04.16.2012 in Economy, Featured by Bill Wilson 23

IMF chief urges more U.S. ‘appropriate indebtedness’

Christine LagardeBy Bill Wilson — Is the International Monetary Fund (IMF) inserting itself into U.S. political affairs and potentially setting up a conflict over U.S. sovereignty?

After a speech last week at the Brookings Institution on the financial crisis, IMF Managing Director Christine Lagarde took questions from the audience, including one from U.S. Bureau of Economic Analysis economist Garth Trinkl.  Trinkl wanted to know if a massive mortgage bailout — funded by taxpayers — was in the offing and what Lagarde and the IMF thought about it.

Asked Trinkl, “Is this a time where there could be some debt restructuring within the older [advanced] countries to add to aggregate demand in the U.S.? And could this expand beyond just foreclosures so that there could be — now that the financial sector has had a boost — the middle class in the OECD could have its own boost?”

“A matter of urgency”

Lagarde responded to Trinkl’s question, saying, “This is something the IMF has had a long-standing position on. The housing problem is something that needs to be addressed as a matter of urgency.”

But what business is it of the IMF’s? Is Lagarde joining the Obama reelection campaign to push for his policies? Taxpayers in part pay for her salary. Is this what they’re paying for?

The only thing Congress should be “urgently considering” is withdrawing the $165 billion of U.S. taxpayer  funds  from the IMF.  Because of the IMF, we are on the hook for tens of billions of debt owed by bankrupt countries in Europe and elsewhere.

This is a very dangerous precedent. The IMF — along with the European Union — is already making demands on the sovereignty of countries like Greece, Ireland, and Portugal that have been forced to accept bailout refinance loans for their sovereign debt.

Now, Lagarde is inserting herself and the IMF directly into the economic decisions of the United States.  She is proving the worse fears of many that the IMF intends to dictate economic terms to every nation in the world. By inserting herself into the already highly charged domestic political debate over mortgage bailouts, Legarde has lite a fuse that could explode at any time.

Mortgage bailout debate heats up

Trinkl was implicitly referring to recent pressure being placed on Federal Housing Finance Administration head Edward DeMarco to use taxpayer money to bail out borrowers who owe more on their mortgages than their houses are worth.

So far, DeMarco has refused on the grounds it would put Fannie Mae and Freddie Mac further into the red when his statutory mission provided by Congress was to “ensure that… each regulated entity operates in a safe and sound manner”. For that, he has been blasted by congressional Democrats who want an election year handout for a favored constituency.

Now, the Obama Administration wants DeMarco to tap directly into what remains of the Troubled Asset Relief Program (TARP) so that the costs of the bailouts will be added directly to the national debt and not be booked as losses for Fannie and Freddie — which of course, would still have been added to the debt anyway.

But DeMarco is still resisting. At a recent Brookings Institution speech of his own, he noted even if Fannie and Freddie engaged in mortgage principal forgiveness, eligibility for such a program would be limited to at most about 691,000.

Said DeMarco, “Whether Fannie Mae or Freddie Mac forgive principal or not, the universe of Enterprise borrowers potentially eligible for a HAMP PRA is well less than one million households, a fraction of the estimated 11 million underwater borrowers in the country today.”

“Appropriate indebtedness”

But by Lagarde’s analysis, a far more widespread principal forgiveness strategy of as much if not all of the nation’s $717 billion negative equity would be needed to unclog the arteries of the global financial system.

She explained, “The boys and girls, Fannie and Freddie, have to be part of the equation, because clearly, the American households have to be able to unload a bit. Just in the way we’ve encouraged banks to lend, well, the households have to be helped to borrow so that consumption and appropriate indebtedness can be reinitiated. That’s our position.”

“Appropriate indebtedness can be reinitiated”? That’s what she said, folks.

Lagarde is referring to the total amount of credit outstanding in the U.S., a figure that has typically doubled every decade since World War II. But since 2008, it has remained essentially frozen at about $53 trillion.

Lagarde is suggesting that in order to boost aggregate demand — the premise of Trinkl’s question — taxpayers must assume the costs of borrowers’ bad decisions to take on loans they either could not afford or did not understand the risks associated with them.

By extension, Lagarde takes the ironic position that the only way banks will be able to expand lending — which Keynesians believe is necessary to facilitate economic growth — is if households are “able to unload a bit” of their bad debt onto taxpayers so that those troubled borrowers are able to take on new “good” debt.

This is akin to sending new credit cards to people who have just defaulted on their old ones.

Therefore, in Lagarde’s opinion, upside down mortgages in Nevada, Florida, California, and Arizona are holding back growth around the world.

