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Joanne98 Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jun-30-10 09:07 AM
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Why Should We Trust the IMF?
The IMF is shouting about the need for austerity today, but it was strangely quiet during the build-up of the bubble that got us here
by Dean Baker

Is advice from the IMF better than advice from a drunk in the street? That is the question that people around the world should be asking as the International Monetary Fund dishes out its prescription for austerity. The IMF programme calls for cutbacks in government support for healthcare, pensions, and a wide range of other public services. It also calls for weakening labour market regulations that provide workers with job security.
These recommendations are being given in a context where the world economy is suffering from a massive shortfall of demand. In other words, tens of millions of people are unemployed right now because there is not enough spending to keep them employed. The IMF's programme is almost certain to reduce spending further leading to even larger shortfalls in demand and more unemployment.

But, the IMF says that we should trust them. The question we should all be asking is: "why?"

Where was the IMF when the housing bubble in the US and elsewhere was inflating to ever more dangerous levels? Was it frantically yelling at governments to rein in the bubbles before they burst with disastrous consequences? After all, what could possibly have been more important than warning of the dangers of these bubbles?

It was easy to both recognise the housing bubbles and that their collapse would have devastating consequences for the economy. Economies don't adjust easily to a loss of wealth that in some cases exceeded 50% of GDP.

Real economists know this, but apparently the folks at the IMF did not, or if they did, they didn't think it was worth saying anything. One will look in vain through IMF publications during the build-up of the housing bubble for serious warnings of the potential dangers. While the IMF can scream about the need for austerity today, it couldn't be bothered to say much about the bubbles that got us here.

The IMF's track record gives us reason not only to question the institution's competence but also its motivations. This question comes up most clearly in the case of Argentina. At the end of 2001 Argentina defaulted on its debt, enraging the IMF. Prior to the default, Argentina had been an IMF poster child eagerly embracing the IMF's programme.
http://www.commondreams.org/view/2010/06/29
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