Tag Archive | "IMF"

Findings & Forecasts 02/27/2013

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In a radio inter­view today, this writer defended the defla­tionary posi­tion against those who con­tinue to use hyper­in­fla­tion as the ulti­mate threat against the global economy. For the most part, most of the hyper­in­fla­tion hys­teria resides within the pre­cious metals industry, which has used hyper­in­fla­tion as a prop to sell more gold and silver.

For the vast majority of metals dealers, the issue of buying and selling has been a one-way street. Buy now, buy tomorrow and don’t ever think about selling.  In fact, it’s not likely that anyone has ever heard a gold coin dealer say “Sell” because prices were too high or that pre­vious forces that drove prices up had changed direc­tion and were now dri­ving prices down.

As explained in the last issue of Find­ings & Fore­casts, America is not at risk for hyper­in­fla­tion unless some cat­a­clysmic eco­nomic supply event took place. In fact, since 2000, the grand eco­nomic super-cycle has changed from infla­tion to defla­tion. Once a defla­tionary cycle has taken hold of the economy, it will not release its grip until the bottom is reached on its own.

The Fed’s multi-year pro­gram of Quan­ti­ta­tive Easing has failed. For all the “pumping”, has the economy recov­ered? Has unem­ploy­ment been con­quered? No. What we got for the Q4 2012 was neg­a­tive growth.

But, you have to ask the ques­tion, “Who got all this money, anyway?” Well, I didn’t get any of it, and I bet you didn’t either. No, the Fed’s money did not migrate into the hands of con­sumers, but instead into the cof­fers of global banks and cor­po­ra­tions to shore up their rotten finan­cial con­di­tion (see below). QE has been a giant pro­gram to avoid defla­tion, and as I pre­dicted years ago, it has failed and will con­tinue to fail. When the Fed exhausts it ability to “create” more money, the cha­rade will be exposed and out­right defla­tion will crush what remains.

The middle class in America and around the world has lost wealth at an unprece­dented rate since 2006. While it’s true that more and more bud­gets are being overrun by rising gas and food prices, those prices are not reflec­tive of infla­tion as much as manip­u­lated price gouging. The average con­sumer has less to spend, and wants to hold onto their dwin­dling cash as long as pos­sible: A tell­tale symptom of deflation.

At the World Eco­nomic Forum in Davos, Switzer­land last month, IMF man­aging director Chris­tine Lagarde stated,2013 will be a make or break year. 2012 was tough. A lot hap­pened in Europe, a lot hap­pened in the U.S. and there is clearly a lot hap­pening in Asia.”

The con­text of her remarks indi­cate a need to reduce gov­ern­ment debt: “Pol­i­cy­makers have to stay focused on the medium-term plan to reduce debt.” Will Obama and/or Con­gress reduce U.S. debt over the next 4 years of this pres­i­dency? No, it’s not even con­ceiv­able. Amer­ican rhetoric will talk about debt reduc­tion, but will do nothing to achieve it — and debt will grow.

Will Europe reduce debt? It’s con­ceiv­able but the recent elec­tion in Italy has all but repu­di­ated the EU’s aus­terity man­date. If Italy breaks the debt limit rules, others are sure to follow and the EU will again be in jeop­ardy of dissolution.

In the plainest terms, the ulti­mate end of ever-increasing gov­ern­ment debt is bank­ruptcy. Gov­ern­ments are not somehow immune to the uni­versal law of finance — they can and do go bank­rupt, just like indi­vid­uals, cor­po­ra­tions and munic­i­pal­i­ties. When gov­ern­ments and their respec­tive cen­tral banks are drawn up short by investors unwilling to finance them, the party will be over and the out­come certain.

Big Banks’ $83 Bil­lion Annual Subsidy

Bloomberg, of all places, asks the ques­tion in a recent article, “Why Should Tax­payers Give Big Banks $83 Bil­lion a Year.” The analysis is com­pelling and the con­clu­sion is succinct.

“On tele­vi­sion, in inter­views and in meet­ings with investors, exec­u­tives of the biggest U.S. banks — notably JPMorgan Chase & Co. Chief Exec­u­tive Jamie Dimon — make the case that size is a com­pet­i­tive advan­tage. It helps them lower costs and vie for cus­tomers on an inter­na­tional scale. Lim­iting it, they warn, would impair prof­itability and weaken the country’s posi­tion in global finance.

“So what if we told you that, by our cal­cu­la­tions, the largest U.S. banks aren’t really prof­itable at all? What if the bil­lions of dol­lars they allegedly earn for their share­holders were almost entirely a gift from U.S. taxpayers?

“Granted, it’s a hard con­cept to swallow. It’s also cru­cial to under­standing why the big banks present such a threat to the global economy.

Let’s start with a bit of back­ground. Banks have a pow­erful incen­tive to get big and unwieldy. The larger they are, the more dis­as­trous their failure would be and the more cer­tain they can be of a gov­ern­ment bailout in an emer­gency. The result is an implicit sub­sidy: The banks that are poten­tially the most dan­gerous can borrow at lower rates, because cred­i­tors per­ceive them as too big to fail.

“Lately, econ­o­mists have tried to pin down exactly how much the sub­sidy lowers big banks’ bor­rowing costs. In one rel­a­tively thor­ough effort, two researchers — Kenichi Ueda of the Inter­na­tional Mon­e­tary Fund and Beat­rice Weder di Mauro of the Uni­ver­sity of Mainz — put the number at about 0.8 per­centage point. The dis­count applies to all their lia­bil­i­ties, including bonds and cus­tomer deposits.

“Small as it might sound, 0.8 per­centage point makes a big dif­fer­ence. Mul­ti­plied by the total lia­bil­i­ties of the 10 largest U.S. banks by assets, it amounts to a tax­payer sub­sidy of $83 bil­lion a year. To put the figure in per­spec­tive, it’s tan­ta­mount to the gov­ern­ment giving the banks about 3 cents of every tax dollar collected.

“The top five banks — JPMorgan, Bank of America Corp., Cit­i­group Inc., Wells Fargo & Co. and Goldman Sachs Group Inc. — - account for $64 bil­lion of the total sub­sidy, an amount roughly equal to their typ­ical annual profits. In other words, the banks occu­pying the com­manding heights of the U.S. finan­cial industry — with almost $9 tril­lion in assets, more than half the size of the U.S. economy — would just about break even in the absence of cor­po­rate wel­fare.

In large part, the profits they report are essen­tially trans­fers from tax­payers to their share­holders.” [emphasis added]

  The last line under­scores a pat­tern that I have described many times over the years: Namely, the global banks and cor­po­ra­tions would not be sus­tain­able except for the monies that they can suck out of tax­payers (including their gov­ern­ments) along the way. Their profits are real, but rigged and obfuscated.

— —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  — –  Note: Addi­tional con­tent on this page is avail­able only to Pre­mium sub­scribers of Find­ings & Fore­casts.
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Findings & Forecasts 10/10/2012

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I have written in the past that there were signs of the global elite dumping Obama much like Jimmy Carter was dumped in 1979 after a single Pres­i­den­tial term. In spite of that and in light of O’s strong elec­toral vote showing, it seemed like he would sail to vic­tory on November 6, with ease.

It’s time to revisit the first sce­nario again. After a lop­sided Pres­i­den­tial debate against Romney, it appeared that the estab­lish­ment pulled the rug out from under Obama, and then threw him under the bus. Sev­eral promi­nent Democ­rats have turned against him. Some of the lib­eral media are crit­i­cizing him.

Nev­er­the­less, as of today, Huff­in­gton Post elec­toral tracking shows Obama ahead with 263 elec­toral votes, com­pared to Romney’s 206. The winner must cap­ture at least 270 elec­toral votes. Electoral-Vote.com shows Obama with 317 and Romney with 206. Either way, Obama is still ahead with a con­sid­er­able margin.