“Interconnectedness”

Earlier in her Brookings Institution talk, Lagarde emphasized the urgency involved in her analysis, saying “countries have to be totally convinced of the interconnectedness of our economies”.

Lagarde was very much concerned that policymakers did not understand the implications of globalization on the financial system, noting that the “most connecting [thing] in a way is that of the financial sector’s totally integrated and organizing links and binds between our economies.”

She explained her apprehension: “My personal fear is that we lose sight of that, and some countries rather retire and withdraw in the vast territory that they have under their control and do not pay attention sufficiently to what happens to the rest of the world. Because what happens in the rest of the world is going to either have a negative or positive effect on them.”

Toeing the company line

While Lagarde’s worldview eagerly embraces expanding U.S. indebtedness on both a governmental and individual level to prop up the global financial house of cards, this is not a vision that embraces the concept of individual sovereignty our nation was founded on. It is one that treats individuals more like drones in a bee hive, working toward collective ends.

In other words, in Lagarde’s mind, we’re all in this together, so the U.S. and its citizens had better get on board and toe the company line — by taking on massive amounts of new debt.

But let’s leave that aside for a moment, and even the fact that Lagarde is sticking her nose where it doesn’t belong. Let’s just consider everything she said.

If she is telling the truth, that global economic growth depends in fact on the American people going deeper into “appropriate indebtedness,” being nothing more than slaves to the world bank cartel, we’ve got a much bigger problem on our hands.

If what she says is true, then liberty cannot survive while the cartel is allowed to exist. That the only way to save the individual from totalitarianism on a global scale — is to let it burn. So, stripped of all the diplomatic-speak and the polite decorum, is this what Lagarde was saying, is this the choice she is laying out for the American people and other peoples of the world?  If so, we are in for a very rocky time.

Bill Wilson is the President of Americans for Limited Government. You can follow Bill on Twitter at @BillWilsonALG.

This article has 23 comments
  • Drjake43 16.04.2012 1:16 PM

    She’s kidding right? Have the French never heard of moral hazard? We have far too much of that already.

  • Thomas Berquist 16.04.2012 2:54 PM

    Obama was responsible for putting this idiot in place….FIGURES! Tell the IMF and Obama to take a hike!

  • yennikcm 16.04.2012 3:52 PM

    F-Off commie appointeee

  • 19don36 16.04.2012 3:53 PM

    Dear Christine, I am not just sure how you do these things in Europe, other than badly judging by the mess the Euro seems to be in, but in the US of A, we take money rather seriously.  We used to have the position if you couldn’t repay the loan, don’t borrow the money.  Then, along came the progressive idea that everyone should own a house, if you could afford it or not.  Our government pressured bankers (I’m sure you know how it’s done) to make a bunch of loans to people who had no hope of ever paying them back.  That gave them mortgages which they couldn’t afford and the bankers knew it.  Not wanting to get stuck for all that money, the bankers divided these mortgages into small pieces, which they mixed in with similarly divided good mortgages.  Then, they sold these combinations off as investments to people who thought they were smart, but turned out to be not so.  The people who weren’t as smart as they thought they were ran to the government for help and the term “To big to fail” was invented!  So now, while We, the People are deciding how many of these “officials” (who used our money to bail out the people who weren’t as smart as they thought) need to be fired, or tarred and feathered, and we don’t need your help doing it.  Thanks for offering, though.  So we invite you to take your grand ideas of how we ought to run our country, and go back where you came from.  If we need you, we’ll call you, but don’t hold your breath waiting.

  • specialops01 16.04.2012 4:28 PM

    Get ready America. The NWO is at our doorstep and nobody is doing anything to stop it.

  • Jim 16.04.2012 4:29 PM

    Screw Her and the rest of the idiots in D.C.

  • David Peacock 16.04.2012 4:53 PM

    SHE AND bERNANKE ARE IDIOTS. rOMNEY NEEDS TO KICK THE un’S ASS OUT OF nEW yORK BY nOVEMBER )*,2012.

  • moose2moose 16.04.2012 5:11 PM

    They are pure hard-core Communist.

  • dean 16.04.2012 5:24 PM

    What is wrong with this scenario?  We are not in a position to bail out anybody and, if we were, it would be a catastrophic move.  If you were stupid enough to get into debt, you better ba ready to dig youeself out.

  • pduffy 16.04.2012 5:48 PM

     I have an idea! How about we make those who actually took out the debt pay back the money? What a novel idea! How about we put the deadbeats into slavery instead of the “taxpayer”? I have another idea! How about we make those who took the bad risk lose THEIR shirts? Hmmm….because it’s the elite who will lose, and THAT will never happen.

