HowardDon't Wait on the IMF to Change; Time to Act
Waiting at the FDR PO, Manhattan
The IMF system has deteriorated since the dollar went off the gold exchange standard. Now some worry that the IMF (Intl Monetary Fund) itself will go broke. With Argentina, Brazil and other nations getting out of arrears to the fund, it seems just a matter of time.
[Source: Wall Street Journal, Financial Times, 2/1/07. New York] THE ULTIMATE "FAILED" BANK: THE IMF. A panel of experts is advising the cash-strapped International Monetary Fund (IMF) to sell off 400 tons of gold (worth $6.6 bn.) and then invest the proceeds in what the Wall St. Urinal calls more "lucrative, riskier securities." Hedge funds or derivatives perhaps?
The Fund reportedly has "gaping holes" in its budget, expected to reach an annual shortfall of $400 mn. by 2010. Revenue derived from interest on loans has declined, because many countries are borrowing less from the Fund, if at all. Brazil and Argentina, once two of the largest borrowers, have paid off what they owed altogether. The brilliant experts advising the Fund on how to become more solvent include European Central Bank President Jean Claude Trichet, and former Fed chief Alan Greenspan. With their track record, and the state of the world economy, there may not be an IMF to kick around for much longe
"CLARION CALL" TO THE CITY OF LONDON THAT CONSUMER DEBT, a flu pandemic, and a change in the way the markets price risk, could trigger a "shock" to the financial system, in its annual Financial Risk Outlook published yesterday. The FSA warned that a shock would be worse in 2007, due to use of complex financial instruments and a new correlation between financial markets, such as property and equities.
Of the nine priority risks, worst is the possibility that a "significant minority" of onsumers have big debt problems. The FSA reports that average consumer debt levels have now reached the all-time high of 140% of income, twice that of the 1980s. This amounts to 1.3 trillion pounds. Now, some 34% of consumers are having difficulty paying their bills. While most of these consumers are renters, those who are homeowners also face problems: if house prices were to fall, they would no longer be able to use equity in their homes to refinance other debts. Carlson said the FSA had been "rather surprised" by the rise in
bankruptcies and individual voluntary arrangements, given low interest rates. Perhaps if people sold their homes and became homeless, they could pay their CC debt. Then, the real estate bubble, however, would crash even faster.
