Monday, September 28, 2009

'Why Triple IMF Resources Now?'   [Veronique de Rugy]

Good question. I personally don't think there is ever a good reason to fund institutions like the IMF, the OECD, or the World Bank with taxpayers' dollars. For one thing, most of these places are packed with bureaucrats who don't pay taxes but spend their time advising foreign governments about the need for them to increase taxes.

That's why I was relatively satisfied when a year ago the IMF announced that it was in a somewhat dire financial situation (it even had to cut the subsidies for its employees' cafeteria, imagine that!). It was even starting to let go some members of its vast army of bureaucrats. But, then the financial crisis happened and the IMF got a new lease on life. Remember the $100 billion in emergency spending for the IMF from the U.S. alone? 

So I am enjoying this post by Stanford University's John Taylor today, which asks: Why we should increase the IMF's funding now? He writes:

Why? First, the IMF does not need the money: as the first chart shows, it has loaned only a small fraction (7%) of the targeted $750 billion, even less than it loaned in severe emerging market crisis period of 1995-2003. (The IMF uses SDRs to measure loans: SDR= $1.6). Second, emerging market economies have recovered from the worst of the financial crisis. In fact, according to the purchasing managers index shown in the other chart, they bottomed out in December of last year, well before the April G20 decision to treble resources. Third, providing too many resources to any government institution can be harmful. Discipline is lost without a budget constraint. Even with the best intentions, resources are wasted or misused. Excess resources become a slush fund leading to mission creep, unpredictable policies, and more crises.

Check out the really cool charts he has on his blog here.

09/28 12:00 PMShare