Darrell Castle reviews an article from Foreign Affairs concerning the World Bank.
The World Bank and the International Monetary Fund conducted their annual meeting in Washington, D.C., on October 9-11, 2010. Finance ministers and bank governors from 187 countries met to decide our financial fate.
Before we look at some of the things that were decided at the meeting, we should introduce some of the players and talk a little about where these organizations came from.
The World Bank and the International Monetary Fund (IMF) were formed out of the movement to charter the United Nations at the end of World War II. They were originally formed to make loans and oversee the finances of rebuilding the postwar world, but have become more like financial managers of the world in recent years.
The World Bank president is traditionally an American, and the IMF president is traditionally a European. That is a small indication of who these organizations believe runs the world financially. The current president of the World Bank, Robert Zoellick, was previously managing director of Goldman Sachs and is a graduate of Harvard Law School. He once received the Knight Commander’s Cross of the Order of Merit of the Federal Republic of Germany for his achievements in the course of German reunification.
The managing director of the IMF, Dominique Strauss-Kahn, is an economist, lawyer, and a member of the French Socialist Party. He is expected to seek the Socialist Party nomination for President of France in 2012, and polls indicate that if he ran against President Sarkozy today he would win by 18 percentage points.
The delegates at this year’s meeting seemed more nervous and less confident than in years past. Strauss-Kahn warned of future problems, including war, from low growth and high unemployment. He went on to point out that the hostility that seems to be escalating between Washington and Beijing could prove to be a “catastrophe.”
I will give you excerpts from his speech and try to translate.
“During this crisis the global economy lost about 30 million jobs. On top of that, in the coming decades, 450 million people are going to enter the labor market, so we really face the risk of a lost generation.” Strauss-Kahn went on to talk about how unemployment destroys the social fabric of a nation and can destroy democracy and peace.
He told the delegates that they were gathering “at a pivotal moment facing a very uncertain future. Growth is coming back but we all know it is fragile and uneven. History shows that the use of currencies as a weapon did not work and could even lead to a catastrophe.”
Translation: The economies of the whole world are totally screwed and we don’t know a thing to do about it that hasn’t already been proven to have failed.
We do know that the US’s current race to the bottom with China will lead to disaster.
The US is demanding that China revalue its currency higher to help the US boost its exports and help the Chinese domestic economy so Chinese people can buy more US products. China, which depends on exports for 66% of its GDP, doesn’t seem interested.
The US is also urging the Europeans to do more quantitative easing, which means print more money and loan it into the economy. That is a Las Vegas gambler’s tactic of doubling down. In other words, when you are almost out of money and very worried, you double your bet in hopes of getting it all back on one roll, or one hand of cards. Quite often that tactic leads one to bankruptcy court.
Now let me close by giving you my translation for the entire meeting once all the bureaucratic smoke and double speak are sorted through. Here it is:
We don’t know nothing about nothing. We have no idea what to do about all this. Dr. Keynes didn’t tell us what to do when his theories ultimately fail. Our degrees from Harvard, Wharton, and the London School of Economics admit us to the club, but it is run by lunatics and idiots. The whole world is a gigantic lunatic asylum run by psychotic criminals thanks to us and our owners.
- Darrell Castle