There are more debates ahead, but don’t expect Obama and Biden to make the same mis­takes again. They may make dif­ferent mis­takes, but they are far from being overwhelmed.

Mean­while, take note of some of the Tri­lat­eral Com­mis­sion gad­flies in and around the Romney campaign:

Robert Zoel­lick, former member of TC and Pres­i­dent of the World Bank

Robert D. Black­will, Henry A. Kissinger Senior Fellow for U.S. For­eign Policy, Council on For­eign Rela­tions, Wash­ington; former Deputy Assis­tant to Pres­i­dent George W. Bush and Deputy National Secu­rity Advisor for Strategic Plan­ning; former Ambas­sador to India

Paula J. Dobri­ansky, Dis­tin­guished National Secu­rity Chair at the U.S. Naval Academy; Adjunct Senior
Fellow, Belfer Center for Sci­ence and Inter­na­tional Affairs, John F. Kennedy School of Gov­ern­ment,
Har­vard Uni­ver­sity; former U.S. Under Sec­re­tary of State for Democ­racy and Global Affairs

Con­doleezza Rice, Pro­fessor of Polit­ical Sci­ence, Stan­ford Uni­ver­sity, and Thomas and Bar­bara
Stephenson Senior Fellow on Public Policy, Hoover Insti­tu­tion, Palo Alto; former U. S. Sec­re­tary of
State; former National Secu­rity Advisor to Pres­i­dent George W. Bush

Eliot Cohen, Robert E. Osgood Pro­fessor of Strategic Studies, Director of Strategic Studies Pro­gram, and Director of Philip Mer­rill Center for Strategic Studies, Paul H. Nitze School of Advanced Inter­na­tional Studies, The Johns Hop­kins Uni­ver­sity, Wash­ington; former Coun­selor to the U.S. Sec­re­tary of State

Susan Schwab, Pro­fessor of Public Policy, Uni­ver­sity of Mary­land, Col­lege Park, and Strategic
Advisor, Mayer Brown, LLP; former U.S. Trade Representative

Henry A. Kissinger, Chairman, Kissinger Asso­ciates, Inc., New York; former U.S. Sec­re­tary of State;
former U.S. Assis­tant to the Pres­i­dent for National Secu­rity Affairs; Life­time Trustee, Tri­lat­eral
Com­mis­sion. (names and bio infor­ma­tion taken from the Tri­lat­eral Com­mis­sion mem­ber­ship list)

As has been the case since the elec­tion of Jimmy Carter in 1976, the Tri­lat­eral Com­mis­sion has dom­i­nated both the Repub­lican and Demo­crat par­ties and their sub­se­quent Admin­is­tra­tions. (See The Tri­lat­eral Com­mis­sion: Usurping Sov­er­eignty).


The IMF is not to be viewed as a friend to humanity. It is a global elite sumo wrestler that oper­ates a tag team with the World Bank and the Bank for Inter­na­tional Set­tle­ments, in order to pro­mote the poli­cies of globalization.

Inter­est­ingly, the IMF has issued two point­edly bearish reports in the last few days. The first, World Eco­nomic Out­look, was reported in The Tele­graph (UK), IMF sees ‘alarm­ingly high’ risk of fresh global slump:

“The Inter­na­tional Mon­e­tary Fund has slashed its growth fore­cast for large parts of the world economy and warned of a full-blown global slump if pol­i­cy­makers in Europe or the US mis­handle serious threats

The report states that “risks for reces­sion in the advanced economies are alarm­ingly high” and that “the inten­sity of the euro area crisis has not abated as assumed in pre­vious pro­jec­tions.”  

The second IMF state­ment of gloom (Global Finan­cial Sta­bility Report) was scooped by Bloomberg, IMF Sees Euro­pean Banks Facing $4.5 Tril­lion Sell-Off.

“The Inter­na­tional Mon­e­tary Fund said Euro­pean banks may need to sell as much as $4.5 tril­lion in assets through 2013 if policy makers fall short of pledges to stem the fiscal crisis, up 18 per­cent from its April esti­mate. Failure to imple­ment fiscal tight­ening or set up a single super­vi­sory system in the timing agreed could force 58 Euro­pean Union banks from Uni­Credit SpA (UCG) to Deutsche Bank AG (DBK) to shrink assets.

 Shrinking assets by a more proper name is defla­tion, but bankers under­stand that the public reacts very neg­a­tively toward the use of such a word. Infla­tion is a split part­ner­ship of debauchery where banks get rich while investors who play the debt game get rich also. With defla­tion, which cannot be reg­u­lated with Fed policy tools, the down­ward spiral takes back every­thing and more. All those who live on or in the debt tower, get crushed in the end. The Fed’s response to this is to replace bank liq­uidity lost to defla­tion, with freshly cre­ated money. This keeps the banks afloat while everyone else gets crushed… but the Fed can’t keep this game up indef­i­nitely, and I strongly sus­pect that they know this. As gov­ern­ments, munic­i­pal­i­ties, cor­po­ra­tions and indi­vid­uals con­tinue to de-leverage, the spiral is vir­tu­ally guar­an­teed to take the cen­tral banks and their bankster mem­bers, into the same crushing machine.

Another inter­esting view of the global eco­nomic slow­down is seen in the Export Trends for Top FedEx Mar­kets below.

Growth in all mar­kets has slowed since Jan­uary 2010 and four out of nine mar­kets are cur­rently expe­ri­encing out­right contraction.

— —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  —  — –  Note: Addi­tional con­tent on this page is avail­able only to Pre­mium sub­scribers of Find­ings & Fore­casts.
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Global Banking: The World Bank

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By Patrick Wood, Editor


According to The World Bank, it is,

“a vital source of finan­cial and tech­nical assis­tance to devel­oping coun­tries around the world. We are not a bank in the common sense. We are made up of two unique devel­op­ment insti­tu­tions owned by 184 member coun­triesÂ — the Inter­na­tional Bank for Recon­struc­tion and Devel­op­ment (IBRD) and the Inter­na­tional Devel­op­ment Asso­ci­a­tion (IDA). Each insti­tu­tion plays a dif­ferent but sup­portive role in our mis­sion of global poverty reduc­tion and the improve­ment of living stan­dards. The IBRD focuses on middle income and cred­it­worthy poor coun­tries, while IDA focuses on the poorest coun­tries in the world. Together we pro­vide low-interest loans, interest-free credit and grants to devel­oping coun­tries for edu­ca­tion, health, infra­struc­ture, com­mu­ni­ca­tions and many other pur­poses.” 1

High-minded words like “our mis­sion of global poverty reduc­tion and the improve­ment of living stan­dards” would lead the reader to believe that the World Bank is some benev­o­lent and global wel­fare orga­ni­za­tion. Why is it then, that The World Bank joins the Inter­na­tional Mon­e­tary Fund and the World Trade Orga­ni­za­tion as orga­ni­za­tions that people around the world just love to hate?

In reality, the World Bank car­ries its weight, along with the Inter­na­tional Mon­e­tary Fund and the Bank for Inter­na­tional Set­tle­ments, to forcibly inte­grate minor coun­tries of the world into its own brand of cap­i­tal­istic democracy.

World Bank Beginnings

A sib­ling of the IMF, the World Bank was born out of the U.N. Mon­e­tary and Finan­cial Con­fer­ence at Bretton Woods, New Hamp­shire in July, 1944. The orig­inal name given to the World Bank was the Inter­na­tional Bank for Recon­struc­tion and Devel­op­ment (IBRD) and reflects its orig­inal mis­sion: to rebuild Europe after the dev­as­ta­tion of World War II. The name “World Bank” was not actu­ally adopted until 1975.

