E-mailed from the Philipines:
THE US AND THE IMF
Eric V. Encina
In the history of the foundation of the IMF, from its inception, it has been dominated by the interest and wishes of its largest member, the United States of America. In fact, there was an absolute dominance since then until 1956, that decisions were made in favor of the US interest, effectively, by the US Secretary of the Treasury even to the point that the IMF's staff had no authority to negotiate conditions for drawing rights.
Even the European states or nations and Japan have become more economically powerful in the 1980's, though the American dominance has declined relatively, but still there are no major decisions are taken againt the interest or strong wish of the United States. It is assumed that any official of the IMF who is not in line with the US foreign economic policies will be eventually forced to resign like what happened to the resignation, among others, of Piere-Paul Schweitzer as IMF Managing Director when the US Government said it did not have confidence anymore on him.
IMF controls third world nations but it is the major policies of the powerful rich nations that impose the structural economic policies that the IMF officials are constrained to implement lest they are in trouble with the government officials and leaders of these rich nation-investors.
As we know, the IMF Managing Director is by agreement and tradition always a European, and the President of teh WB is always an American. But the IMF's Deputy Managing Director has been an American since the Fund was created in 1949.
The IMF is managed or rather controledd by the member-nations paying annual subscriptions, and thus controlled in proportion to the size of the member-nation quotas. PHILIPPINES IS PAYING US$500 Million subscription payment to IMF every 5th year. In reality despite of theoretical belief that IMF is controlled by all member-nations, it is rather and actually controlled firmly by the rich-nation members.
When the IMF was inaugurated, the US quota was reportedly by far the largest and amounted to about 36% of the total, although it has declined to 23% through the periodic re-adjustments of quotas which have been made since then. The quota adjustment is decided by 80% majority but the US has the formal veto power over decisions. The EU nations have been given a collective veto only by a new requirement of an 85% voting majority only for certain types of decisions but must be in line witht he US decisions, in terms of finance and economy, thus the quotas of the original six amount collectively to about 16% of the total.
In the past few years, the five members with the largest quotas were USA, UK, France, Germany and India - but not Japan. Each five member has appointed an executive director. Accordingly, the two countries whose currency has been most drawn from the IMF in the previous year has also have the right to appoint a director, if they are not already in the 'big five'. The rest of the twenty-member Board are elected by combinations of countries and their votes are weighed according to the total of the countries electing them. Formal votes are usually avoided in the Executive Board, but everyone concerned has a good idea of each director's voting power, and how a vote, if taken, would turn out.
What is a paradox is that formal voting power is a less important factor in the IMF membership, but the US being recognized in economic and military powers and by virtue of the key role of the dollar and the sheer size of the country as importer and exporter obviously controls the voting power of the IMF major decisions.
The past international monetary crisis has shown that the IMF has no any power to impose any discipline on the US since the IMF is under US foreign economic policies and it has become only a reduced to a mere forum for negotiations.
The US Executive Director of IMF cannot cast his vote at his own discretion, but he is bound by law to accept instructions from the Secretary of Treasury. The IMF's subserviency to the US interest and wishes is underlined by the location of its headquarters in Washington, D.C., just a nearby place and just a phone call away from the top American officials monitoring and watching the move of the IMF.
ANOTHER PARADOX THE REPELS THE MIND OF HUMANITY:
The US is now the major debt country of the world, although it has benefitted massively from the IMF's resources, both through stand-by arrangements and by other means. But USA has never been subjected to any type of dictation of IMF which is imposed on the smaller indebted countries even including the UK. It seems to show that what is happening the world finance is a kind of tricky collusion of the USA to use IMF as a tool to get the world in debt while as a camouflage to make USA in debt likewise at the expenses of AMERICAN TAXPAYERS, but has the power of debt absorption and liquidation or even self-cancellation of debt while most member-nations are not permitted too by the signed protocols or cannot do so. This is a kind of self-inflicting economic tactic as a form of camouflage but his remains to be a sort of racketeering monetary tactics to keep the poor nation-members in the bondage of debt and DEPENDENCY to US foreign economic policies.
The US is both a tricky creditor in camouflage, being the dominant member of the IMF, and the at the same time, as a debtor nation. But the truth is: IMF HAS BEEN A MAJOR SOURCE OF FINANCE FOR THE US DEFICITS BOTH BUDGET AND TRADE DEFICITS. Based on the records or 1960 to 1967, the IMF financed 10% of the US deficit. In fact in 1964, the IMF has deliberately bent its rules which specified which currencies could be used in re-purchasing drawings, that is, in order to PROVIDE ADDITIONAL FINANCE TO THE US DEFICIT.
