Inside The IMF – U.S Pulls Strings

The U.S. government has by far the largest share of votes in both the IMF and World Bank and, along with its closest allies, effectively controls their operations with 18% of the votes in the IMF and 15% in the World Bank.

Together, the United States, Germany, Japan, the U.K. and France control about 40% of the shares in both institutions.The rest of the shares spread among 175 other member governments, some holding just a tiny number of votes, so in a general sense – the United States is effectively in charge.

Currently Timothy F. Geithner is listed as the U.S Governor to the IMF – with our good friend Ben Bernanke listed as “alternate”.

The IMF makes sure that U.S. allies get the financial support they need to stay in power, abuses of human rights, labor, and the environment notwithstanding; that big banks get paid back, no matter how irresponsible their loans may have been; and that other governments continually reduce barriers to the operations of U.S. business in their countries, whether or not this conflicts with the economic needs of their own people.

The IMF lends money to governments. Because many governments, especially governments of poor countries, are often in dire need of loans and cannot readily obtain funds through financial markets, they turn to The IMF . And if the IMF will not loan to a country, international banks certainly won’t. As a result, the IMF wields great power, and is able to insist that governments adopt certain policies as a condition for receiving funds. As seen through the economic and environmental fall out after IMF intervention in Ecuador in 2001 – 2003 (more on this later).

In some way this could be perceived as “a loan of last resort/loan sharking” – considering that the country accepting the loan is now in scenario where the IMF can dictate repayment terms (at unrealistic interest rates) in order to impose even greater influence – ( In Argentina for example –  The Buenos Aires water system was sold for pennies to Enron, as was a pipeline going from Argentina to Chile) as corporate America swoops in and buys prime assets on the cheap.

6 Responses

  1. Nfxtrader March 21, 2013 / 9:50 am

    Hey Kong maybe USD pullback finally underway? Before next USD leg up? Jpy longs not looking hot but balanced by gbp/usd longs.

    • Forex Kong March 21, 2013 / 10:07 am

      Flat as a pancake – and sitting here watching paint dry so……….pretty tough to make any longer term calls based on today’s action.

      JPY’s are a pain here – but Im sticking to the trade as they are slowly….slooooowly rolling over – Ill stick through tonight and tomorrow and see if this thing is going to move one way or the other. Im still of the thinking we get a pullback in risk here – but days like today do make you squirm a bit right?

      So it goes…..they don’t make it easy!

  2. Derek March 21, 2013 / 5:08 pm

    Hola Senor Kong,
    I enjoy your articles. And have noticed your presence missed at SMT:
    Well, I thought to ask the expert. In general, do you see the DXY putting in its yearly cycle high here? The theory being as the BP, CD, EC, SF, and JY put in their yearly cycle lows, the dollar tops and then makes its own descent.
    Know your time-frames are shorter, but, in sum, do you see this as a valid thesis?
    Gracias hermano.

    • Forex Kong March 21, 2013 / 5:31 pm

      Hi Derek.

      No I don’t agree at all – hence my complete lack of interest / participation with SMT…’s really unfortunate what’s happened there.

      These markets are dynamic and ever changing. If only it was ” that easy” to simply identify a particular point/low/high as a “yearly low” – and passively “assume” it’s correct – then trade off it. Ridiculous.

      One needs to consider the fundamentals behind currency movement – and learn to interpret how these changes will not only effect the given currency – but how it will effect the given currency in the “current environment”. For example – QE and gold the first couple times around…..but certainly not the same this time. Why? – we need to look at the investment environment as a whole.

      Counting the number of days (or weeks) between significant turns could provide some framework as a general guide – but then you see “an extended cycle”…followed by a “shortened cycle” blah blah etc – and it’s all out the window.

  3. schmederling March 21, 2013 / 5:31 pm

    I continue to ride long AUD/USD with an ALL-IN play from yesterday. I am not moving from this position…. good luck folks… I am riding this wave all the way into Early summer….

    • Forex Kong March 21, 2013 / 5:36 pm

      I love your enthusiasm Schmed!

      I imagine the trade has been great for you as of the past few days. I jumped out early and haven’t considered getting back in….with respect to the current uncertainty. I’ll “trade it like I see it” – when the time looks right!

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