Tag: IMF

It will not Happen To Me. Guess What? It Will!

It will not happen to me! Guess what? It Will! Chapter 10

THE GREEDY STIR UP CONFLICT, BUT THOSE WHJO TRUST IN THE LORD PROSPER.

Proverbs 28:25

Chapter 10 The Greedies- There are many.

Editor’s note: I write these chapters on the theory that my recommendations in Part One were not followed and the entire world is sinking into an abyss that is mentioned in Revelations. That is the last book in the Christian Bible. It would behoove the dear reader to pass these chapters along to your politicians who are supposed to represent you. All nations must have a better understanding of our problems.

YOUR FRIENDLY BANKER IS NOT YOUR FRIEND.

I remember reading the Wall Street Journal about how the “friendly banker was calling people and saying , “want to borrow some money?” That was in the mid-1960s. My how times have changed!

The 1929 crash was blamed on too much easy credit. Margin for stocks was 10%. That means if one wanted to buy $1,000 of stock ; all one had to do was put $100.00. If a stock r5ose 10% one would double their money. Conversely if a stock dropped 10% one’s investment was wiped out There is an old rule on the Wall Street. “Never meet a margin call with cash – the stock is telling you something- SELL!”

Today Margin for stocks is 50%. This means if you want to buy on margin then all you have to do is borrow some money in order to pay 50%. I have seen margin rates in the 1960’s as high as 90%. The Federal Reserve used to raise or lower margin rates to curb enthusiasm or dampen speculation.

Today margin rates for US Treasuries are 10%. Many commodities are the same, but some are raised or lower in order to protect the players. When one is making a long term commitment in a commodity such as some precious metals they should pay cash and take delivery. Some firms provide storage space. This prevents the individual from getting whip sawed by professional traders.

So in 2012 the big problem has been in derivatives and collateralized mortgages or CMO’s. All these debt instruments are started off by buying a slug of treasuries at lowest possible margin rates and adding and mixing products with those moneys at enormous fees(all hidden of course). Then to add frosting on their cake they split it all up into several “tranches”( really layers) and pass some off to the unsuspecting public marked up even further.

There has been a feeble attempt for “transparency” which means the buyers want to know the commissions involved.

These so called debt instruments break another cardinal rule for brokers. If it is to complicated to explain to your potential buyer forget it. It is

called the KISS. KEEP IT SIMPLE STUPID!”

It is almost impossible to track each part of these instruments since record keeping is at the kindergarten level. But all future trades should be banned and existing one allowed to mature whenever that may be.

All these problems are result of the Glass-Stiegel Act in the 1930s and rescinded in the 1990’s. The problem was that the Congress did not review this act for almost 70 years and it became a hindrance to the banking industry and eventually the public. Times change and industries mature and acts like this one should be reviewed by a bipartisan commission every 12 to 15 years.

Congress should revisit the Federal Reserve Act and realign the Federal Reserve districts so that each one has equal dollar weighting.

Immediately, banks and brokerage firms should be segregated the old fashion way. Split from each other. It is the Volker rule with force. A banker is a banker and loves reserves. A broker is a broker and a risk taker. He loves to trade and take risks. A banker is not a broker and a broker is not a banker.

When a major player can disrupt the steady flow of income and earnings of a normal investment by using manipulating strategy that are unavailable to the general public – they should be banned.

The banking industry has to take a big hit in order to restore fairness and an even playing field for the public and long term growth.

The government must be in control of a financial system with hard and fast rules that must be enforced with a vengeance. They should be the umpires or referee’s that professional sports enjoy. Have you ever seen a professional hockey player take on the referees that are on the ice breaking up fights?

The only referees that I have seen step back were the ones working Wayne Gretzky games. He had an enforcer on his line that would go “ape” if anyone took a cheap shot at Hockey’s greatest star. I even saw a player he was after run off the ice and never came back on the ice

Business should have similar rules and then we should all prosper.

Our Congress is the body to make the laws to help for the common good. It is up to the Supreme Court to determine whether that law is valid. This is our check and balances that the founding fathers had faith in. The lobbyist have become to powerful force that denies the citizen his individual rights in favor of the larger corporations.

May 28, 2012
Vatican Calls for ‘Central World Bank’ to Be Set Up

Jan Stromme | Riser | Getty Images

The Vatican calls for a “global public authority” and a “central world bank” to resolve injustice

The Vatican called on Monday for the establishment of a “global public authority” and a “central world bank” to rule over financial institutions that have become outdated and often ineffective in dealing fairly with crises.

A major document from the Vatican’s Justice and Peace department should be music to the ears of the “Occupy Wall Street” demonstrators and similar movements around the world who have protested against the economic downturn.

The 18-page document, “Towards Reforming the International Financial and Monetary Systems in the Context of a Global Public Authority,” was at times very specific, calling, for example, for taxation measures on financial transactions.

“The economic and financial crisis which the world is going through calls everyone, individuals and peoples, to examine in depth the principles and the cultural and moral values at the basis of social coexistence,” it said.

It condemned what it called “the idolatry of the market” as well as a “neo-liberal thinking” that it said looked exclusively at technical solutions to economic problems.

