Destroying National Currencies (fwd)

[Sid Shniad <shniad@xxxxxx>]

> 	DESTROYING NATIONAL CURRENCIES
>
> 	by
>
> 	Michel Chossudovsky
>
> Professor of Economics, University of Ottawa, author of "The Globalisation
> of Poverty, Impacts of IMF and World Bank Reforms, Third World Network,
> Penang and Zed Books, London, 1997. The author can be contacted at
> chosso@xxxxxxxxxxxxxx
>
> Copyright by Michel Chossudovsky, Ottawa 1997. All rights reserved.
>
>
> Since the onslaught of the debt crisis in the early 1980s, the IMF has
> played a central role in exchange rate policy often requiring indebted
> Third World countries to devalue their currency by 50 percent as a
> "pre-condition" for the subsequent negotiation of a loan agreement. IMF
> sponsored currency devaluations have invariably resulted in abrupt price
> hikes and a dramatic compression of real earnings.
>
> What is distinct in the cases of Korea, Indonesia and Thailand is that the
> devaluation (which preceded the bail-out agreement and the imposition of
> sweeping macro-economic reforms) had not been explicitly demanded by the
> Washington based bureaucracy. Rather it was the result of speculative
> pressures on currency markets exerted by the large merchant banks and
> financial institutions (through the use of a variety of speculative
> instruments).
>
> In the context of the Asian financial crisis, "institutional speculators"
> (rather than the IMF) have come to play an indirect role in the process of
> macro-economic reform. In other words, international banking and financial
> institutions have (in a de facto sense) dictated country-level foreign
> exchange policy, --ie. through the deliberate manipulation of currency
> markets. In this context, "institutional speculators" are involved in
> "setting the stage" for the subsequent IMF bail-out operation. They are
> also involved in routine consultations with the Bretton Woods institutions
> pertaining to the various components of the macro-economic reform package
> included in the bail-out agreements (eg. the deregulation of Korea's
> financial sector and the opening up of Seoul's bond market to foreign
> capital).
>
> In turn, the same Western and Japanese financial and banking institutions
> (routinely involved in currency and stock market speculation) are the
> creditors of Asia's central banks. They also hold large amounts of short
> term debt and have, therefore, a vested interest in averting loan default
> by Asian financial institutions. Not surprisingly, these same Western and
> Japanese financial institutions have pressured G7 governments to implement
> the bail-out operations of which they are the ultimate beneficiaries, --ie.
> the 57 billion dollars under the IMF sponsored agreement with the Seoul
> government will be used to reimburse Korea's creditors.
>
> How will these multi-billion dollars operations be financed? The
> contribution of the Bretton Woods institutions and the Asian Development
> Bank (ADB) constitutes but a fraction of the total. The largest
> contributions to the bail-outs are from G7 governments, requiring the
> issuing of vast amounts of public debt.
>
> In other words, G7 governments have come to the rescue of the merchant and
> commercial banks by accepting to finance the bail-out, yet to undertake
> this objective, G7 national treasuries are obliged to issue large amounts
> of public debt which is invariably underwritten by the large merchant
> banks. In other words, the "beneficiaries" of the bail-out are also the
> underwriters of the public debt operation required to finance the bail-out.
>  An absurd situation: G7 governments are "financing their own
> indebtedness"...
>
> While the bail-outs are conducive to the building up of public debts (in
> both the Asian and G7 countries) --thereby reinforcing the stranglehold of
> the creditors over the conduct of economic policy-- tens of billions of
> dollars of public money are transferred into the hands of private financial
> institutions leading to an unprecedented accumulation of private wealth. In
> turn, the macro-economic reforms imposed in the context of the IMF
> sponsored bail-outs are conducive to a dramatic collapse of the real
> economy leading to the impoverishment of millions of people.
>
>
>
>
>
>
>
>     Michel Chossudovsky
>
>     Department of Economics,
>     University of Ottawa,
>     Ottawa, K1N6N5
>
>     Fax: 1-613-7892050
>     E-Mail: chosso@xxxxxxxxxxxxxx
>
>     Alternative fax: 1-613-5625999
>