• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • A Trillion Dollars of Smoke and Mirrors

    News reports indicate that the G-20 pledged an additional $1.1 trillion in financing for the International Monetary Fund, the World Bank and other global institutions so that they can help countries cope with the global economic crisis. The details of the proposal are virtually non-existent, i.e. exactly who will be responsible for what portion of the pledge, what exactly the money is supposed to be used for, and when it will be delivered. It’s clear that much of the money was already in the pipeline in one form or another. Most of it appears to be in the form of loans, raising the specter of a possible new Third World debt crisis, and most of it is about increasing leverage in the international financial system, injecting exactly the same kind of risk back into the system that market forces are in the process of scrubbing out.

    One thing is sure, however: It is a spectacularly bad and high risk idea to pour vast new sums through failed or failing institutions. And that is what the IMF and World Bank are. Both have a woeful record of meeting their chief missions of, respectively, spurring economic development and encouraging responsible economic policies by recipient governments and seeing them through financial crises.

    In the case of the World Bank, the preponderance of economic studies indicate that foreign assistance whether provided by the Bank or some other source, is not a key contributor to economic growth and development. That is particularly the case for the world’s poorest region, sub-Saharan Africa, which has yet to have a significant aid recipient escape poverty despite hundreds of billions in assistance from the Bank and other sources over the past five decades. Even leaving aside the Bank’s propensity for ignoring corruption in its own programs, there is little cause to plus up its funds.

    The IMF has staggered from financial crisis to financial crisis over the past few decades earning ever poorer marks. Few recipients of IMF assistance have had kind words for the organization after receiving IMF help. True, countries often ignore sound advice from the IMF, but being ineffective and ignored by recipient countries is not a convincing reason to give the organization hundreds of billions of new dollars.

    The G-20 announcement isn’t a surprise – these types of meetings demand an outcome statement of action. Over time we will see how much of the promised funds actually materialize in the world economy. Often statements by world leaders in high profile meetings fade into obscurity within hours. Hopefully, the G-20 pledge will follow suit.

    Posted in International [slideshow_deploy]

    7 Responses to A Trillion Dollars of Smoke and Mirrors

    1. MDR, Miami, FLORIDA says:

      In January 1940 H.G. Wells wrote of the wondrous and wonderful "new world order", collectivism, Marxism, socialism and all of their great benefits and pronounced Stalin a benevolent man. No doubt Mr. Wells would approve of President Obama and his Bobble-head buddy Brown and their new world order and their global spending spree. Unluckily for us, both Obama and Brown are complete frat-boy-stunned-by-their-own-celebrity idiots without a clue to economics and sound practice. As they are flushing the free enterprise system down the sewer, they are also creating a new kind of class warfare, rancor and anger between religious groups by giving more control and courtesy to one group than another, greater unemployment (in the USA now 8.9%) and placing a burden of crippling debt on their citizens for decades to come. If you like Brown and Obama, then you should go read the frightening (but true to life) rant of H.G. Wells and the glories of collectivism.

      http://www.prisonplanet.com/hg_wells_the_new_worl… …

      If you don't like it then get out and demonstrate, write letters, speak your mind and influence your neighbors to change governments in both countries.

    2. Franklin's Lock says:

      The hubris of these leaders is simply astounding. None of them understand what all this spending is doing to economy. Now, they are spreading this flawed policy all over the world. They are just doing what they did here everywhere. Now, not only will our economy fail but now everyone’s.

      http://franklinslocke.blogspot.com/

    3. Zabeth, Iowa says:

      I have just been wondering if any of us tried to borrow money to pay off debt the way these guys are. It seems that borrowing from Peter to pay off Paul is getting pretty thin…I wonder if they think, because they are the leaders,they will escape the consequences of their actions? What do they think is going to shield them from this audacious way they are proposing to save the economy? Why are they not following common sense and responsible financial choices. Why are they limiting their consultants to a select few instead of the many successful men and women who can offer sound wisdom in these matters.

      Also, on another note: Has any one heard the ad for the free laptop computers that are being given away? My first thought when I heard this, was that the government has planted some sort of chip in them and is giving them away as a means to follow what the people are doing. I won't go for one.

    4. Pingback: PA Pundits - International

    5. cliff vaughan,freder says:

      Your hatred has distroyed you. Rest in sorrow for all eternity

    6. cliff vaughan,freder says:

      Your hatred has distroyed you. Rest in sorrow for all eternity.

      I celebrate the death of conservatism. May Americans never again be separated by red/blue, left/right, ethnically, by region, by deranged presidental policy, etc, etc.

    7. Barb -mn says:

      Yeah, cliff vaughan,fredericksburg, va, cause being responsible to yourself, to your existence on earth, takes a lot of personal discipline and accountability, along with valuing your life and the lives around you which appreciates equal rights. Yep. death of conservatism. Way to go. People are too weak to take on themselves. To be responsible to their own freedom of choice, to be accountable to the consequences these choices my pose. To reach their level of prosperity independently. To abide by civil law. Yep. Way too much! death of conservatism. Let's make the government in charge of all we do. Heck, let's get them to tell us what to do. Why should we have the ability to do that?

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.

    ×