The INTERNATIONAL MONETARY FUND
PART 2 of 3
Click here for parts ----->One &
[COMMENT: This article describes a system in which privately owned
banks, through government collusion, control the economics of most of
the world. Or, at least, they are making a good stab at it.
The UN is run by thug countries, and thug persons in many cases.
They have no interest in honest government, the are interested, for the
most part, in control, right down to the smallest aspect of our lives.
There is no help for this mess other than a spiritual renewal. We
are watching the rebuilding of Babel all over again.
January 7, 2006
Currency, Monetary Roles and Gold
Two years prior to the collapse of the Bretton Woods system, the IMF
created a reserve mechanism called the Special Drawing Right, or SDR.
The SDR is
not a currency, nor is it a liability of the IMF, rather it is
primarily a potential claim on freely usable currencies. Freely
usable currencies, as determined by the IMF, are the U.S. dollar,
euro, Japanese yen, and pound sterling.
Since the value of the component currencies change relative to each
other, the value of the SDR changes relative to each component. As of
December 29, 2005, one SDR was valued at $1.4291. The SDR interest rate
was pegged at 3.03 percent.
There should be no mistake in the readers mind that the IMF correctly
views itself as the "currency controller" for all countries who have
hitched a ride on the globalization express. According to an official
The IMF is
therefore concerned not only with the problems of individual
countries but also with the working of the international monetary
system as a whole. Its activities are aimed at promoting policies
and strategies through which its members can work together to ensure
a stable world financial system and sustainable economic growth. The
IMF provides a forum for international monetary cooperation, and
thus for an orderly evolution of the system, and it subjects a wide
area of international monetary affairs to the covenants of law,
moral suasion, and understandings.
The IMF works closely with the Bank for International Settlements in
promoting smooth currency markets, exchange rates, monetary policy, etc.
The BIS, as central bank for central banks, more likely tells the IMF
what to do rather than vice versa. This notion is bolstered by the fact
that on March 10, 2003, the BIS adopted the SDR as its official reserve
asset, abandoning the 1930 gold Swiss franc altogether.
This action removed all restraint from the creation of paper money in
the world. In other words, gold backs no national currency, leaving the
central banks a wide-open field to create money as they alone see fit.
Remember, that almost all the central banks in the world are privately-
or jointly-held entities, with an exclusive franchise to arrange loans
for their respective host countries.
This is not to say that gold has no current or future role in
international money. Under Bretton Woods, gold was the central reserve
asset, and original subscribers contributed large amounts of gold
bullion. Gold was abandoned completely in 1971, but the IMF continues to
own and hold gold into the present: 103.4 million ounces (3,217 metric
tons) with a current market value of about $45 billion. This is no small
amount of gold!
The U.S. Treasury claims to have 261.5 million ounces of gold, but there
has never been an official, physical audit of Fort Knox and other
repositories to back up this claim. By comparison, Great Britain claims
to own 228 million ounces of gold.
The BIS, IMF and major central banks (notably the New York Federal
Reserve Bank and the Bank of England) have collectively and methodically
sold portions of their gold stocks while claiming that "gold is dead".
This manipulation has tended to suppress the price of gold since the
early 1970's. Antony Sutton's 1979 book, The War on Gold, dealt
definitively on this matter. More recently, the group
Gold Anti-Trust Action Committee (GATA)
was founded in 1999 with essentially the same argument: gold has been
Suffice it to say that if so many organizations have conspired to keep
"gold as money" out of the public mind, then gold is not dead but just
temporarily on the shelf. When fiat currencies have been drained dry by
the global cartel, gold will likely be brought back by the same people
who told us it was forever a dead issue.
This is a technical legal term with a precise meaning, but it easily
understood. Moral hazard is the term given to the increased risk of
immoral behavior resulting in a negative outcome (the "hazard"), because
the persons who increased the risk potential in the first place either
suffer no consequences, or benefit from it.
While the IMF is riddled with specific instances of moral hazard, its
very existence is a moral hazard.
The eminent economist Hans F. Sennholz (Grove City College) sums up the
IMF operations this way:
actually encourages bankers and investors to take imprudent risk by
providing taxpayer funds to bail them out. It encourages corrupt
governments to engage in boom and bust policies by coming to their
rescue whenever they run out of dollar reserves.
The money shuffle goes like this: The World Bank and the BIS develop
markets for credit by enticing governments to borrow money. They (and
the private banks along side of them) are encouraged to make risky loans
because they know that IMF stands ready to rescue countries with
defaulting loans -- the moral hazard. As the usury interest builds up
and finally threatens the entire financial stability of the affected
country, the IMF steps in with a "bail out" operation. Defaulted loans
are replaced or restructured with (taxpayer provided) IMF loans.
Additional money is loaned to repay back interest and allow for further
expansion of the economy. In the end, the desperate country is even
further in debt and is now saddled with all kinds of additional
restrictions and conditions. Plus, under the phony aegis of "poverty
reduction", citizens are invariably left worse off than in the
This is also a technical term that has a specific meaning: A
conditionality is a condition attached to a loan or a debt relief
granted by the IMF or the World Bank. Conditionalities are typically
non-financial in nature, such as requiring a country to privatize or
deregulate key public services.
