries with US States, and
Replace EU with US.
If people were to look equally skeptical at the US system as they are at outside systems we’d get somewhere. Until that day comes Americans will only talk about how all the other economies and monetary systems are bound to fail. People should also look equally at “their” Republicans as they look at the opposite party members. And the Democrats should look equally “critical” at their own elected members as they are with the Republicans. But that will never happen and so we just point fingers at the others - until the next failure and then we pass more regulation and grow the size of Government. Brought to us by both parties…
"The Euro will not survive, because the European Welfare State model will not survive. "
We’ve been hearing this for over forty years now from American conservatives. Wishful thinking.
Europe will keep going…but call it dead, little growth in the rich countries, no growth in the poor. Living standards stagnate and slightly contract. Money is still out there to borrow, so your right, they will hand around for a long while, still.
It’s funny how their system works. The workers/savers are asked to fund those who act irresponsibly and people call them names for being upset in having to fund everyone else and their over the top social agendas and public sector workforce… It seems like an awesome system bound for greatness. Perhaps we should adopt something similar…
Merkel went from hero to goat on this one, and it looks like she is paying the price politically. I'd imagine the Germans may be more sensitive than many others about this bailout, because I remember when the wall fell and West Germany took on an economically crumbling East. Lots of pain and anger for many years, as their combined economy got back on it's feet.
**I’d imagine the Germans may be more sensitive than many others about this bailout, because I remember when the wall fell and West Germany took on an economically crumbling East. Lots of pain and anger for many years, as their combined economy got back on it’s feet. **
I was in Germany as the world cheered the collapse of the wall. The only ones upset were the actual Germans but that doesn’t make good headlines. The West was upset because they had a direct tax on their paychecks to remind them of their “generosity” and the East now had to look for jobs and compete against those far more skilled. The old adage about people loving freedom, as long as someone else does the dirty work is apt.
After that, i don’t think they will take kindly to bailing out a country that is responsible for their own mess.
“It’s funny how their system works. The workers/savers are asked to fund those who act irresponsibly and people call them names for being upset in having to fund everyone else and their over the top social agendas and public sector workforce… It seems like an awesome system bound for greatness. Perhaps we should adopt something similar…”
Replace European Countries with US States, and
Replace EU with US.
If people were to look equally skeptical at the US system as they are at outside systems we’d get somewhere. Until that day comes Americans will only talk about how all the other economies and monetary systems are bound to fail. People should also look equally at “their” Republicans as they look at the opposite party members. And the Democrats should look equally “critical” at their own elected members as they are with the Republicans. But that will never happen and so we just point fingers at the others - until the next failure and then we pass more regulation and grow the size of Government. Brought to us by both parties…
You fail to mention that the EU states have no central authority to raise taxes and to set fiscal policy at the country level.
In the US, the feds can raise taxes in order to bailout another state, no such mechanism exists in the EU.
Progressive states here in the US will be subsidized indirectly by responsible states when the shit starts to hit the fan.
But, the money will flow at the federal level, rather than having say New Hampshire give Rhode Island a $3B rescue package.
The EU will fail because the free loader problem is not sustainable.
The collapse of the Welfare State system will be spectacular.
"In the US, the feds can raise taxes in order to bailout another state, no such mechanism exists in the EU.
Progressive states here in the US will be subsidized indirectly by responsible states when the shit starts to hit the fan. "
Only problem with that argument is that this is not the case in the US as the deficit spending is far greater than any tax revenue. The bailouts are all financed through inflation.
"The EU will fail because the free loader problem is not sustainable. "
The US will fail because the free loader problem is not sustainable.
“The collapse of the Welfare State system will be spectacular.”
And that is true for the US Welfare State, too. It will be even more spectacular as Americans lived on credit and beyond their means much more so than the European society. Americans also enjoy more personal bailouts…so much for Europe being more Socialist…
"In the US, the feds can raise taxes in order to bailout another state, no such mechanism exists in the EU.
Progressive states here in the US will be subsidized indirectly by responsible states when the shit starts to hit the fan. "
Only problem with that argument is that this is not the case in the US as the deficit spending is far greater than any tax revenue. The bailouts are all financed through inflation.
"The EU will fail because the free loader problem is not sustainable. "
The US will fail because the free loader problem is not sustainable.
“The collapse of the Welfare State system will be spectacular.”
And that is true for the US Welfare State, too. It will be even more spectacular as Americans lived on credit and beyond their means much more so than the European society. Americans also enjoy more personal bailouts…so much for Europe being more Socialist…
Yeah, but China has our back!
“Yeah, but China has our back!”
There comes a time when one has to cut the financial umbilical cord…China won’t be there indefinitely to finance the US and its irresponsible fiscal policies.
Euro now at 1.25.
The utopian vision of a unified pan European model where milk is traded for BMW’s is now all but shattered.
The EU banks continue to short the euro as a way to hedge against their impending doom, all the while more and more people each day trade in their worthless euro paper for gold.
France threatens to leave the EU and Greece and Spain plan more “worker” (jesus christ what an oxymoronic term) strikes–which is to say more bodies will be burned in the streets.
Got to feel sorry for the German people, because they are really taking it in the ass on this one.
How long this charade can last is anyone’s guess, but the EU is destined to blow up quite spectacularly–without a central fiscal authority, how could you argue otherwise?
EDITLooks like the 1.25 stops just got taken out, last quote was 1.2443–the race to the bottom is on!
If people were to look equally skeptical at the US system as they are at outside systems we’d get somewhere.
Some of us in the US are. Yet most will not react until we reach a breaking point as has been reached in Greece.
If that day comes it will be globally catastrophic as this would be a failure of more than the ENTIRE EU. At present the US already has 2 states that are in as bad or worse shape than Greece both of which have a larger GDP than does Greece, CA and IL.
~Matt
Word on the street is one or more countries in the eurozone may pull out of the currency in the next week or so.
Word on the street is one or more countries in the eurozone may pull out of the currency in the next week or so.
Dude, you are moving markets!
EUR/USD now a 1.23 handle.
In the US some states will muster up enough political will to cut deficits–NJ will be the template for this–which will be enough to keep the party going.
The EU and it’s member countries don’t have the political will and there is no central authority to enforce the needed reductions–long live the welfare state!!
These socialist establishments are still living the utopian dream and nobody is going to take it away from them–wasn’t their a thread here recently about how taking a vacation should be a right enjoyed by all EU denizens?
I think that tells you all you need to know about the EU.
Looks like Germany to introduce short selling ban.
“German coalition sources told Reuters earlier that Finance Minister Wolfgang Schaeuble plans to ban short-selling from midnight.
Economy Minister Rainer Bruederele told Reuters that it was possible the short-selling ban would be quickly enacted.
No other details were immediately available.”
That is great news for my short EUR/USD position!
There must be some shit sucky news coming out soon for such a useless and desperate policy like that to be implemented.
We might reach parity sooner than I thought.
Long live the Welfare State!!!
1.22 and falling!