Both the IBRD and the IMF were cre­ated as inde­pen­dent spe­cial­ized agen­cies of the United Nations, of which they remain to this day.

The word “Devel­op­ment” in the IBRD name was rather insignif­i­cant at the time because most of the southern hemi­sphere was still under colo­nial rule, with each colo­nial master respon­sible for the busi­ness activ­i­ties in their respec­tive countries.

Note: It is argued by some that there was an orig­inal desire by banking elites to put an end to colo­nialism by restruc­turing invest­ment and trade pat­terns in col­o­nized coun­tries. This paper will not deal with this issue, but it should be noted that this has been exactly what has hap­pened, in many cases being aided by the oper­a­tions of the World Bank and the IMF.

As a “recon­struc­tion” bank, how­ever, the World Bank was impo­tent. It ulti­mately loaned only $497(US) mil­lion for recon­struc­tion projects. The Mar­shall Plan, by con­trast, became the true engine of the recon­struc­tion of Europe by loaning over $41(US) bil­lion by 1953.

The pri­mary archi­tects of the World Bank were Harry Dexter White and John May­nard Keynes, both of whom are sum­ma­rized Global Banking: The Inter­na­tional Mon­e­tary Fund (see article for com­plete details) as follows:

“Such is the moral fiber and intel­lec­tual cre­den­tials of the cre­ators of the IMF [and the World Bank]: One was an Eng­lish ide­o­logue econ­o­mist with a markedly global bent, and the other a cor­rupt and high-ranking U.S. gov­ern­ment offi­cial who was a top Soviet spy.“2

Struc­ture of the World Bank

Today, the World Bank con­sists of two pri­mary units: The already-mentioned IBRD and the Inter­na­tional Devel­op­ment Asso­ci­a­tion (IDA), which was cre­ated in 1960.

The IBRD lends only to gov­ern­ments who are credit-worthy; in other words, there is an expec­ta­tion that they will repay their loans. The IDA, by con­trast, only lends to gov­ern­ments who are not credit-worthy and are usu­ally the poorest nations. Together, they create a “one-two” punch in global lending to any gov­ern­ment that they are able to talk into bor­rowing. The U.S. cur­rently con­tributes about $1 bil­lion per year of tax­payer funds to the IDA.

Three other affil­i­ates com­bine with the World Bank, to be col­lec­tively called the World Bank Group:

  • The Inter­na­tional Finance Cor­po­ra­tion (IFC) — Founded in 1956, lends directly to the pri­vate sector in devel­oping counties.
  • The Mul­ti­lat­eral Invest­ment Guar­antee Agency (MIGA) –Founded in 1988, pro­vides guar­an­tees to investors in devel­oping coun­tries against losses caused by non­com­mer­cial risks.
  • The Inter­na­tional Center for Set­tle­ment of Invest­ment Dis­putes (ICSID) — Founded in 1966, pro­vides inter­na­tional facil­i­ties for con­cil­i­a­tion and arbi­tra­tion of invest­ment disputes.

Head­quar­ters for the World Bank is Wash­ington, DC. It employs approx­i­mately 7,000 in the Wash­ington com­plex, and another 3,000 in 109 offices scat­tered throughout member countries.

IBRD funds its lending oper­a­tions by selling AAA-rated bonds and other debt instru­ments to other banks, pen­sion funds, insur­ance com­pa­nies and cor­po­ra­tions around the world. By con­trast, the IDA is funded by (tax­payer) con­tri­bu­tions from member coun­tries. Annual levels of lending is roughly equal between IBRD and IDA. While the IFC gen­er­ates its own cap­ital in open mar­kets, MIGA and ICSID receive the majority of their funding from the World Bank, much of which is tax­payer funded.

Own­er­ship of the World Bank con­sists of voting shares held by member coun­tries, according to size and con­tri­bu­tions. Cur­rently, the U.S. is the largest share­holder with 16.4 per­cent of total votes. The next largest voting blocks are Japan (7.9 per­cent) and Ger­many (4.5 per­cent). Because major deci­sions require an 85 per­cent super-majority vote, the U.S. can effec­tively veto any change (100% –16.4% = 83.6%).

Amer­ican Hegemony

It should be noted that the United Nations is head­quar­tered in the United States, on land orig­i­nally donated to it by David Rock­e­feller. The Bretton Woods Con­fer­ence was held in New Hamp­shire. Every pres­i­dent of the World Bank has hailed from the United States. It is no wonder that the rest of the world views the World Bank as an Amer­ican operation.

There has been an unwritten but tra­di­tional rule that the World Bank pres­i­dent will always be an Amer­ican, while the pres­i­dent of the IMF is Euro­pean. (A recent excep­tion to this is the cur­rent IMF pres­i­dent, who is Canadian)

It is instruc­tive to review the past pres­i­dents of the World Bank, because it demon­strates which elite cabal is really in con­trol of World Bank oper­a­tions. In turn, this will point strongly to the real ben­e­fi­cia­ries of the World Bank hege­mony. The com­plete biogra­phies and accom­plish­ments of these men far exceed the avail­able space in this report, so only a few high­lights are noted.

1. Eugene Meyer. June to December, 1946. Chairman, Board of Gov­er­nors of the Fed­eral Reserve from 1930 – 1933; owner of the Wash­ington Post; Member, Council on For­eign Rela­tions; agent of Lazard Freres, Brown Brothers, Har­riman; appointed head of the War Finance Cor­po­ra­tion during WWI by Woodrow Wilson.

2. John J. McCloy. March 1947 to April 1949. Member and chair of the Council on For­eign Rela­tions; Chairman, Ford Foun­da­tion; Chairman, Chase Man­hattan Bank; lawyer whose firm was council to Chase Man­hattan Bank.

3. Eugene Black. July 1949 to December 1962. Chairman, Board of Direc­tors for the Fed­eral Reserve System (1933 – 34); senior vice pres­i­dent of Chase Man­hattan Bank; Member, Council on For­eign Rela­tions; member of Bilder­bergers; cre­ated the Inter­na­tional Finance Cor­po­ra­tion and the Inter­na­tional Devel­op­ment Asso­ci­a­tion at the World Bank.

4. George Woods. Jan­uary 1963 to March 1968. Vice pres­i­dent of Harris, Forbes & Co.; vice pres­i­dent of Chase Bank; vice pres­i­dent of and board member of First Boston Corp. (one of the largest U.S. invest­ment banking firms).

5. Robert Strange McNa­mara. April 1968 to June 1981. Pres­i­dent and director of Ford Motor Com­pany; Sec­re­tary of Defense in the Kennedy and Johnson admin­is­tra­tions; member of Tri­lat­eral Com­mis­sion, Council on For­eign Rela­tions and Bilder­bergers; hon­orary council trustee of Aspen Insti­tute. Per­son­ally nego­ti­ated China’s entrance into the World Bank.

6. A.W. Clausen. July 1981 to June 1986. Pres­i­dent, CEO and chairman of Bank of America; member, Tri­lat­eral Com­mis­sion; member, Bretton-Woods Committee.

7. Barber B. Conable. July 1986 to August 1991. Member of U.S. House of Rep­re­sen­ta­tives from 1965 to 1985; member Tri­lat­eral Com­mis­sion and Council on For­eign Rela­tions; senior fellow, Amer­ican Enter­prise Insti­tute; board member, New York Stock Exchange; member, Com­mis­sion on Global Governance.

8. Lewis T. Pre­ston. Sep­tember 1991 to May 1995. Pres­i­dent, CEO and chairman of J.P. Morgan & Co., and chairman of the exec­u­tive com­mittee; vice pres­i­dent of Morgan Guar­anty Trust Co.; member and trea­surer of Council on For­eign Rela­tions; director of Gen­eral Electric.