US is using monetary tactic gimmick through IMF facilities for its own advantage. It is a lie that IMF was set up to provide an international reserve of money to help nations with big deficits, bail out is not a kind of help, but a loan at interest that pressures poor nations. Hence, the truth is: the international reserve of money is US$ only goes to finance budget deficits for the benefits, not of the American citizens, but of the powerful US Federal Reserve System - of privately owned banks. So in practice, IMF methods make the matters worse: to make nations in calamitous debts.
But of course other rich-member-nations benefit likewise from the IMF, from the interest payments collected in HUNDREDS OF BILLIONS OF $ DOLLARS from the impoverished taxpaying peoples of the third world. Large of the IMF loans to third world nations flow back to the economies of the US and the wealtheir nations in the form of interest.
The most tricly thing is: IMF loans are money CREATED OUT OF NOTHING, called to be international fractional reserved system, based on cash reserved pool from the membership subscription payments of many nation, around 180 nations, and is primarilly provided by the Western rich nations, per se, currently, G-8 nations, that, also by camouflage and trickery, also go into debt to provide it, however in order to cover up the DEBT MONEY SYSTEM.
The repayment obligation including interest payments remains with the debtor nations of mostly poor nations but USA and the other rich countries though also hugely indebted have the power of making decisions to be absolved from debts. Most of the central banks of these rich nations under BIS in Switzerland are in collusion with the IMF in line with the economic policies of the USA.
The third world nations remains in the HORRORS OF DEBT and likewise the populations are suffering in acute financial-economic crisis, increasing taxes like the 12% EXPANDED VALUED ADDED TAX IN THE PHILIPPINES IMPOSED BY THE IMF, and actually covertly imposed by the US government, and now suffering deficits, inflationary pressures, devaluation of currency endlessly, dire poverty, hunger, malnutrition and unemployment of the poor inhabitants, breakdown of the family and social services, chaos, violence, bankruptcies and instigating rebellion.
The poor countries are pressured to export more products even at teh destruction of teh environmetn just to meet the interest payments t5o IMF, to WB and to other foreign and international banks in collusion thereby.
The sums paid in interest over the years far exceed the amounts of the original loans themselves. IMPOVERISHED THIRD NATIONS AND POPULATIONS ALIKE have paid more than enough - and now in the VERITABLE ABYSS OF HUMAN AND THIRD DEGRADATION.
It is proven that IMF and WB act as handmaiden of mainly US interest and wishes, and partly of the Western rich nations at the terrible expenses of the poor nations and inhabitants.
The only radica solution is to abolish IMF and WB. Each country must create its own money debt and interest free according to the proposals of MONETARY REFORM, and all economic freedom in turn will follow with justice to all humanity without the bondage of debt and interest, without monopoly, and in the economic democracy climate, there would be FINANCIAL-ECONOMIC SECURITY TO ALL from the cradle to the grave in the form of supplementary basic income.
We need debt free money creation for each nation, not membership to the IMF's tricky fund and policies manuevered and imposed by the US foreign policies.
Any comments, suggestions, criticism, opinions are welcome.
Eric V. Encina
Filipino Alternative Solutions For Sustainable Survival Movement
c/o Lito Alhambra Old House, Homesite, Km.2, Brgy. Lawa-an,
PO Box 8, 5800 Roxas City, Capiz, Philippines
Do you have any comments about the Puposes of the IMF?
Please let me know. Thanks.
The purposes of the International Monetary Fund are:
1. To promote international monetary cooperation through the permanent institution which provides for consultation and collaboration on international problems.
2. To facilitate the expression and balanced growth of international trade and to contribute thereby to the promotion and maintenance of high levels of employment and real income and the development of the productive resources of all members as primary objectivs of economic policy.
3. To promote exchange stability, to maintain orderly exchange arrangements among members and to avoid competitive exchange depreciation.
4. To assist in the establishment of a multilateral systm of payments in respect of current transactions between members and the elimination of foreign exchange restrictions which hamper the growth of world trade.
5. To give confidence to members bymaking the Fund's resources available to them under adequate safeguards, thus providing them with the opportunity to correct mal-adjustments in their balance of payments without resorting to measure destructive of national or international prosperity.
6. In accordance with the above to shorten the duration and lessen the degreee of disequilibrium in the international balances of payments of members.
(Martin Honeywell, E. A. Brett,Robert Carty, R. Andrew Nickson, Winston James, James Paionter, The Poverty Brokers: The IMF and Latin America (Great Britain, Russel Press, 1983) p. 17.