...disqualifying "odious" debt [(i.e., debt related to arms purchases, debt accumulated by previous non-democratic or corrupt regimes, etc.)] would involve a radical change in the validity of creditor claims and the sanctity of contracts, which would have adverse implications for the operation of capital markets.
IMF
So that's why they can't drop the debt. It's obvious when you think about it. We can't allow any "adverse implications for the operation of capital markets."
When I read the reasons they offer, it sounds even more bollocks than when I try to explain it. I'm opposed to their policy, and I think I could make a better argument than that.
It seems just a euphemism for “we’re already in this crap and can’t break free without ripping a hole in the economies.”
Willem / 9:43pm / 23 November 2005
Exactly. It actually wouldn’t involve any negative change in the “sanctity of contracts”, since valid contracts would be honoured no less often (and usually more often). But it does indicate a huge change in creditor claims which is what they’re scared about. All this time they’ve been encouraging debt to increase rather than have debtors declare bankruptcy. So it really is their fault.
There’s a theory by one of the IMF guys, called The Mussa Theorem, that assuming benevolent government runs a country and assuming the IMF lends at the “right” rate, then IMF loans can never cause an unwanted outcome. It’s all very clever except, I think the first assumption is almost never true, and you never actually know if the second assumption is true because no one knows what the right rate is.
Ryan / 7:00am / 24 November 2005
That’s like saying, “If, for a moment, we ignore that people can die, then guns really shouldn’t kill anyone!”
You can make any assumption about any system that ignores how the system really is, but obviously that would render the conclusions useless.
By un-assuming those two real properties of economic/political systems, then EVERY loan has unwanted outcomes, one way or another.
From the introduction, it seems the Mussa Theorem is saying that any ‘adverse effects’ cannot be the fault of the IMF, but that it is the debtors that are to blame for their own lack of financial wisdom.
But the IMF IS providing loans, and it IS a powerful institute. I say that “With great power comes great responsibility” should overrule any childish justice in “But it’s their own fault.”
Willem / 10:53pm / 25 November 2005
PS.
I’ve mailed myself aboot the blockquote script, so I will actually remember it.
Willem / 10:58pm / 25 November 2005