9. James D. Wolfen­sohn. June 1995 to 2005 Exec­u­tive partner and head of the invest­ment banking depart­ment, Salomon Brothers (New York); exec­u­tive deputy chairman and man­aging director, Schroders Ltd. (London); director, Rock­e­feller Foun­da­tion; board member, Rock­e­feller Uni­ver­sity; hon­orary trustee, Brook­ings Insti­tu­tion; Director, Pop­u­la­tion Council (founded by John D. Rock­e­feller); member, Council on For­eign Relations.

10. Paul Wol­fowitz. 2005 — present. Deputy Sec­re­tary of Defense (2001 – 2005); member, Tri­lat­eral Com­mis­sion; member, Council on For­eign Rela­tions; member, Bilder­bergers; director of the neocon flag­ship, Project for the New Amer­ican Cen­tury (PNAC); member of the elite “Vul­cans” group that advised George W. Bush on for­eign policy during the 2000 pres­i­den­tial elec­tions (other neocon mem­bers included Con­doleezza Rice, Colin Powell and Richard Perle); member of and fre­quent speaker at Social Democ­rats USA (suc­cessor to the Socialist Party of America).

An impor­tant pat­tern emerges here. These men frame a 50-year time period stretching from 1946 to 2006. The early players have long since passed away. There was no social con­nec­tion between the early and latter pres­i­dents. Yet, seven out of ten are mem­bers of the Council on For­eign Rela­tions; four are mem­bers of the Tri­lat­eral Com­mis­sion, seven have major global bank affil­i­a­tions (Chase Man­hattan, J.P. Morgan, Bank of America, First Boston, Brown Brothers, Har­riman, Salomon Brothers, Fed­eral Reserve), and four men were directly con­nected to Rock­e­feller interests.

A detailed analysis is not required to see the pat­tern emerge: Global bankers (the same old crowd) and their related global proxies, have com­pletely dom­i­nated the World Bank for its entire his­tory. Col­lec­tively and indi­vid­u­ally, they have always oper­ated pur­pose­fully and con­sis­tently for their own self-interested, finan­cial gain. Why would anyone expect even one of them to act out of char­acter (e.g., be con­cerned for world poverty) while directing the helm of the World Bank?

Pur­poses of convenience

What­ever the true pur­poses of the World Bank and IMF might have been, the pub­licly dis­played pur­poses have changed when it was con­ve­nient and necessary.

In 1944, recon­struc­tion of war torn coun­tries after WW II was the impor­tant issue.

When the Bank demon­strated its impo­tence by loaning only a pit­tance of less than $500 mil­lion, it changed its pubic image by posi­tioning itself as a check and bal­ance to the expan­sion of com­mu­nism. Without the World Bank to engage all of the lesser coun­tries of the world who were sus­cep­tible to com­mu­nist influ­ence, com­mu­nism might spread and ulti­mately threaten to end the cold war with an ugly nuclear Holocaust.

Public and leg­isla­tive sen­ti­ment ulti­mately fiz­zled and the Bank was again under heavy crit­i­cism when Robert Strange McNa­mara was appointed president.

Poverty Reduc­tion: Trojan Horse

As noted above, McNa­mara was pres­i­dent of the World Bank from 1968 through 1981. He was also among the orig­inal mem­ber­ship of the Tri­lat­eral Com­mis­sion, founded in 1973 by Rock­e­feller and Brzezinski, and was widely con­sid­ered to be a cen­tral figure in the global elite of his day.

It was McNa­mara who caused the focus of the World Bank to fall on poverty and poverty reduc­tion. This has essen­tially remained the siren call right into the present. This was a bril­liant maneuver because who would ever say they are anti-poor or pro-poverty? Any attack on the Bank would thus be viewed as an attack on poverty relief itself. From 1968 onward, the battle cry of the Bank has been “elim­i­nate poverty.”

This is clearly seen on the About Us page of the World Bank web site, where these words are promi­nently displayed:

“Each insti­tu­tion (IBRD and IDA) plays a dif­ferent but sup­portive role in our mis­sion of global poverty reduc­tion and the improve­ment of living stan­dards. [emphasis added]

How­ever, Article I of The Arti­cles of Agree­ment of the IBRD, as amended on Feb­ruary 16, 1989, state its offi­cial Pur­poses as follows:

(i) To assist in the recon­struc­tion and devel­op­ment of ter­ri­to­ries of mem­bers by facil­i­tating the invest­ment of cap­ital for pro­duc­tive pur­poses, including the restora­tion of economies destroyed or dis­rupted by war, the recon­ver­sion of pro­duc­tive facil­i­ties to peace­time needs and the encour­age­ment of the devel­op­ment of pro­duc­tive facil­i­ties and resources in less devel­oped countries.

(ii) To pro­mote pri­vate for­eign invest­ment by means of guar­an­tees or par­tic­i­pa­tions in loans and other invest­ments made by pri­vate investors; and when pri­vate cap­ital is not avail­able on rea­son­able terms, to sup­ple­ment pri­vate invest­ment by pro­viding, on suit­able con­di­tions, finance for pro­duc­tive pur­poses out of its own cap­ital, funds raised by it and its other resources.

(iii) To pro­mote the long-range bal­anced growth of inter­na­tional trade and the main­te­nance of equi­lib­rium in bal­ances of pay­ments by encour­aging inter­na­tional invest­ment for the devel­op­ment of the pro­duc­tive resources of mem­bers, thereby assisting in raising pro­duc­tivity, the stan­dard of living and con­di­tions of labor in their territories.

(iv) To arrange the loans made or guar­an­teed by it in rela­tion to inter­na­tional loans through other chan­nels so that the more useful and urgent projects, large and small alike, will be dealt with first.

(v) To con­duct its oper­a­tions with due regard to the effect of inter­na­tional invest­ment on busi­ness con­di­tions in the ter­ri­to­ries of mem­bers and, in the imme­diate postwar years, to assist in bringing about a smooth tran­si­tion from a wartime to a peace­time economy.

The Bank shall be guided in all its deci­sions by the pur­poses set forth above.3

Note that the word “poverty” does not appear even once. The reason is clear: What­ever “busi­ness as usual” might be with the Bank, it has nothing to do with poverty or poverty reduc­tion. Rather, the Bank is in busi­ness to loan money by stim­u­lating bor­rowing demand in devel­oping coun­tries, with a view to increasing inter­na­tional trade. The pri­mary ben­e­fi­cia­ries of inter­na­tional trade are the global cor­po­ra­tions, and the poor are actu­ally poorer as a result.

This hypocrisy was noted even by Nobel lau­reate and former World Bank chief econ­o­mist, Joseph Stiglitz, as late as 2002:

As far as these ‘client coun­tries’ were con­cerned, it was a cha­rade in which the politi­cians pre­tended to do some­thing to redress the prob­lems [of poverty] while finan­cial inter­ests worked to pre­serve as much of the status quo as they could.4

Lib­er­al­iza­tion and Struc­tural Adjustments

When Alden Clausen (also an orig­inal member of the Tri­lat­eral Com­mis­sion) took over the reins from Robert McNa­mara in 1981, a mas­sive shakeup in the bank occurred. As Stiglitz noted,

“In the early 1980’s a purge occurred inside the World Bank, in its research depart­ment, which guided the Bank’s thinking and direc­tion.“5

Clausen, a true core member of the global elite, brought in a new chief econ­o­mist with rad­ical new ideas:

“…Ann Krueger, an inter­na­tional trade spe­cialist, best known for her work on ‘rent seeking’ — how spe­cial inter­ests use tar­iffs and other pro­tec­tionist mea­sures to increase their incomes at the expense of others…Krueger saw gov­ern­ment as the problem. Free mar­kets were the solu­tion to the prob­lems of devel­oping coun­tries.6 [emphasis added]

This was pre­cisely the time when so-called lib­er­al­iza­tion poli­cies and Struc­tural Adjust­ments were force­fully imple­mented as a means of forcing coun­tries to pri­va­tize indus­tries. If gov­ern­ments were the problem, then they should turn over areas of crit­ical infra­struc­ture to pri­vate multi­na­tional cor­po­ra­tions which, according to Krueger, could per­form better and more effi­ciently than bureau­cratic gov­ern­ment bodies.

