Money Is Power An Inside View of the IMF's Massive Global Influence

By and

Part 3: Instant Flows of Cash


Some 2,400 people work for the Fund, most of them in Washington, but there are also small offices around the world, with three or four people working in each country. If Iceland becomes insolvent, it can apply for a loan, for hard currency and for a subsidized interest rate that can be as low as 5 percent. Things have to happen quickly, too. The field team, as it's called, submits reports, a team in Washington writes a rescue plan, and Iceland approves it. The IMF's Board of Governors confers on the issue and decides whether the plan will work. With the press of a button, $168 million is sent to Reykjavik, arriving there seconds later. This is what distinguishes IMF decisions from many multilateral decisions: the immediate flow of cash.

Then a team from Washington follows the money to Reykjavik, where it advises and keeps a close eye on the Icelanders. This goes on for months, because the new emergency program, known as the "Flexible Credit Line" -- money provided with no strings attached -- increases the risk for the Fund. Will this money ever be repaid?

'I Had to Look Up Terms on Wikipedia'

Olivier Blanchard is considered to be the brain of the organization. A slim, soft-spoken man, he is sitting in his office, room number 10-700 H, with the top two buttons of his shirt undone. Blanchard is a macroeconomist and one of DSK's top advisers. A Frenchman like Strauss-Kahn, Blanchard is not a politician but a product of the University of Cambridge. He has two positions at the Fund: economic adviser and director of the research department.

He talks about how, at the beginning of the economic crisis, they sat in their offices, speechless with amazement, and tried to understand what tricks Lehman Brothers and others had employed to bring about their own demise. "It was a fulltime job. In the beginning I had to look up terms like 'CDO squared' on Wikipedia," he says with a chuckle.

Then the crisis escalated, and it gradually became clear that Africa, Iceland and many others needed help. "That's when we became part of the game," says Blanchard, "and what I may have been able to add was a widening of understanding of what was happening: This is not a standard recession. These are very complicated developments that are asking for complex solutions, and broad thinking."

Blanchard is an astute academic who admires Strauss-Kahn for qualities he probably prefers not to find in himself: "The Machiavellian side. Without the darkness. He is Machiavelli without the shadow, do you know what I mean?"

How the Americans Got Their Own Way

If anyone ought to know what has truly changed at the Fund, it is James Boughton. An elderly man, he sits in his office, surrounded by his books, off a deserted hallway lined with empty offices on the fifth floor.

Boughton talks about 1944 and the establishment of the World Bank and the IMF in Bretton Woods, New Hampshire, when the images of the war were still omnipresent. The idea was that free trade would prevent new wars from breaking out, and the Fund was intended to "facilitate the expansion and balanced growth of international trade," as the IMF's articles of agreement put it.

But there was more to it, of course. The British wanted the organization to be headquartered in New York, but the Americans, who preferred to keep it closer to their seat of government, got their way. The Fed, the major Wall Street banks and the White House treated the Fund as a tool of American policy. During the Cold War, IMF loans were contingent on compliance with Washington's political agenda. For decades, neoliberal economic theory was the only true theory, and it preached raising taxes, reducing subsidies and liberalizing markets.

Dominique Strauss-Kahn is publicly portrayed as the man who transformed the Fund. But inside the Fund they say that it was Reza Moghadam, who experienced the street rioting during the Asian crisis, who truly transformed the organization.

Boughton says that neither assessment is correct, and that the process of transformation began under Horst Köhler, the former German director who would later become the country's president. "Horst Köhler asked for a more cooperative way of approaching officials in borrowing countries. The shift to more narrowly focused and less intrusive conditions for credits began under Köhler," says Boughton.

