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  1. Wealth
November 25, 2008

The world's bank

By Spear's

Lending money to the real down-and-outers whose credit has gone ping ’ that’s what the IMF is up to.

Lending money to the real down-and-outers whose credit has gone ping – that’s countries that is, is what the IMF is up to.

When a sovereign nation cannot borrow against its own reserves, if any, or is excluded from the capital markets for whatever reason – behind with debt repayments, a bust budget, runaway inflation – that is when you’re essentially bust.

Well, you just form an orderly queue in Washington and await your bail-out, with strings attached. The queue, however, has recently got longer, quite long in fact, and the teller at the window doling out the greenbacks is looking at just how long it is and beginning to wonder if he’s got enough moolah in the kitty.

The average bail-out is approaching $10 to $15 billion per third world country at the first level of request and “commitments” so far have eaten up the first $100 billion. The queue has seen Ukraine, Hungary, Bulgaria, Roumania and Pakistan turn up at the guichet, followed by more on their way, especially from east Europe, that’s Latvia, Estonia and Lithuania and Poland, followed by Iceland, Finland and Uncle Tom Cobley and all.

Gordon Brown’s Britain and the South Americans have yet to show up… The IMF has caught a severe bout of the Brown/Bernanke strain of the Keynesian virus, and instead of thinking about the new capitalism and a new world financial order so urgently required, is running around stuffing money into unreformed places it shouldn’t be in.

Hold on a minute! Did you say Britain? Yes, I said Britain. It has had to go cap-in-hand to the IMF before, when Old Labour, during a Sterling Crisis in 1967 with the public finances out of control, had to get out the begging-bowl. So why would New Labour surprise us by not getting the public finances into a total mess again? In fact that is exactly what they’ve been doing for the last ten years, haven’t they?

Gordon Brown’s Britain ticks all the wrong IMF boxes already: third world country with collapsing infrastructure, no gold reserves, oil reserves running down, Sterling off 25% against the Dollar in just four months, GDP contracting by over 2% in the recession, savings non-existent and private borrowing has gone through what’s left of the roof that was, the PSBR charging past 40% of GDP before the bail-outs, unemployment on its way to over 3 million, inflation beyond any domestic control, the banking system is bust, and what with climate change we’ll all be growing bananas as a cash crop any day soon.

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Oh, yes, Gordon Brown’s Little Britain could easily end up in the IMF queue, particularly if there’s a further run on Sterling. And Brown himself, who was called Prudence before the name change, is running around the world without the slightest hint of modesty, telling anyone with money, that’s basically the Arabs, to lend it to the IMF IMMEDIATELY.

The IMF needs more money than it’s got, that’s obvious: it has $200 billion and another $50 billion it can whistle for, but that’s it. And the IMF is already well into its second $100 billion. (Gordon had better think about getting his application in soon.)

The Arabs aren’t stupid though, and whilst they’re happy to accept invitations to Washington or London and wine and dine with the has-beens, they are also quite happy to lend to Barclays at 14% p.a. for ten years, with a no-brainer equity kicker thrown in for Christmas or do I mean Ramadan, where they will doubtless get their money back, and some. At least this interest rate is realistic in the context of the super-inflation that’s set to get going in 2009. Well played them. Welcome to Capitalism.

What should Gordon Brown do, if Sterling and everything else continues to slide?

1.      Go to the IMF and get a standby fix while he can and so reserve his place in the queue?

2.      Call a General Election if he has to draw this IMF facility down?

3.      Soldier on because there’s no one else to run the country, given the fine old Laurel & Hardy mess he’s got us into?

4.      Resign, and let Minibrand take over?

5.      Go home to Kirkaldy and apply to be Manager of Raith Rovers?

My reaction to 1 to 5 above:

1.      Sensible in the circumstances, as a run on Sterling would be disastrous.

2.      Definitely. If he stays, he needs a new mandate in the crisis.

3.      This seems very likely, given the Conservatives apparent inability to say anything remotely relevant. (That Osborne should go now.)

4.      You don’t mean Milliband! Heavens, No!

5.      Brilliant all-round solution!

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