Reply #94: Eurocarnage Continues [View All]

http://www.nakedcapitalism.com/2011/11/eurocarnage-continues.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

Reader Antifa had noted in comments that the IMF had expanded access on Thursday to borrowing facilities via a Precautionary and Liquidity Line (PLL), which would allow “responsible” borrowers to take down five or perhaps as much as ten times their normal allotment. But I don’t agree with his/her hopeful view that this meant the IMF was acting as lender of last resort. Only the ECB, an issuer of euros, can play that role. The IMF gets its budget from member nations, and my understanding in the US is that it comes from the Treasury, not the Fed, which means it is a budgetary item. New spending allocations, particularly to ‘furriners, are not likely to get much traction. China was already approached directly (for the EFSF) and was notably cool on the idea. Why would it lend indirectly, via the IMF, when it and other emerging economies are already unhappy that their voting share is out of line with their economic power? The BRICs have made it clear they want more voting rights as a condition to making bigger contributions. So I don’t see the IMF as an effective force, in general, and even on a stopgap basis given it certain to be insufficient firepower....