The IMF (International Monetary Fund) is the refuge of the poor and desperate – countries that is. Countless nations have received emergency financial aid from the IMF, and as the global recession bites ever harder, even more nations are expected to approach the IMF with proposals for bail outs. Usually, the fund is well stocked by thriving economies, such as the US, UK, Japan, China and chunks of Europe, but, as we all know, these countries are battling to keep the wolves from their own doors and aren’t in a position to be financially beneficent.
On Sunday the 22nd February 09, European leaders agreed that helping the IMF to raise funds was vital and together pledged to raise at least $200 billion, but no plan detailing how this would be done has been revealed. Japan has apparently already agreed to a $100 billion loan, but after Japanese stocks plummeted today (Tuesday 24th Feb 09), it may be in Japan’s best interests to tend to its wounds before it needs to approach the IMF for a loan of its own.
UK Prime Minister and G20 Chairman, Gordon Brown, said that European countries propose raising the IMF purse to $500 billion to enable it to not only deal with, but prevent crises. The German Chancellor, Angela Merkel, sang a similar tune, saying that they need to double the IMF’s resources, so that it can help member countries “swiftly and flexibly”. However, neither the UK nor Germany have committed to providing any loans, as they feel that the whole G20 needs to be a part of the process, and has nothing to do with their own problems I’m sure.
Meanwhile, even though the US Dollar is considered to be the safest currency in this time of turbulent foreign exchange, it has proven to be as vulnerable as any other as stocks took a dive to their lowest level in over 11 years. The timing is awful because the US is in the middle of trying to reassure US citizens and offshore investors that they’re working hard to get a handle on the crisis. But fears persist that the US recession is far deeper than anyone has previously thought. One of the most pressing concerns is that cash injections and industry bail outs will serve no purpose other than throwing good money after bad.
President of the Federal Reserve Bank of Dallas, Richard Fisher, says, “Few of us imagined in our wildest dreams that our global economy could have turned so rotten so quickly. We are duty-bound to apply every tool we can to clean up the mess that has soiled the face of our financial system and get back on the track of sustainable economic growth with price stability.” While Keith Springer of Capital Financial Advisory Services says, “People left and right are throwing in the towel. The biggest thing I see here is the incredible pessimism. The Government is doing a lousy job of alleviating fears.”
To underpin how important the US economy is to the rest of the world, Japanese Chief Cabinet Secretary Takeo Kawamura says that it is “necessary” for the US stock market to recover as soon as possible so that the rest of the world can begin to heal. And the European Central Bank President Jean-Claude Trichet says that the financial crisis is spreading beyond the US and UK and Japan into the wider economy, placing the international financial systems (particularly in the euro zone) under “severe strain”.
So, President Obama has the fate of the world on his shoulders, and that’s no exaggeration.