Not sur­pris­ingly, most of the career staff econ­o­mists left the Bank in the early 1980’s in protest over Clausen and Krueger’s policies.

How the Money Laundry Works

The mech­a­nism and oper­a­tion of Struc­tural Adjust­ments, along with the tight coop­er­a­tion between the IMF and the World Bank, was ade­quately cov­ered in The August Review’s Global Banking: The Inter­na­tional Mon­e­tary Fund. The fol­lowing well-documented example will be the “pic­ture worth a thou­sand words” in the Review’s effort to pro­file self-serving Bank and global cor­po­rate poli­cies. It also demon­strates the “tag-team” approach used by the Bank and IMF in the prying open of closed mar­kets in unco­op­er­a­tive coun­tries. It’s a rather tan­gled story, but careful reading will pro­duce under­standing of how the “system” works.

Water Wars

In 1998, the IMF approved a loan of $138 mil­lion for Bolivia it described as designed to help the country con­trol infla­tion and sta­bi­lize its domestic economy. The loan was con­tin­gent upon Bolivia’s adop­tion of a series of “struc­tural reforms,” including pri­va­ti­za­tion of “all remaining public enter­prises,” including water ser­vices. Once these loans were approved, Bolivia was under intense pres­sure from the World Bank to ensure that no public sub­si­dies for water existed and that all water projects would be run on a “cost recovery” basis, meaning that cit­i­zens must pay the full con­struc­tion, financing, oper­a­tion and main­te­nance costs of a water project. Because water is an essen­tial human need and is cru­cial for agri­cul­ture, cost recovery pricing is unusual, even in the devel­oped world.

In this con­text, Cochabamba, the third largest city in Bolivia, put its water works up for sale in late 1999.Cochabamba Water War Only one entity, a con­sor­tium led by Bechtel sub­sidiary Aguas del Tunari, offered a bid, and it was awarded a 40-year con­ces­sion to pro­vide water. The exact details of the nego­ti­a­tion were kept secret, and Bechtel claimed that the num­bers within the con­tract are “intel­lec­tual prop­erty.” But, it later came to light that the price included the financing by Cochabamba’s cit­i­zens of a part of a huge dam con­struc­tion project being under­taken by Bechtel, even though water from the Mis­i­cuni Dam Project would be 600% more expen­sive than alter­na­tive water sources. Cochabam­bans were also required to pay Bechtel a con­trac­tu­ally guar­an­teed 15% profit, meaning that the people of Cochabamba were asked to pay for invest­ments while the pri­vate sector got the profits.

Imme­di­ately upon receiving the con­ces­sion, the com­pany raised water rates by as much as 400% in some instances. These increases came in an area where the min­imum wage is less than $100 a month. After the price hike, self-employed men and women were esti­mated to pay one quarter of their monthly earn­ings for water.

The city’s res­i­dents were out­raged. In Jan­uary of 2000, a broad coali­tion called the Coor­di­na­tion for the Defense of Water and Life, or simply La Coor­di­nadora, led by a local worker, Oscar Olivera, called for peaceful demon­stra­tions. Cochabamba was shut down for four days by a gen­eral strike and trans­porta­tion stop­page, but the demon­stra­tions stopped once the gov­ern­ment promised to inter­vene to lower water rates. How­ever, when there were no results in Feb­ruary, the demon­stra­tions started again. This time, how­ever, demon­stra­tors were met with tear gas and police oppo­si­tion, leaving 175 injured and two youths blinded.

The threat that pri­va­ti­za­tion of public ser­vices under GATS (Gen­eral Agree­ment on Trade in Ser­vices) poses to democ­racy were demon­strated in March 2000. La Coor­di­nadora held an unof­fi­cial ref­er­endum, counted nearly 50,000 votes, and announced that 96% of the respon­dents favored the can­cel­la­tion of the con­tract with Aguas del Tunari. They were told by the water com­pany that there was nothing to negotiate.

On April 4, the res­i­dents of the city returned to the streets, shut­ting down the city. Again, they were met with police resis­tance, and on April 8, the gov­ern­ment declared mar­tial law. The Boli­vian mil­i­tary shot a 17-year-old pro­tester in the face, killing him. How­ever, the protests con­tinued, and, on April 10, the gov­ern­ment relented, signing an accord that agreed to the demand of the pro­testers to reverse the water con­ces­sion. The people of Cochabamba took back their water.

Unfor­tu­nately, this inspiring story didn’t simply end with the vic­tory for the people of Cochabamba. On Feb­ruary 25, 2002, Bechtel filed a griev­ance using investor pro­tec­tions granted in a Bolivia-Netherlands Bilat­eral Invest­ment Agree­ment at the World Bank, demanding a $25 mil­lion dollar pay­ment as com­pen­sa­tion for lost profits.7

Note: Bechtel Engi­neering is the largest civil engi­neering com­pany in the world. It is pri­vately owned by the Bechtel family. For many years, gen­eral counsel (and vice-president) for Bechtel was none other than orig­inal Tri­lat­eral Com­mis­sion member Caspar Weinberger.

Since then, the World Bank has granted addi­tional “poverty reduc­tion” loans to Bolivia. Care­fully read the Bank’s cur­rent (2006) assess­ment on Bolivia found on its web site:

“Bolivia is expe­ri­encing a time of dif­fi­culty and uncer­tainty. In recent months, var­ious polit­ical and social dis­tur­bances have esca­lated with serious con­se­quences, cul­mi­nating in the res­ig­na­tion of Pres­i­dent Gon­zalo Sánchez de Lozada in October 2003, and the appoint­ment of Vice-President Carlos Mesa as Pres­i­dent. The cur­rent admin­is­tra­tion inherits a dif­fi­cult eco­nomic, polit­ical and social cli­mate, which is com­pounded by long-term issues, such as pro­found inequality, an economy that has been adversely affected by the regionÂ’s recent eco­nomic slump, and wide­spread public dis­en­chant­ment with cor­rup­tion.“8

Polit­ical and social dis­tur­bances? Dif­fi­cult eco­nomic, polit­ical and social cli­mate? Pro­found inequality? Wide­spread dis­en­chant­ment with cor­rup­tion? It leaves one speechless.

So, in the case of Bolivia, we see the fol­lowing in operation:

  • An IMF loan is made to Bolivia, with conditionalities
  • The World Bank steps in to enforce the con­di­tion­al­i­ties and impose struc­tural adjustments
  • The World Bank loans “devel­op­ment” funds to Bolivia, and simul­ta­ne­ously brings in pri­vate bank con­sor­tiums to fund the var­ious projects that Bechtel had in mind.
  • Bechtel makes a sole-source bid, and it is accepted.
  • The water project ends in total failure and Bechtel gets kicked out after extreme polit­ical pres­sure from consumers.
  • Bechtel files a “lost profit” claim according to a pre-negotiated “insur­ance guar­antee” with the World Bank Group (MIGA, see above.)
  • If Bechtel wins its claim, it will be paid off with tax­payer money con­tributed by member countries.
  • Undoubt­edly, any loans from private-sector banks that later turn sour, will be bailed-out with tax­payer funds as well.