Conditionalities are most significant within so-called Structural
Adjustment Programs (SAP) created by the IMF. Nations are required to
implement or promise to implement the attached conditionalities prior to
approval of the loan.
The fallout of conditionalities is notable. The globalist think-tank
Foreign Policy in Focus published IMF
Bailouts and Global Financial Flows by Dr. David Felix in 1998. The
report's introduction makes these key points:
The IMF has been transformed into an instrument for prying open third
world markets to foreign capital and for collecting foreign debts.
This transformation violates the IMF charter in spirit and substance,
and has increased the costs to countries requesting IMF financial aid.
The IMF’s operational crisis stems from growing debtor resistance to its
policy demands, soaring fiscal costs, and accumulating evidence of IMF
The general public has not seen such "internal criticism" of the IMF. If
an outsider were to make the very same criticism, he would be ostracized
for being part of the radical fringe.
So, conditionalities are instruments of forcing open markets in
third-world countries, and of collecting defaulted debts owed by public
and private organizations. The accumulating result of conditionalities
is increasing resistance to such demands, bordering on hatred in many
countries. The countries who can least afford it are saddled with
soaring costs, additional debt and reduced national sovereignty.
Perhaps the most authoritative report on this topic was produced in 2002
by Axel Dreher of the Hamburg
Institute of International Economics entitled The Development and
Implementation of IMF and World Bank Conditionality.
Dreher notes that there was no consideration of conditionalities at the
founding of the IMF, but rather they were gradually added in increasing
numbers as the years passed and mostly by U.S. banking interests.
Conditionalities are arbitrary, unregulated, and imposed in varying
degrees on different countries according to the whims of the
negotiators. The recipient countries have little, if any, bargaining
The August Review has observed several times that 1973, with the
creation of the Trilateral Commission, was a pivotal year in the
stampede to globalization. It is no surprise then that conditionalities
became a standard business practice in 1974 with the introduction of the
Extended Fund Facility (EFF).
EFF created lines of credit, or "credit tranches", that could be drawn
on as needed by a troubled country, thus creating additional moral
hazards as well.
Dreher also points out the tight coordination with the World Bank:
reforms under IMF programs have mainly been designed by World Bank
economists. Fund conditionality often was supportive of measures
contained in Bank supported public enterprise reform operations. The
selection of public enterprises to be reformed as well as the
modalities and time table was developed by the Bank as well.
So, we see that the IMF does not act alone in the application of
conditionalities and in some cases, it is pointedly driven by the World
Dreher's meticulous research uncovered another interesting statistic:
The most frequent condition included is bank privatization -- included
in 35 percent of the programs analyzed!
International bankers have always had disdain for banking operations run
by governments instead of by private or corporate ownership. Thus, they
have used the IMF and World Bank to force privatization of what remains
in government hands in the third-world.
If all of this was not disturbing enough, Dreher informs us that there
are direct connections between conditionalities imposed and various
private banks who work in concert with the IMF and World Bank:
private creditors were willing to lend further only if IMF programs
were in effect, the Fund's leverage was enhanced... since for crisis
resolution sometimes more money is needed than can be provided by
the IFIs, IMF and World Bank depend on these private creditors who
should therefore be able to press for conditions which lie in their
With the IMF, World Bank and other international banks forcing
governments to run their countries in ways not of their choosing, and
with the United States viewed as the primary driver of these
organizations, it is no wonder that the third-world musters such intense
hatred for the U.S. and for the self-interested globalization it exports
wherever possible. The globalization process is most often
anti-democratic and completely ineffective at accomplishing it's lofty
stated goal of poverty reduction.
It should be plainly evident by now that the "can opener" for
globalization to take place is the power of money. Borrowed money
enslaves the borrower, and puts him at the mercy of the lender. When
President Bill Clinton finally acknowledged the error of his ways during
his affair with Monica Lewinski, he stated that it was for the
absolutely worst of reasons: "Because I could." Why do these global
financial organizations take such advantage of those whom they
systematically put in jeopardy? Because they can!
Next: IMF Bailout of Brazil
Click here for
parts ----->One &
Overview of the IMF as a Financial Institution, p.11
2, ibid, p. 3
IMF Bailouts Make Matters
and Global Financial Flows, Vol. 3, No. 3, April 1998
The Development and Implementation of IMF and World Bank Conditionality,
Hamburg Institute of
6, ibid, p. 9
7, ibid, p. 17
8, ibid, p. 18
ibid, p. 21
© 2006 Patrick Wood - All Rights Reserved
Patrick M. Wood
is editor of The August Review,
which builds on his original research with the late Dr. Antony C. Sutton,
who was formerly a Senior Fellow at the Hoover Institution for War, Peace
and Revolution at Stanford University. Their 1977-1982 newsletter,
Trilateral Observer, was the original authoritative critique on the New
International Economic Order spearheaded by members of the Trilateral
regarded two-volume book, Trilaterals Over Washington, became a standard
reference on global elitism. Wood's ongoing work is to build a knowledge
center that provides a comprehensive and scholarly source of information on
globalism in all its related forms: political, economic and religious.