Central Bankers See Crash Coming, Deploy IMF Partial Bailout
As central bankers were apparently unable to come up with a solution to the threatening financial collapse during their annual convention at Jackson Hole (Aug. 26–28), the International Monetary Fund was quietly deployed to bail out the debt bomb of developing countries.
As Donald Kohn, the Federal Reserve’s former Vice Chair for Financial Supervision, told the gathering, the global debt bubble is estimated at over one quadrillion dollars, so regulators and lawmakers had better act fast. One of the most exposed sections of it is the foreign debt of poor countries, which has exploded under the COVID-19 pandemic. Therefore, just last week, the International Monetary Fund allocated $650 billion in what are called IMF Special Drawing Rights (SDRs) to 215 member countries, in an effort to stave off the collapse.
In fact, this is a similar tactic to the hyperinflationary “quantitative easing” programs carried out by the Federal Reserve and other big central banks to prevent the blowout of corporate and household debts in Europe and the United States.
While the SDRs seem to amount to a big sum, they are just rights of countries to borrow back their own IMF quotas for an indefinite period in order to pay foreign debts, which the underdeveloped nations would otherwise default on imminently. What will the IMF do next? It will ask the major nations for new quotas to replenish its coffers, just as it demanded $500 billion from a G20 meeting in Feb. 2009, right after the 2008 global crash.
In reality, the emission of SDRs is an outrageous move by the IMF to claim the authorization to be the lender of last resort to super-indebted countries, providing them the income to pay debts to giant banks and other multilateral financial firms. This pure waste defines the difference between dumb money, which it is, and credit –which it is not. Dumb because it comes down to stealing money from major developed economies and passing it out as new debt to roll over unpayable debts.
This was prohibited under the Bretton Woods agreements, which gave us a healthy, functioning international monetary system from 1945-70.
The last time the IMF pulled out this particular scheme, in 1982, Lyndon LaRouche was well known and trusted by developing countries’ leaders, despite Henry Kissinger’s threats against him. LaRouche told those leaders that the Third World debt had to be reorganized, as Alexander Hamilton had done for the young American Republic, and made the basis for new credit directed to economic development. LaRouche was proven right –the IMF intervention only caused the debt bomb to explode!
Credit, productive lending from major sovereign nations to equally sovereign developing nations, for economic development and future industrialization, is the crucial element needed immediately now, to shift the paradigm from endless wars to peace through development.