This kind of oper­a­tion is brazen stealing (albeit per­haps legally) of funds from everyone in sight: Bolivia, the city of Cochabamba, the people of Cochabamba, U.S. tax­payers. The only ben­e­fi­cia­ries are Bechtel, the com­mer­cial banks and a few cor­rupt politi­cians who got their cus­tomary bribes and kickbacks.

A pen­e­trating ques­tion remains to be answered: When did Bechtel first set their sights on the Bolivia deal? Did Bechtel have a role in sug­gesting or cre­ating the con­di­tion­al­i­ties and Struc­tural Adjust­ments spec­i­fied by the World Bank in the first place? If so, there would be grounds for crim­inal investigation.

It is not likely that the World Bank will tell us, because of its very secre­tive inner work­ings. Even Stiglitz has noted,

The IMF and World Bank still have dis­clo­sure stan­dards far weaker than those of gov­ern­ments in democ­ra­cies like the United States, or Sweden or Canada. They attempt to hide crit­ical reports; it is only their inability to pre­vent leaks that often forces the even­tual dis­clo­sure.“9


The World Bank has received accu­sa­tions of cor­rup­tion for many years. Since the Bank is an inde­pen­dent spe­cial­ized agency of the United Nations and con­sid­ering the old adage, “The fruit doesn’t fall far from the tree”, this might not come as a sur­prise to most. The United Nations has a major and doc­u­mented track record on cor­rup­tion of every con­ceiv­able sort. It would be too sim­plistic to just leave it at that.

In May, 2004, Sen. Richard Lugar (R-Indiana), as Chairman of the For­eign Rela­tions Com­mittee, kicked off the most recent inquiry into cor­rup­tion related to the activ­i­ties of the mul­ti­lat­eral devel­op­ment banks, of which the World Bank is foremost.

The heads of the var­ious devel­op­ment banks were invited to tes­tify (vol­un­tarily) before the Com­mittee. According to Sen. Lugar, James Wolfen­sohn “declined the invi­ta­tion, citing the estab­lished prac­tice of Bank offi­cials not to tes­tify before the leg­is­la­tures of their numerous member countries.”

Wit­nesses before the Com­mittee tes­ti­fied that as much as $100 bil­lion may have been lost to cor­rup­tion in World Bank lending projects.

In Sen. Lugar’s opening remarks, he points out that the entire his­tory of the World Bank is sus­pect, with between 5 per­cent and 25 per­cent of all lending being lost to corruption.

But cor­rup­tion remains a serious problem. Dr. Jef­frey Win­ters of North­western Uni­ver­sity, who will tes­tify before us today, esti­mates that the World Bank ‘has par­tic­i­pated mostly pas­sively in the cor­rup­tion of roughly $100 bil­lion of its loan funds intended for devel­op­ment.’ Other experts esti­mate that between 5 per­cent and 25 per­cent of the $525 bil­lion that the World Bank has lent since 1946 has been mis­used. This is equiv­a­lent to between $26 bil­lion and $130 bil­lion. Even if cor­rup­tion is at the low end of esti­mates, mil­lions of people living in poverty may have lost oppor­tu­ni­ties to improve their health, edu­ca­tion, and eco­nomic con­di­tion.10

One must wonder why World Bank offi­cials have been so sloppy and care­less with tax­payer dol­lars. Even fur­ther, one must wonder if the cor­rup­tion was a neces­sity to achieve the under­lying pur­poses of the Bank, that is, to create bogus and unwanted projects in order to “stim­u­late” trade.

Sen. Lugar con­tinued his opening remarks,

Cor­rup­tion thwarts devel­op­ment efforts in many ways. Bribes can influ­ence impor­tant bank deci­sions on projects and on con­trac­tors. Misuse of funds can inflate project costs, deny needed assis­tance to the poor, and cause projects to fail. Stolen money may prop up dic­ta­tor­ships and finance human rights abuses. More­over, when devel­oping coun­tries lose devel­op­ment bank funds through cor­rup­tion, the tax­payers in those poor coun­tries are still oblig­ated to repay the devel­op­ment banks. So, not only are the impov­er­ished cheated out of devel­op­ment ben­e­fits, they are left to repay the resulting debts to the banks.11

It has not been deter­mined which Bank employees might have taken bribes in exchange for influ­ence, but one can be sure that any deal starting with cor­rup­tion only has one direc­tion to go — down. In the end, it is help­less indi­vid­uals who are left holding the bag. The incurred debts and failed projects just add to the impov­er­ish­ment of already poor people.

This is not to say that charges of cor­rup­tion at the World Bank are modern rev­e­la­tions only. In 1994, marking the 50th anniver­sary of its cre­ation at Bretton Woods, South End Press released “50 Years is Enough: The Case Against the World Bank and the Inter­na­tional Mon­e­tary Fund,.” edited by Kevin Danaher. The book details offi­cial Bank and IMF reports that reveal the same kind of cor­rup­tion back then. In addi­tion, it revealed dif­ferent types of cor­rup­tion, for instance,

“Beyond the wasted money and the envi­ron­mental dev­as­ta­tion, there was an even more sin­ister side to the Bank during the McNa­mara years: the World Bank’s predilec­tion for increasing sup­port to mil­i­tary regimes that tor­tured and mur­dered their sub­jects, some­times imme­di­ately after the vio­lent over­throw of more demo­c­ratic gov­ern­ments. In 1979, Sen­ator James Abourezk (D-South Dakota) denounced the bank on the Senate floor, noting that the Bank was increasing ‘loans to four newly repres­sive gov­ern­ments [Chile, Uruguay, Argentina and the Philip­pines] twice as fast as all others.’ He noted that 15 of the world’s most repres­sive gov­ern­ments would receive a third of all World Bank loan com­mit­ments in 1979, and that Con­gress and the Carter admin­is­tra­tion had cut off bilat­eral aid to four of the 15 — Argentina, Chile, Uruguay and Ethiopia — for fla­grant human rights vio­la­tions. He blasted the Bank’s ‘exces­sive secre­tive­ness’ and reminded his col­leagues that ‘we vote the money, yet we do not know where it goes.’” 12

The text speaks for itself and needs no com­ment. Readers of this report will likely have a better under­standing of where the money went!


This report does not pre­tend to be an exhaus­tive analysis of the World Bank. There are many facets, exam­ples and case studies that could be explored. In fact, many crit­ical and ana­lyt­ical books have been written about the World Bank. The object of this report was to show how the World Bank fits into glob­al­iza­tion as a cen­tral member in the triad of global mon­e­tary powers: The IMF, the BIS and the World Bank.

The World Bank is likely to con­tinue to operate despite any amount of polit­ical flack or public protest. Such is the pat­tern of elitist-dominated insti­tu­tions. Such is the his­tory of the Inter­na­tional Mon­e­tary Fund and the Bank for Inter­na­tional Settlements.