“In fact, the crisis has revealed behaviors like selfishness, collective greed and hoarding of goods on a great scale,” it said, adding that world economics needed an “ethic of solidarity” among rich and poor nations.

“If no solutions are found to the various forms of injustice, the negative effects that will follow on the social, political and economic level will be destined to create a climate of growing hostility and even violence, and ultimately undermine the very foundations of democratic institutions, even the ones considered most solid,” it said.

It called for the establishment of “a supranational authority” with worldwide scope and “universal jurisdiction” to guide economic policies and decisions.

Such an authority should start with the United Nations as its reference point but later become independent and be endowed with the power to see to it that developed countries were not allowed to wield “excessive power over the weaker countries.”

Effective Structures

In a section explaining why the Vatican felt the reform of the global economy was necessary, the document said:

“In economic and financial matters, the most significant difficulties come from the lack of an effective set of structures that can guarantee, in addition to a system of governance, a system of government for the economy and international finance.”

It said the International Monetary Fund (IMF) no longer had the power or ability to stabilize world finance by regulating overall money supply and it was no longer able to watch “over the amount of credit risk taken on by the system.”

The world needed a “minimum shared body of rules to manage the global financial market” and “some form of global monetary management.”

“In fact, one can see an emerging requirement for a body that will carry out the functions of a kind of ‘central world bank’ that regulates the flow and system of monetary exchanges similar to the national central banks,” it said.

The document, which was being presented at a news conference later on Monday, acknowledged that such change would take years to put into place and was bound to encounter resistance.

“Of course, this transformation will be made at the cost of a gradual, balanced transfer of a part of each nation’s powers to a world authority and to regional authorities, but this is necessary at a time when the dynamism of human society and the economy and the progress of technology are transcending borders, which are in fact already very eroded in a globalizes world.”

www.cnbc.com, 24 Oct 2011

October 26, 2011
Greece most complex debt crisis for years: IIF chief

By Alexandra Hudson and Asli Kandemir

ISTANBUL | Tue Jun 28, 2011 8:20am EDT

ISTANBUL (Reuters) – Greece is embroiled in the most complex sovereign debt problem for years as there are so many parties involved and no unified European view, the head of the Institute of International Finance (IIF) said on Tuesday.

“This is the most complex sovereign debt crisis I have ever been connected with, because there are so many players, no unified European view, and the weaknesses of the Greek economy are extraordinarily serious,” said Charles Dallara, who has been managing director of the IIF bank lobby group for 18 years and was involved in other sovereign crises.

“The private financial community has to play a part,” Dallara said, but added: “It will be exceptionally difficult to align the political, economic and financial stars.”

Dallara said radical proposals by France to roll over some Greek debt for 30 years had stimulated debate and some of the proposals were likely to be in the final solution.

But he said more European cohesion is needed. “At some points European leaders will have to see themselves as European leaders and not as French, or German or Greek.”

Speaking in Istanbul at an event hosted by Turkey’s Garanti Bank, he said if Greece’s government approves an austerity plan and Europe commits to a further bailout then the International Monetary Fund and others are likely to allow Greece a period of time to sustain its efforts.

Dallara, a former banker who has also held senior roles in the U.S. Treasury, is playing an informal role in the talks to thrash out a solution.

It is familiar ground for the IIF, which represents over 400 firms and was created in 1983 in response to the international debt crisis and aims to help stabilize the industry, including managing sovereign risk.

(Reporting by Alexandra Hudson and Asli Kandemir; Editing by Dan Lalor and David Holmes)

via Greece most complex debt crisis for years: IIF chief | Reuters.

June 29, 2011
Dominique Strauss-Kahn Resigns As Head Of International Monetary Fund

Dominique Strauss-Kahn is arraigned Monday, May 16, 2011, in court for the alleged attack on a maid who went into his penthouse suite at a hotel near Times Square to clean it, in New York, Monday, May 16, 2011. (AP Photo/Richard Drew, Pool)

SINGAPORE, May 19 (Reuters) – Dominique Strauss-Kahn resigned as head of the International Monetary Fund, the IMF said in a statement dated May 18, as he faces charges of sexual assault and attempted rape.

“I deny with the greatest possible firmness all of the allegations that have been made against me,” Strauss-Kahn said in his letter of resignation, released by the IMF.

(Reporting by Emily Kaiser)

www.huffingtonpost.com, 19 May 2011

May 19, 2011
IMF’s New Chief, New York Times and Turkey’s Crab Mentality

While Dominique Strauss-Kahn is waiting in jail, Treasury Secretary Geithner suggested DSK to step aside. There are a few leading candidates for this position. One of them is Turkey’s Kemal Dervis. He is the former head of United Nations Development Programme, and the Vice-President for Poverty Reduction and Economic Management at the World Bank. He is qualified for the position but his chances are really slim.

