Re: [A-List] IMF: a Clintonian view

["Anne Williamson" <annewilliamson@xxxxxxx>]

It is incorrect that the New Deal denied foreign holders
of dollars convertibility into gold.  FDR conviscated
the gold of US citizens - upon pain of fines, penalities,
and imprisonment - giving them Federal Reserve
Notes in exchange, and then devalued the dollar - AND
FOR FORTY YEARS IT WAS ILLEGAL FOR ANY
AMERICAN TO HOLD OR TRADE IN GOLD, and
that meant at a minimum they could not convert their FRNs
into gold.

Post-Bretton Woods, the world operated not on the gold
standard, but on what is known as the "gold exchange
standard," which was the US's highly successful effort to
force foreigners to treat dollar reserves as if they were
gold.  (All members of the IMF sign away any rights to
back their currencies with gold.)  It was Richard Nixon
who broke convertibility for foreign holders of FRNs in
1971 when the US defaulted on its foreign debt, essentially
telling its creditors, "We won't pay.  Here, eat some more
of our delicious, phony-baloney counterfeits."

The only lawful money is gold, and according to the US
Constitution a dollar is a certain weight of gold.  The
world operates today without lawful money anywhere
since the Swiss bit the bullit 18 months ago and ended
convertibility of the Swissy.  And the only bona fide dollars
are gold coin.

Paper notes issued by the Fed are "Federal Reserve Notes,"
unsigned promissory notes that merely
represent a claim upon wealth/resources/products that
may or may not be honored.

Enjoy your FRNs, the greatest swindle the world has ever
known -- and the preferred tool of  US-led global fascism.

And, BTW, foreign authorities are just as nervous about a
possible collapse of the "dollar" as are US authorities.  In
1990, 51% of foreign central bank reserves were in "dollars".
Today, that figure has risen to 69% -- leaving all the world's
parasites stuck in the FRN quagmire on their knees praying
the "dollar" retains its current market strength.

Swine.  Each and every one.

Anne

----- Original Message -----
From: Henry C.K. Liu <hliu@xxxxxxxxxxxxxx>
To: <a-list@xxxxxxxxxxxxxxxxxxx>
Sent: Saturday, May 18, 2002 4:47 PM
Subject: Re: [A-List] IMF: a Clintonian view