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lakechamplainer 10/05/2010
1. Who elected Strauss-Kahn?
I found this to be a very informative article. Kudos to Klaus Brinkbaeumer and Ullrich Fichtner. I get the sense the that Strauss and the other IMFers were trying to be careful about what they said, but didn't realize how it would sound to an average person. For example, * Print * E-Mail * Feedback 10/04/2010 Money Is Power An Inside View of the IMF's Massive Global Influence By Klaus Brinkbäumer and Ullrich Fichtner Photo Gallery: 9 Photos Martin H. Simon / MHS Three years ago, the International Monetary Fund was irrelevant, an object of derision for all opponents of globalization. Under director Dominique Strauss-Kahn and as a result of the global economic crisis, the IMF has since become more influential -- governing like a global financial authority. It is also putting Europe under pressure to reform. The building that houses the headquarters of the global economy is a heavily guarded, 12-story beige structure in downtown Washington with a large glass atrium and water bubbling in fountains. The flags of the 187 member states are lined up in tight formation. Visitors walking into the office building find the cafeteria on the right, where many meetings are held. There, experts in their shirtsleeves, their jackets draped over the backs of chairs, drink lattes out of paper cups and talk countries into crises or upturns. A little farther down the hallway is the Terrace, the IMF building's upscale restaurant where the director receives official guests. On a Tuesday afternoon in late September, as the first leaves are falling from trees outside, the director, wearing a blue suit and a blue tie, is sitting on a blue couch high up in his office at the headquarters of the International Monetary Fund (IMF), outlining his idea of a new world. Some of it already exists, in the form of a new world order established in September 2008 to replace the one that was collapsing at the time. The result wasn't half bad -- but it is robust? 'The Money Is The Medicine' These are important times for humanity. The crisis has forced everyone to see many things from a new perspective. Now the IMF is preparing for its annual meeting on Oct. 8. Can it live up to expectations, and can it police the new global economic order and keep global banks in check? "You have to imagine the IMF as a doctor," says Dominique Strauss-Kahn, the 61-year-old director of the International Monetary Fund. "The money is the medicine. But the countries -- the patients -- have to change their habits if they want to recover. It doesn't work any other way." He smiles benevolently as he says these things, his eyes disappearing behind small cushions of wrinkled skin. Who elected him to anything? Who his he to say how human beings should order their societies? In Strauss-Kahn's view, the IMF should become an administrative unit of sorts for the G-20, an agency that "tries to find solutions for global and national problems," and comes up with plans and create values. "In the end we aim at much more than just the right financial and economic policies. The ultimate goal, of course, is world peace through economic stability." This is the way Strauss-Kahn views his organization, and the astonishing thing is that hardly anyone, with the exception of a lone professor in Boston, disagrees with him anymore. As an American, I don't recall a process being followed to give up sovereignty and assign it to the IMF, and to assign them control of a large chunk of my tax dollars. I certainly don't support it, and it is clearly against the US Constitution.
BTraven 10/07/2010
2.
Zitat von lakechamplainerI found this to be a very informative article. Kudos to Klaus Brinkbaeumer and Ullrich Fichtner. I get the sense the that Strauss and the other IMFers were trying to be careful about what they said, but didn't realize how it would sound to an average person. For example, * Print * E-Mail * Feedback 10/04/2010 Money Is Power An Inside View of the IMF's Massive Global Influence By Klaus Brinkbäumer and Ullrich Fichtner Photo Gallery: 9 Photos Martin H. Simon / MHS Three years ago, the International Monetary Fund was irrelevant, an object of derision for all opponents of globalization. Under director Dominique Strauss-Kahn and as a result of the global economic crisis, the IMF has since become more influential -- governing like a global financial authority. It is also putting Europe under pressure to reform. The building that houses the headquarters of the global economy is a heavily guarded, 12-story beige structure in downtown Washington with a large glass atrium and water bubbling in fountains. The flags of the 187 member states are lined up in tight formation. Visitors walking into the office building find the cafeteria on the right, where many meetings are held. There, experts in their shirtsleeves, their jackets draped over the backs of chairs, drink lattes out of paper cups and talk countries into crises or upturns. A little farther down the hallway is the Terrace, the IMF building's upscale restaurant where the director receives official guests. On a Tuesday afternoon in late September, as the first leaves are falling from trees outside, the director, wearing a blue suit and a blue tie, is sitting on a blue couch high up in his office at the headquarters of the International Monetary Fund (IMF), outlining his idea of a new world. Some of it already exists, in the form of a new world order established in September 2008 to replace the one that was collapsing at the time. The result wasn't half bad -- but it is robust? 'The Money Is The Medicine' These are important times for humanity. The crisis has forced everyone to see many things from a new perspective. Now the IMF is preparing for its annual meeting on Oct. 8. Can it live up to expectations, and can it police the new global economic order and keep global banks in check? "You have to imagine the IMF as a doctor," says Dominique Strauss-Kahn, the 61-year-old director of the International Monetary Fund. "The money is the medicine. But the countries -- the patients -- have to change their habits if they want to recover. It doesn't work any other way." He smiles benevolently as he says these things, his eyes disappearing behind small cushions of wrinkled skin. Who elected him to anything? Who his he to say how human beings should order their societies? In Strauss-Kahn's view, the IMF should become an administrative unit of sorts for the G-20, an agency that "tries to find solutions for global and national problems," and comes up with plans and create values. "In the end we aim at much more than just the right financial and economic policies. The ultimate goal, of course, is world peace through economic stability." This is the way Strauss-Kahn views his organization, and the astonishing thing is that hardly anyone, with the exception of a lone professor in Boston, disagrees with him anymore. As an American, I don't recall a process being followed to give up sovereignty and assign it to the IMF, and to assign them control of a large chunk of my tax dollars. I certainly don't support it, and it is clearly against the US Constitution.
Presumably the man who runs the IMF does not know that his organisation could became redundant given that most countries “helped out” by the IMF have learned its lesson, namely to stockpile as much money as possible. China does it, Brazil too, even Argentina piles lot of cash. From one extreme to another one.
esperonto 10/08/2010
3. a bee in the bonnet
Its plain to me that these old guys who want the New World Order have what is known as a "bee in their bonnets", meaning a little idea they hope to capitalize on, which is more grandiose in concept than in its true practice -- namely, that this New World Order will not pan out. It will fall apart, but perhaps before doing so, a few people will get rich, and that is all it is really about. Humanity will shirk off the stress the NWO is putting on them with all this military action, and they will relax back into normal humans and laugh at the diabolicalness of the western minds trying to push people over the edge.
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