This didn’t stop the Turkey’s ruling party and its finance minister, Mehmet Simsek, from sabotaging Kemal Dervis’ slim chances of becoming IMF’s next president. This is the crab mentality at its rawest form. A decade ago Turkey got into a Greek-style budget deficit problem where almost everybody expected Turkey to default. Turkish Prime Minister asked Dervis to leave his post at the World Bank and help him with the budget and debt crisis. Dervis cut a deal with the IMF and went on to implement the plan. He was so successful that Turkey didn’t default on its debt and started to grow at a very healthy pace again. However, Erdogan’s AKP won the elections in 2002 and reaped all the benefits of Dervis’ hard work. Between 2002 and 2007, the Turkish economy grew by more than 7% annually, thanks to declining interest rates and the implementation of an IMF-backed programme that was struck by Dervis. Turkish economy went back to its mediocre performance after the IMF agreement ended in early 2008.

Erdogan’s AKP doesn’t have any credible alternatives in Turkey and they are expected to win the 2011 elections. However, they are worried that if Dervis becomes the next chief of the IMF, he will probably be an unbeatable candidate in 2015. That’s why they are trying to pull him down like crabs pulling down other crabs in a boiling pot. That’s why Mehmet Simsek, who was just a managing director at Merrill Lynch before he became Turkey’s finance minister and Erdogan’s puppet, announced his candidacy to run the IMF.

The New York Times didn’t waste this opportunity and made fun of Mehmet Simsek by saying “Among some potential candidates, modesty was not a characteristic widely on display.” The funny thing is Dani Rodrik, a Turkish economist at Harvard, published an article yesterday supporting Kemal Dervis’ candidacy. It’s well known that Rodrik doesn’t like the Erdogan government and he saw this as an opportunity to make a jab. Unfortunately Simsek announced his ridiculous candidacy to give the Germans and the French enough ammunition to shot Dervis’ slim chances down.

via IMF’s New Chief, New York Times and Turkey’s Crab Mentality – Insider Monkey.

May 19, 2011
Would Turkey’s Kemal Dervis Pass German Chancellor Angela Merkel’s “European” Test to Head the International Monetary Fund?

By Marc Champion

ISTANBUL — No sooner had news broken concerning the arrest of International Monetary Fund chief Dominique Strauss-Kahn on sex-related charges, than Turkey’s media began to speculate Monday on whether the country’s former economy minister, Kemal Dervis, might be the one to replace him.

Could Turkey’s Kemal Dervis, right, replace Dominique Strauss-Kahn at the IMF?

AFP/Getty Images

Could Turkey’s Kemal Dervis, right, replace Dominique Strauss-Kahn at the IMF?

If Mr. Dervis were to put himself forward, he’d be a strong candidate — but he’d also present German Chancellor Angela Merkel with a tough test of whether she believes a Turk counts as a European.

Ms. Merkel made it clear Monday that she would want to see a European replace Mr. Strauss-Kahn, due to the continuing travails of the euro-zone, rather than a candidate from a developing nation. Ms. Merkel also has in the past made clear her opposition to Turkey joining the European Union. That could spell a major obstacle for any bid by Mr. Dervis.

Still, Mr. Dervis would be a hard candidate to ignore. He has strong ties in Washington as well as in Western European capitals, and he would satisfy the developing world’s desire to see Europe’s lock on running the IMF broken.

Mr. Dervis joined the World Bank in 1978; he became the organization’s vice president for the Middle East and North Africa region in 1996, drawing up Bosnia’s post-war economic recovery program along the way. In 2001, he returned to Turkey to take up a job as secretary of state of the economy, crafting the economic program that lifted Turkey out of a brutal financial crisis.

Those policies were adopted more or less wholesale by the ruling Justice and Development Party, or AKP, when it came to power in 2002, and appear to have stood the test of the latest global financial crisis. Turkey’s banking system has been unscathed by the turmoil and has proved an engine of the country’s runaway recovery. As a result, Mr. Dervis is a rare example of a public figure who enjoys cross-party respect in Turkey.

Mr. Dervis joined the Republican People’s Party to run for election in 2002, and became a member of parliament in the political opposition after AKP’s victory. But he left parliament in 2005, distancing himself from Turkish politics and moving to head the United Nations Development Program. Currently, he is a vice president at the Brookings Institution in Washington, where he heads the think tank’s Global Economy and Development program.

A former economics professor, Mr. Dervis also has been drafted to a fistful of high-level commissions in Europe, including the Commission on the Measurement of Economic Performance and Social Progress, which was set up by French President Nicolas Sarkozy in 2008 to look at the adequacy of gross domestic product and other key indicators. Nobel Prize-winning economist Professor Joseph Stiglitz chaired the group.

Turkish economists say Mr. Dervis has been well-received by the government whenever he returns to visit Turkey, and that when it comes to economic policy, there’s little to separate them. “I can’t see why they wouldn’t want to support him, it would be a big coup for Turkey” — and for the government’s efforts to turn the country, already a G20 member, into a global player, said Atilla Yesilada, an economist with Istanbul Analytics, an Istanbul-based consultancy.

* IMF,

* Kemal Dervis,

* Turkey

via Would Turkey’s Kemal Dervis Pass German Chancellor Angela Merkel’s “European” Test to Head the International Monetary Fund? – Emerging Europe Real Time – WSJ.

May 17, 2011