Christine Lagarde picked as the new IMF chief

The executive board of the IMF today picked Christine Lagarde as the new head of the International Monetary Fund. She is the first woman to lead the organization.

Ms. Lagarde, 55, a national of France, has been the Minister of Finance of France since June 2007. Prior to that, she served as France’s Minister for Foreign Trade for two years. Ms. Lagarde also has had an extensive and noteworthy career as an anti-trust and labor lawyer, serving as a partner with the international law firm of Baker & McKenzie, where the partnership elected her as chairman in October 1999. She held the top post at the firm until June 2005 when she was named to her initial ministerial post in France. Ms. Lagarde has degrees from Institute of Political Studies (IEP) and from the Law School of Paris X University, where she also lectured prior to joining Baker & McKenzie in 1981.

I am more favorable to this political nomination than, say, Finland’s prime and finance ministers, but she is a beholden to modern economics and thereby very likely to continue IMF’s failed policies.

IMF reporting from Greece

Here’s the IMF report on Greece situation (emphasis mine).

Overall, significant progress, in particular in the area of fiscal consolidation, has been achieved during the first year of the adjustment program. However, reinvigoration of fiscal and broader structural reforms is necessary to further reduce the deficit and achieve the critical mass of reforms needed to improve the business climate and pave the way for sustainable economic recovery.

Regarding the outlook, the recession in 2010 was slightly more pronounced than what was anticipated. But there have been encouraging signs recently, in particular a notable pick-up in exports. Unit labour costs are set to decline further, supporting the strong export dynamics, and inflation is on a declining trend. We expect the economy to stabilize at the turn of the year.

That is not going to happen. This is what is going to happen:

To be fair, I fully support the austerity measures. A government cannot spend more than it earns, but Greece should start saving by defaulting on its debt. They should not force their citizens into debt slavery to save foreign private banks just so that the same banks can buy Greek assets at firesale prices so that Greece can pay interest on the debt they refuse to default on. Insane? Yes.

The Greece bailout was and still is a failure

Now, I wasn’t going to comment on this before something new actually happened and the fake Greece will abandon EU rumors that dropped the euro do not qualify.

But then came Jean-Claude Trichet and said the following:

“We have a programme, approved by the international community, approved by the IMF board, the entire world, approved by the European [Union], approved and financed by the IMF and the European [Union].

First of all, the Greece bailout was NOT APPROVED BY THE ENTIRE WORLD. See here, I was against it. I certainly was not the only one. Isn’t it strange that those in favor of the bailout and the very same people who could not foresee the recession even when we were in it and those that did foresee the recession once again understand that the bailouts will not help Greece. To be honest, this time it is very easy because the bailout are not even meant to help Greece, but the creditor banks of Greece.

Secondly, the bailouts are not financed by the IMF and the European Union but by the taxpayers. This might seem like a unnecessary remark but trust me when I say this, they avoid using the term taxpayer on purpose.

To recap my position:

The Greece bailout by the IMF and the EFSF and financed by the taxpayers was planned to do one thing and one thing only, transfer the losses incurred by Greece’s creditor banks onto the balance sheets’ of the taxpayers. There is only one winner from the Greece bailout and that is the former creditor banks. The people of Greece can always default on their debt. It is complete nonsense to claim that sovereign debt cannot be defaulted on. If this was the case, Greece debt would not be trading at half of its nominal value. If they do choose to default it is not going to be pretty as most of the debt is held by local pension funds and households. But consider the alternative, are they just going to keep paying larger share of their nation’s output as interest.

At least the following goals will be “achieved”:

  • Bank shareholders will win
  • Bank debtholders will win
  • Bank executives will win
  • The upcoming depression will be postponed
  • Taxpayers from EU and US will lose
  • Bailout nations will lose much of their sovereignty

And a free advice to Greece:

An idea has started circulating that Greece should put up collateral in exchange of further bailout loans. This is something I demanded as a citizen of Finland, but according to our finance minister Katainen there was no time to think about collateral. Under no circumstances should you pledge collateral because you have all the cards.


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