fatvegan

It's been interesting to watch the gradual demise of the IMF. Countries have gradually stopped borrowing money from it, presumably because they no longer want it to run the show. They've started building up foreign reserves of their own, which I think is the only real solution to the problem of financial stability. For me. the IMF highlighted what is wrong with spending other people's money. The lenders have a problem when you're unable to observe from the outside whether a policy is good or bad. Instead of trying to work this out (which probably would have failed anyway) they picked some academically appealing set of policies and decided that everyone would have the same ones. It punished good and bad leaders alike. Sometimes it was probably an improvement, but I suspect that in the countries with good leaders it made things worse and in the countries with bad leaders nothing changed at all. Financial policy doesn't exist in a vacuum.

I think countries are realising that if they have the money to pay back IMF loans, then they don't actually need IMF loans. IMF loans aren't intended to help a country develop (although that may have changed more recently), just to get countries through tough periods. Countries figure that if they can accumulate the more before the crisis instead of having to accumulate it after the crisis, they can cut the IMF out of the picture altogether. And the country receives interest on its reserves instead of paying interest on its loans.

The idea of poor countries hoarding foreign assets in a bank has always been unappealing because people thought that poor countries needed that wealth out in the economy, helping to develop the nation. I think that people have since realised that the theoretical potential for huge investment returns isn't the same thing as actually having huge investment returns. On the whole, money invested in poor nations doesn't ending up returning that much more than anywhere else. Which is encouraging in one sense because it means that it makes as much sense for poor countries to have reserves as for rich countries.

So the IMF is experiencing something of a crisis. It feels like all the sucker poor countries have finally realised they've been duped all along, and don't want to play anymore. The IMF is doing everything it can to persuade the world that it is still needed. Apparently IMF interest income is way way down from what it was 10 years ago and it can't afford the glittery lifestyle it once led. I wouldn't be surprised if IMF lenders are under enormous pressure to make loans wherever they can. The IMF is going to have to tighten its belt. The first thing I would recommend is eliminating all health insurance for IMF workers and lengthening the employee work day to 12 hours. It will be tough at first, but all those who suffer will surely be grateful in the long run.