STAFF NEWS & ANALYSIS
Shut Down the IMF
By Staff News & Analysis - June 17, 2013

IMF warns US economic recovery has been slowed by 'ill-designed' cuts but warns Congress against spending less on infrastructure and education … IMF managing director Christine Lagarde said: 'The IMF's advice is to slow down but hurry up.' … The International Monetary Fund said on Friday that an "excessively rapid and ill-designed" deficit reduction plan had hampered the "tepid" recovery in the US economy. – UK Guardian

Dominant Social Theme: Listen to the IMF. They've been getting it right for decades.

Free-Market Analysis: Actually, the IMF has been getting it resolutely wrong for decades. But we are supposed to accept its wisdom because it is large and the governments of countries around the world contribute to it.

For us, that mostly shows the power of the Anglo-American alliance and the ability of the top men of that alliance to convince (intimidate) others into going along with the program.

Of course, these days there is at least one other competitor waiting in the wings. The BRICs' leaders are beginning to construct their own version of a global infrastructure and thus the IMF may not have the field all to itself in the future.

Never has a worldwide organization filled with prestigious financial types issued so much wrongheaded advice with so much certainty. Most recently the IMF admitted its focus on "austerity" had helped collapse the economy of Greece, and they could have mentioned Spain, as well.

The IMF's peculiar combination of tax hikes and increased regulatory activism combined with reduced social spending is a recipe not for economic recovery but for civil unrest. It happened in Argentina in the early 2000s before the government kicked the IMF out and most recently it has set parts of Europe afire.

Undeterred, however, the IMF continues to issue statements that are both pompous and economically illiterate. Most recently, we see in this excerpt from the UK Guardian, the IMF has commented on the much-vaunted (and still fairly invisible) US recovery.

The IMF could have commented on the US's $2 trillion black market, or its impossible debt overhang that can explode into chaos and bankruptcy if interest rates move up too hard and too fast.

But … no … that is not what the IMF has discovered about the US. Instead, they issue a purely Keynesian report damning the US government for making spending cuts! Also, taxes should have been introduced more slowly. Here's more:

In its annual report on the US economy, the IMF said growth this year would have been as much as 1.75% higher than the sluggish 1.9% forecast had spending cuts and tax increases been introduced more slowly. It forecast 2.7% growth for 2014. "The deficit reduction in 2013 has been excessively rapid and ill-designed," the IMF said. "These cuts should be replaced with a back-loaded mix of entitlement savings and new revenues, along the lines of the administration's budget proposal."

The organisation warned that cuts to education, science and infrastructure spending could reduce US potential growth in the medium-term. Christine Lagarde, the IMF's managing director, said: "The IMF's advice is to slow down but hurry up: meaning slow the fiscal adjustment this year, which would help sustain growth and job creation, but hurry up with putting in place a medium-term road map to restore long-run fiscal sustainability."

The IMF predicted that the jobs market would start to gain momentum later this year and said the housing market was recovering more quickly than expected. It also said the boom in the US energy market and in business investments should also boost the economy. The IMF warned against an early ending to the massive economic stimulus programme being undertaken by the Federal Reserve.

This is really Keynesian junk. What the US economy needs more than ever is a stiff dose free-markets. Deregulate, cut taxes aggressively, reduce the Fed's inflationary policies and generally get the US's gigantic fedgov out of the business of managing the economy.

Of course, if that did happen, the US would probably default on federal obligations. But maybe that wouldn't be such a bad thing, either, as the US is probably going to default anyway.

Arguments can certainly be made that the US middle class would be pounded by a default, but the middle class throughout the West has already been pounded. At least a default would end the madness of the current central banking economy and make what appears to be a planned globalization of the same economically dysfunctional system less immediately feasible.

One can argue that the BRICs may eventually come up with a better idea when it comes to IMF-style global/financial governance. But this is not likely, as the BRICs' alternative currently seems even more authoritarian and Keynesian than the IMF's vision.

What is being set up between the BRICs and the IMF is a race downhill, from what we can tell. The IMF will insist on its dysfunctional Keynesian solutions and the BRICs will demand that the world adopt an economic blueprint of even MORE government interference in the marketplace.

This is a scary thought, as the IMF's nostrums have proven both impractical and destructive for its entire lifetime. Just look at its analysis of the US downturn. The most prominent feature of the IMF is arrogance. It takes a peculiar skill to be wrong so determinedly.

After Thoughts
Want to really help out the world's economy? Shut down the IMF.

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