G-20 – A unique job of exporting losses to poorer economies

G-20 – A unique job of exporting losses to poorer economies

For whose benefit is the entire game plan – The first two US stimulus program and the UK bank and business stimulus programs were aimed at improving liquidity but it only kept bank business going on but no credit was released to the needy customers. Following them, the following has been sought to be done -

1. Tim Geitner Plan – Not a good bank, bank plan; just for good bank plan.
The Tim Geitner plan is aimed at making sure that Solvent banks remain solvent. Surplus Cash within the investment system will be used to revalue toxic assets. First beneficiary is the current owner of the toxic asset. The second beneficiary is the new private owner who gets assets with the backing of the Government, bolstering his Asset side of the balance sheet with automatic funding from the Government for its own part of the Asset at almost 0% charge. C. The third beneficiary is the Government, who gets time space to do something more fundamental about the economy.

It is obvious here too; the bill is to be footed by the next President and the tax paying population.

This is the best plan for only those banks who can use this money, hence only those who are essentially solvent. The fate of the seller of toxic asset is unknown as he may not remain solvent even after the same.

2. The MTM accounting fraud

The Marked to Market norm of the Asset was a check for making sure that the true value of the asset was reflected in the account books and that over the top risk taking behaviour would be curbed.

The rules of engagement have been changed. The goal post changed. The game ground has been shortened and it is now easier to score. Only two conclusions can be made – a. The team is made up of smaller players – children and they don’t tire themselves out. OR b. It is aimed at making adjustments so the better trained teams is made to play with an inferior team in a smaller ground where the better team skills are of no use!!!

The second one is more plausible. The rules are aimed to suit those players who would be on the bench if the rules were not changed and this puts the rest of the healthy players wonder why they are to take this chance of losing the game. (China, and may be even India)

The argument is that it doesn’t cost a thing to do that!! Once again, it doesn’t make the banks more solvent and capable does it? They still have toxic assets on the books whether mentioned or not. Then why do it????





3. G-20 US 1.1 Trillion Dollar fraud

One question – nobody answered was - Do we need it? Who said so? There is no proof of its need nor is there logic to its success. This is UK – US‘s subversive plan to export losses.

What happens when the IMF gives funds in US Dollars –?

a. The IMF doesn’t get actual money. It is printed money/bonds or whatever from the US. For one, it is not backed by gold or 100% by any other asset. It is a multiple of a seed capital from the Bank’s stake holders and depositors. This money finds its way as the trading currency across the globe as more and more countries access the IMF money through soft loans. This ensures that the USD continues to remain as the Global currency and stronger because of the demand for dollars. There is now virtually no chance of a new currency coming as the global transaction currency in the next 3 - 4 years.
b. This ensures that the vagaries of the US economy do not translate in equivalent manner and extent on the value of the dollar (no downward bias) thus preserving all dollar denominated existing over ground (real estate etc)and underground assets(oil).
c. The idea of creating such a huge cache of funds is to fund central bankers of various small countries to draw on loans to stimulate their local economy, release credit and so on into the local market. For this, central bankers will need to accept long term debt from IMF whose (debt) servicing goes to the currently unsuspecting local public. The countries may use this frivolously as US and the rest must be hoping, thereby the countries are permanently indebted in dollar terms.
d. The way this exports losses out of US et al, is through the refinancing of toxic overseas debt lying with many countries with central banks, other banks and financial institutions, stock and commodity market instruments, on a global scale. This releases the toxic asset from the current banks like Citibank, French and British banks (who have huge positions in Russia, Eastern Europe and South America) and moves it to other local banks in local economies. Thus, transferring what would have been losses on their books to losses in bank books of smaller obscure banks in obscure east European, Asian and African countries. This round tripping will benefits large US and European banks to virtually bring back dollar assets back onshore and leave toxic debt locally.
e. The plan also envisages a USD 250 billion for export and import finance. This is liquidity finance or refinance for banks that may have lost trust in other overseas banks – at least that’s how it should work. The larger countries like India and China have their own export credit banks. But the smaller countries will access these funds to improve their ability to export and import. This once again is useful if there is a buyer and seller in place. Also once again, this will help US banks to continue with overseas banking to sustain business income from these services.
f. The plan envisages USD 250 billion to the global economy called Special Drawing rights, which is basically meant for countries which are almost or are about to get bankrupt. This helps them to print money. Yes even in Dollars which would be hard to come by. If used, it will guarantee inflation (local, regional and international), a must to pull up asset prices.

In all this, just so that, business can go on as usual, US et al need the remaining 50% of the globe to fit the bill by taking on liberal credit. It is a shame making the poor, credit addicts, just so that your (US et al) people don’t face even a small contraction in their lifestyle. This is truly Imperialism of the 21st century. I am surprised Manmohanji has not voiced his concern on this issue. It’s a Shame.