  • June Gagnon 16.04.2012 6:06 PM

    The only way to “unload” is to  PAY DOWN YOUR DEBT; obviously, the “best” plan of action is NOT to overspend in the first place.  And NEVER should any country’s indebtedness “surpass” their national GDP!  What part of economics 101 does “anyone” NOT understand, other than obama-soetoro, the IMF and “libtards” in general?
        As for “bailouts” there is NO such thing as “too big to fail” – -let those that do fail, declare bankruptcy and “clean up their act”, with the help of a bankruptcy court, if necessary!  It should NEVER be up to “taxpayers” to “solve” anyone else’s “spending stupidity”!

  • Swann75 16.04.2012 6:20 PM

    I think it is about time for the United States to close its’ account with the IMF and tell them to go work out of Geneva, Switzerland and to send the United Nations packing also.  They are sticking their noses into something that is none of their business. 

  • Gerry 16.04.2012 6:22 PM

    I say we, the US should withdraw all of our support from the IMF and UN.  Then kick the whole damm bunch out of the our country.  Further, while we are looking at those two, we must get control of he Federal Reserve or get rid of them also.   

  • Jakuhl 16.04.2012 7:34 PM

    I think it’s more appropriate for the IMF to bailout the US.  We’re broke and could use our money back.  I guess it’s all  the point of view.

  • Donnaangelstar 16.04.2012 7:57 PM

    Hey pduffy, you hit the nail on the head.  All these bailouts have accomplished is to pay back banks and bondholders, the people that took all the risks.  Iceland had it right when when they told the ECB, IMF etc to take their bailouts and stuff them.  Yeah, some banks there failed and bondholders hurt but, after all these were the risk takers, not the Icelanders.  Iceland is still a soverign state and their country long on the way to economic recovery.  Switch over to Greece and Spain, Portagul.  Italy and Ireland.  I suppose we could call these canaries in the great scheme of things but the EU has been kicking “Rob Peter to Paul” bit for so long now that the rot of economic global collapse, yeah, not just European, is on the horizon.  With this we get mucho civil unrest, food shortages and riots.  Sound familar?  Look no further than Europe.  This is what the global elitists want, do we see the U.N. on the horizon to step in with Propeganda 21, Small Arms Treaties, Cap and Trade energy policies, etc. 
    Kick these idiots out of our country.
    VOTE FOR OUR FUTURE, VOTE RON PAUL!
    WE STAND WITH ISRAEL!
    SPEAK OUT AGAINST TYRANNY!

  • Donnaangelstar 16.04.2012 7:57 PM

    Hey pduffy, you hit the nail on the head.  All these bailouts have accomplished is to pay back banks and bondholders, the people that took all the risks.  Iceland had it right when when they told the ECB, IMF etc to take their bailouts and stuff them.  Yeah, some banks there failed and bondholders hurt but, after all these were the risk takers, not the Icelanders.  Iceland is still a soverign state and their country long on the way to economic recovery.  Switch over to Greece and Spain, Portagul.  Italy and Ireland.  I suppose we could call these canaries in the great scheme of things but the EU has been kicking “Rob Peter to Paul” bit for so long now that the rot of economic global collapse, yeah, not just European, is on the horizon.  With this we get mucho civil unrest, food shortages and riots.  Sound familar?  Look no further than Europe.  This is what the global elitists want, do we see the U.N. on the horizon to step in with Propeganda 21, Small Arms Treaties, Cap and Trade energy policies, etc. 
    Kick these idiots out of our country.
    VOTE FOR OUR FUTURE, VOTE RON PAUL!
    WE STAND WITH ISRAEL!
    SPEAK OUT AGAINST TYRANNY!

  • Celia J. 16.04.2012 9:16 PM

    We should stop supporting the UN and the IMF. These people only want our MONEY and then side with our ENEMIES .This FRENCH WOMAN should solve her country’s problem instead of meddling in ours.

  • crusty 17.04.2012 10:21 AM

    Where is the residential property for me which I will have to contribute to? We should not have to pay anything toward this clueless troll’s salary.

  • crusty 17.04.2012 10:25 AM

    Speaking of the UN, they should be forced to relocate their headquarters from NYC and the United States, as you mentioned, and take Hillary with them–none of them have any business interfering with our rights.

  • crusty 17.04.2012 10:28 AM

    They probably do something differently on lilly pads. She can shove it.

  • crusty 17.04.2012 10:39 AM

    My best advice is for Christine and Barry to take a hike.

  • podinwv 17.04.2012 7:35 PM

    Wonderful advice from a fascist! Ya….right!  Goes to show that people in power love the power irrespective of the effect of the use of the power. D…A…

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