It is suf­fi­cient to con­clude that…

  • of the two archi­tects of the World Bank, one was a top Soviet com­mu­nist agent (Harry Dexter White) and the other was a British ide­alogue (John May­nard Keynes) totally ded­i­cated to glob­alism (See Global Banking: The Inter­na­tional Mon­e­tary Fund for more details on White and Keynes)
  • From the begin­ning, the Bank has been dom­i­nated by inter­na­tional banking inter­ests and mem­bers of the Council on For­eign Rela­tions and later by the Tri­lat­eral Commission
  • the cry of “poverty reduc­tion” is a sham to con­ceal the recy­cling of bil­lions of tax­payer dol­lars, if not tril­lions, into pri­vate hands
  • the cry of “poverty reduc­tion” defuses critics of the Bank as being anti-poor and pro-poverty
  • cor­rup­tion at the World Bank goes back decades, if not all the way to the very beginning


  1. World Bank web site, About Page
  2. The August Review, Global Banking: The Inter­na­tional Mon­e­tary Fund
  3. World Bank web site, IBRD Arti­cles of Agree­ment: Article I
  4. Stiglitz, Glob­al­iza­tion and its Dis­con­tents (Norton, 2002), p. 234
  5. ibid, p. 13
  6. ibid
  7. Wal­lach, Whose Trade Orga­ni­za­tion? (The New Press, 2004), p.125] See also, Bechtel Vs. Bolivia: The Boli­vian Water Revolt
    See also, The New Yorker, letter on Leasing the Rain
    See also, PBS, Leasing the Rain
  8. World Bank web site, Bolivia Country Brief
  9. Stiglitz, op. cit., p. 234
  10. Lugar, U.S. Senate Web­site, $100 bil­lion may have been lost to World Bank Cor­rup­tion, May 13, 2004
  11. ibid.
  12. Hanaher, 50 Years is Enough: The Case Against the World Bank and the Inter­na­tional Mon­e­tary Fund, (South End Press, 1994), p. 10

NOTE: Carl Teichrib, Senior Fellow at World Research Library, con­tributed to this report

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Global Banking: The International Monetary Fund

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The Inter­na­tional Mon­e­tary Fund (IMF) is

a public insti­tu­tion, estab­lished with money pro­vided by tax­payers around the world. This is impor­tant to remember because it does not report directly to either the cit­i­zens who finance it or those whose lives it affects. Rather, it reports to the min­istries of finance and the cen­tral banks of the gov­ern­ments of the world.1

This author­i­ta­tive state­ment comes from Joseph Stiglitz, who served for seven years as chairman of Pres­i­dent Clinton’s Council of Eco­nomic Advisers and as chief econ­o­mist for the World Bank. Stiglitz is a main­stream glob­alist, but still honest enough to have become dis­il­lu­sioned with the cor­rupt prac­tices of the IMF and the World Bank. His first-hand wit­ness is very insightful:

Inter­na­tional bureau­crats — the face­less sym­bols of the world eco­nomic order — are under attack every­where. For­merly uneventful meet­ings of obscure tech­nocrats dis­cussing mun­dane sub­jects such as con­ces­sional loans and trade quotas have now become the scene of raging street bat­tles and huge demon­stra­tions… Vir­tu­ally every major meeting of the Inter­na­tional Mon­e­tary Fund, the World Bank, and the World Trade Orga­ni­za­tion is now the scene of con­flict and tur­moil.2

Why is the IMF an orga­ni­za­tion that people love to hate? This report will hope­fully shed some light on the subject.

IMF Begin­nings

According to its own lit­er­a­ture, the Inter­na­tional Mon­e­tary Fund (IMF) was “estab­lished to pro­mote inter­na­tional mon­e­tary coop­er­a­tion, exchange sta­bility, and orderly exchange arrange­ments; to foster eco­nomic growth and high levels of employ­ment; and to pro­vide tem­po­rary finan­cial assis­tance to coun­tries to help ease bal­ance of pay­ments adjustment.”

This innocuous descrip­tion hardly describes the crit­ical func­tions that the IMF pro­vides to the process of glob­al­iza­tion. Indeed, the IMF is one of the leading agents of change in the global economy and global governance.

The IMF was actu­ally cre­ated in December, 1945 when the first 29 member nations signed its Arti­cles of Agree­ment, and began oper­a­tions on March 1, 1947. (Note: there are 184 member coun­tries today.)

The autho­riza­tion for the IMF came a few months ear­lier at the famous Bretton Woods con­fer­ence of July 1944.

On the heels of World War II, the Bretton Woods Agree­ments estab­lished a system of pro­ce­dures and rules, together with insti­tu­tions to enforce them, that called for member coun­tries to adopt a mon­e­tary policy that was fixed in terms of gold. Although the Bretton Woods system utterly col­lapsed in 1971 after Pres­i­dent Nixon sus­pended con­vert­ibility of the dollar into gold, the insti­tu­tions cre­ated in 1944 con­tinued on uninterrupted.

While any country may become a member of the IMF, the road to mem­ber­ship is note­worthy. When appli­ca­tion for mem­ber­ship is sub­mitted to the IMF’s exec­u­tive board, a “Mem­ber­ship Res­o­lu­tion” is made to the Board of Gov­er­nors that covers the member’s quota, sub­scrip­tion and voting rights. If approved by the Board of Gov­er­nors, the appli­cant must amend its own laws in order to permit it to sign the IMF’s Arti­cles of Agree­ment and to oth­er­wise ful­fill the oblig­a­tions required of mem­bers. In other words, the member sub­or­di­nates a cer­tain part of its legal sov­er­eignty to the IMF. This sets the stage for the IMF to take an active role in the affairs of the member country.

The IMF is viewed by some as a global orga­ni­za­tion, but it should be noted that the U.S. has 18.25 per­cent of the vote on the IMF board, or three times more than any other member. In addi­tion, it is based in Wash­ington, DC.

IMF Founders: Harry Dexter White and John May­nard Keynes

The prin­cipal archi­tects of the Bretton Woods system, and hence the IMF, were Harry Dexter White and John May­nard White and Keynes Keynes.

Keynes was an Eng­lish econ­o­mist who has had an enor­mous impact on global eco­nomic thinking despite the fact that many of his eco­nomic the­o­ries have been thor­oughly dis­cred­ited. During WWII, he had called for the dis­so­lu­tion of the Bank for Inter­na­tional Set­tle­ments because of its dom­i­na­tion by Nazi oper­a­tives. After WWII how­ever, when dis­banding the BIS was actu­ally man­dated by Con­gress, he argued against the dis­so­lu­tion pending the cre­ation of the IMF and World Bank. His latter argu­ment was the often and over-used ratio­nale “If we close it down too soon, the world finan­cial system will col­lapse.” Keynes glob­alist instincts led him to call for a world cur­rency, called Bancor, that would be man­aged by a global cen­tral bank. This idea flatly failed.

Harry Dexter White was also con­sid­ered to be a bril­liant econ­o­mist, and was appointed in as 1942 assis­tant to Henry Mor­gen­thau, Sec­re­tary of the Trea­sury. He remained Morgenthau’s most trusted assis­tant throughout his term, and argued ver­bosely against the Bank for Inter­na­tional Set­tle­ments. Like Mor­gen­thau and most all Amer­i­cans, White was strongly anti-Nazi. White, how­ever, was NOT pro-American.3

On October 16, 1950, an FBI memo iden­ti­fied White as a Soviet spy whose code name was Jurist.

Fol­lowing the col­lapse of the Soviet Union in 1991, for­merly secret intel­li­gence doc­u­ments were made public and shined new light on the matter. White was not just a spy among the 50-odd iden­ti­fied Amer­ican spies, he was likely the top spy for the USSR in the U.S.

In 1999, the Hoover Digest wrote:

In their new book Venona: Decoding Soviet Espi­onage in America, Harvey Klehr and John Haynes argue that of some fifty Amer­i­cans known to have spied for Stalin (many more have never been iden­ti­fied), Harry Dexter White was prob­ably the most impor­tant agent.

The Venona inter­cepts revealed that at the 1945 con­fer­ence in San Fran­cisco founding the United Nations, White met with a Soviet KGB officer and informed him of the U.S. nego­ti­ating posi­tion on a number of issues. (White’s KGB code name was at var­ious times “Lawyer,” “Richard,” and “Reed.”) Another KGB mes­sage noted that White was thinking of resigning his high Trea­sury post and entering the pri­vate sector because he needed more income to pay one of his daughter’s col­lege tuition. White was regarded as so impor­tant to the Kremlin that his han­dlers pro­posed to pay the tuition so White could remain at Trea­sury.4

Had White lived beyond 1946, he likely would have been pros­e­cuted for high treason against the U.S., the penalty for which is execution.

