The IMF: Is it up to the job?

28th November 2011

We have seen the credit crunch develop in various ways but a main theme has been the way that private-sector debt problems have been transferred to sovereign nations on such a scale that these days sovereign nations are increasingly looking for supranational organisations to take some of the burden off them.

Recent constructions in this area have not gone well with examples such as the European Financial Stability Facility being examples of how not to do it rather than the reverse. This means that politicians are increasingly looking to existing supranational organisations to help them out. Of these the pre-eminent one is the International Monetary Fund or IMF.

So the IMF finds itself in a situation where politicians consider it to be a form of International Rescue but as I shall explain below it falls well short of the powers and skills of the Tracy family and in fact could do with a character with Brains.

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What is the IMF's role?

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This is important as it has undergone something of a metamorphosis in more recent times.

It has plainly changed from an organisation which helps with balance of payments problems to one which helps with fiscal deficits. Whilst this may suit politicians, taxpayers and voters should in my view be concerned about the moral hazard of one group of politicians voting to increase funds available to help another group of politicians which increasingly includes themselves.

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