> Countries do not have debt problems.  The have foreign debt problems.
Applying the State Theory of Money. any government can issue all the money a
country needs as long as its authority to collect taxes is not impaired.
Under condition of production overcapacity, any government can print as much
money as needed with fear of inflation, to boost aggregate demand by
maintaining full employment and rising wages.  It is when a country borrows
foreign currency debt, that its own government cannot legally print that it
faces a debt crisis.
> Sovereign governments do not need IMF, or any other foreign institutions,
permission to refute foreign debt.  Any sovereig government can refute
foreign debt unilaterally by invoking the doctrine of lender liability -
that a lender is responsible for the liability of lending to a borrower that
he knows could not handle or benefit from the loan.  Now international
lenders will of course demand their pound of flesh, but they are powerless
to collect.  The worse that they can do is to stop lending further, which
they are doing anyway when IMF austerity conditionalities are not met.
>
> In the US, a company under bankruptcy reorganization can get
debtor-in-posseion (DIP) loans to operate while working out a reorganization
plan to maximize value to non-secured creditors.  DIP loans enjoy senior
position to all pre-bankruptcy debts.
>
> Under the New Deal, the US by executive order forbade the payment of gold
to foreign holders of the dollar. All a soverign debtor nation needs to do
is to declare by executive order that all foreign currency debts can only be
paid in domestic currencies, and turn over a new financial page.
>
> Henry C.K. Liu
>
> Keaney Michael wrote:
>
> > Forget sovereign bankruptcy plans
> > Rather than ponder new ways for dealing with failing countries, the IMF
should use better the tools it has, says Caroline Atkinson
> > Financial Times: May 17 2002
> >
> > Question: when is a country not like a company? When it has run out of
money. A company can declare bankruptcy. A country cannot. Debt work-outs
for companies are guided by domestic bankruptcy laws. Debt work-outs for
countries are not. They can be long and messy.
> >
> > It is little wonder that the International Monetary Fund and creditor
government officials struggling to manage emerging market financing crises
are seeking new ways to resolve them.
> >
> > The debacle in Argentina adds urgency. Yet the boldest proposal - a
sovereign bankruptcy procedure drawing on the analogy with companies - is
likely to prolong debate, not resolve it. The less ambitious US Treasury
plan - a renewed effort to press for bond clauses to facilitate orderly debt
work-outs - also falls short.
> >
> > Neither scheme would have stopped Argentina's collapse or made its
problems more tractable. Declaring default without changing the currency peg
would have triggered more capital flight. Better procedures for dealing with
bondholders now would not address the imploding financial system, the
crumbling economy and the threat of hyperinflation.
> >
> > Conversely, if Argentina restores financial stability and a credible
framework for growth, its creditors will be keen to strike a deal.
> >
> > In crises from Mexico to Turkey, debt problems are a symptom as well as
a cause of economic trouble. Resolving them requires reforms, notably
exchange rate changes that, although needed for growth, cut living standards
in the short term. Identifying the reforms, persuading countries to
implement them and being ready to stop lending if they do not are the
challenges.
> >
> > Energy should be focused not on the mechanics of debt work-outs but on
three deeper issues. First, how to judge when a country cannot pay its debts
without crippling its economy. Second, how to strengthen the international
community's will to deny money when policies stand little chance of working.
Third, how to use existing tools to push debtors and private creditors
towards agreement.
> >
> > When crisis hits, it is hard to tell whether policy reform and temporary
official financing will be enough to restore investor confidence. In a few
cases, debts may have to be restructured. Tough judgments are involved in
deciding when restructuring is the only option and how to share the pain
between debtor countries and their creditors.
> >
> > The IMF is the only body with political legitimacy and the technical
ability to make such judgments. It should do so with more transparent
guidelines on debt sustainability. Its programmes already require
assumptions about a country's ability to raise taxes, cut spending and
borrow. What is needed is a more open acknowledgement of when debt
restructuring is needed to make these assumptions add up.
> >
> > At times, it is right for the IMF to provide finance for a country to
avoid default. But exceptionally large packages should be more carefully
limited, with tightly monitored and credible policies that make a return of
confidence highly likely. A fixed exchange rate that has been challenged by
the market should almost never be part of the package. And if markets give a
thumbs-down or policies slip, lending should stop and the strategy should be
rethought.
> >
> > Some argue that a sovereign bankruptcy mechanism would help the IMF and
its shareholder governments to say No. But the IMF already has a powerful
tool to push debtors and creditors to negotiate: its ability to lend into
arrears, signalling support for a borrower even if it is not paying all its
debts to private creditors.
> >
> > A sovereign borrower has more freedom than any company to stop paying
its debts and to force a settlement on creditors. Governments rarely do
this. The damage to credibility and loss of access to capital costs too
much. Borrowers need the IMF's "seal of approval" as well as financial
support to ease the crisis. But the IMF can decide to lend when a country is
in arrears to its private creditors if the country is making its best
efforts to reform. Then, creditors have little option but to try to
negotiate a deal. Unlike a corporate bankruptcy, there are few assets to
seize. Creditors need the IMF to bring debtors to the table, with a viable
economic plan.
> >
> > So why has the IMF not made more use of this tool? It requires truly
difficult judgments backed by shareholder governments about how much pain a
country can and should bear and how much risk default poses for the system.
> >
> > A new legal superstructure would not make those judgments easier. Rather
than wait for more legal powers, the international community should refine
its judgment about when to use the power it already possesses. The choice
may not be between new IMF loans and default but between throwing good money
after bad and new loans to back credible policies and a realistic debt
burden.
> >
> > The writer is a senior director at Stonebridge International, a global
strategy company, and adjunct fellow at the Council on Foreign Relations.
She was senior deputy assistant secretary at the US Treasury
>
>
>