Such is the moral fiber and intel­lec­tual cre­den­tials of the cre­ators of the IMF: One was a Eng­lish ide­o­logue econ­o­mist with a markedly global bent, and the other a cor­rupt and high-ranking U.S. gov­ern­ment offi­cial who was a top Soviet spy.

Trying to figure out where these two really stood in the eyes of the core global elite has more twists than a Sher­lock Holmes mys­tery story. It is more easily per­ceived by the end result — the suc­cessful cre­ation of the IMF and the World Bank, both of which were heartily endorsed by the likes of J.P. Morgan and Chase Bank, among other inter­na­tional bankers.

Posi­tioning: IMF vs. the World Bank and the BIS

There is a triad of mon­e­tary powers that rule global money oper­a­tions: the IMF, the World Bank and the Bank for Inter­na­tional Set­tle­ments. Although they work together very closely, it is nec­es­sary to see which part each plays in the glob­al­iza­tion process.

The Inter­na­tional Mon­e­tary Fund (IMF) and the World Bank interact only with gov­ern­ments whereas the BIS inter­acts only with other cen­tral banks. The IMF loans money to national gov­ern­ments, and often these coun­tries are in some kind of fiscal or mon­e­tary crisis. Fur­ther­more, the IMF raises money by receiving “quota” con­tri­bu­tions from its 184 member coun­tries. Even though the member coun­tries may borrow money to make their quota con­tri­bu­tions, it is, in reality, all tax-payer money.5

The World Bank also lends money to gov­ern­ments and has 184 member coun­tries. Within the World Bank are two sep­a­rate enti­ties, the Inter­na­tional Bank for Recon­struc­tion and Devel­op­ment (IBRD) and the Inter­na­tional Devel­op­ment Asso­ci­a­tion (IDA). The IBRD focuses on middle income and credit-worthy poor coun­tries, while the IDA focuses on the poorest of nations. The World Bank is self-sufficient for internal oper­a­tions, bor­rowing money by direct lending from banks and by floating bond issues, and then loaning this money through IBRD and IDA to trou­bled coun­tries.6

The BIS, as cen­tral bank to the other cen­tral banks, facil­i­tates the move­ment of money. They are well-known for issuing “bridge loans” to cen­tral banks in coun­tries where IMF or World Bank money is pledged but has not yet been deliv­ered. These bridge loans are then repaid by the respec­tive gov­ern­ments when they receive the funds that had been promised by the IMF or World Bank.7

The IMF has become known as the “lender of last resort.” When a country starts to crumble because of prob­lems with trade deficits or exces­sive debt bur­dens, the IMF can step in and bail it out. If the country were a patient in a hos­pital, the treat­ment would include a trans­fu­sion and other life sup­port mea­sures to just keep the patient alive — full recovery is not really in view, nor has it ever happened.

One must remember that rescue oper­a­tions would not be nec­es­sary if it were not for the cen­tral banks, inter­na­tional banks, the IMF and the World Bank leading these coun­tries into debts they cannot pos­sibly ever repay in the first place.

The Pur­pose and Struc­ture of the IMF

According to the IMF pam­phlet, A Global Insti­tu­tion: The IMF’s Role at a Glance,

The IMF is the cen­tral insti­tu­tion of the inter­na­tional mon­e­tary system—the system of inter­na­tional pay­ments and exchange rates among national cur­ren­cies that enables busi­ness to take place between countries.

It aims to pre­vent crises in the system by encour­aging coun­tries to adopt sound eco­nomic poli­cies; it is also—as its name sug­gests—a fund that can be tapped by mem­bers needing tem­po­rary financing to address bal­ance of pay­ments problems.

The IMF works for global pros­perity by promoting

  • the bal­anced expan­sion of world trade,
  • sta­bility of exchange rates,
  • avoid­ance of com­pet­i­tive deval­u­a­tions, and
  • orderly cor­rec­tion of bal­ance of pay­ments problems

The IMF’s statu­tory pur­poses include pro­moting the bal­anced expan­sion of world trade, the sta­bility of exchange rates, the avoid­ance of com­pet­i­tive cur­rency deval­u­a­tions, and the orderly cor­rec­tion of a country’s bal­ance of pay­ments prob­lems.8 [Note: Emphasis is theirs]

Although the IMF has changed in sig­nif­i­cant ways over the years, their cur­rent lit­er­a­ture makes it quite clear that the statu­tory pur­poses of the IMF today are the same as when they were for­mu­lated in 1944:

i. To pro­mote inter­na­tional mon­e­tary coop­er­a­tion through a per­ma­nent insti­tu­tion which pro­vides the machinery for con­sul­ta­tion and col­lab­o­ra­tion on inter­na­tional mon­e­tary problems.

ii. To facil­i­tate the expan­sion and bal­anced growth of inter­na­tional trade, and to con­tribute thereby to the pro­mo­tion and main­te­nance of high levels of employ­ment and real income and to the devel­op­ment of the pro­duc­tive resources of all mem­bers as pri­mary objec­tives of eco­nomic policy.

iii. To pro­mote exchange sta­bility, to main­tain orderly exchange arrange­ments among mem­bers, and to avoid com­pet­i­tive exchange depreciation.

iv. To assist in the estab­lish­ment of a mul­ti­lat­eral system of pay­ments in respect of cur­rent trans­ac­tions between mem­bers and in the elim­i­na­tion of for­eign exchange restric­tions which hamper the growth of world trade.

v. To give con­fi­dence to mem­bers by making the gen­eral resources of the Fund tem­porarily avail­able to them under ade­quate safe­guards, thus pro­viding them with oppor­tu­nity to cor­rect mal­ad­just­ments in their bal­ance of pay­ments without resorting to mea­sures destruc­tive of national or inter­na­tional prosperity.

vi. In accor­dance with the above, to shorten the dura­tion and lessen the degree of dis­e­qui­lib­rium in the inter­na­tional bal­ances of pay­ments of mem­bers.8

As lofty as this might sound, one can inter­pret mean­ings by matching up its actions. For instance, “con­sul­ta­tion and col­lab­o­ra­tion” often means “we will enforce our poli­cies on your country” and “ade­quate safe­guards” mean the “col­lat­eral and con­ces­sions we demand in return for bor­rowing our money.”

The IMF has been likened to an inter­na­tional credit union, where mem­bers who con­tribute reserves have the oppor­tu­nity to borrow as the need may arise. The IMF is fur­ther able to raise funds by bor­rowing from member coun­tries or from pri­vate mar­kets. The IMF claims to have not raised funds from pri­vate mar­kets as of yet.

This report will examine four aspects of IMF oper­a­tions: Cur­rency and mon­e­tary roles, moral hazard, bailout oper­a­tions during cur­rency crisis and conditionalities.

Cur­rency, Mon­e­tary Roles and Gold

Two years prior to the col­lapse of the Bretton Woods system, the IMF cre­ated a reserve mech­a­nism called the Spe­cial Drawing Right, or SDR.

The SDR is not a cur­rency, nor is it a lia­bility of the IMF, rather it is pri­marily a poten­tial claim on freely usable cur­ren­cies. Freely usable cur­ren­cies, as deter­mined by the IMF, are the U.S. dollar, euro, Japanese yen, and pound ster­ling.9

Since the value of the com­po­nent cur­ren­cies change rel­a­tive to each other, the value of the SDR changes rel­a­tive to each com­po­nent. As of December 29, 2005, one SDR was valued at $1.4291. The SDR interest rate was pegged at 3.03 percent.

There should be no mis­take in the readers mind that the IMF cor­rectly views itself as the “cur­rency con­troller” for all coun­tries who have hitched a ride on the glob­al­iza­tion express. According to an offi­cial publication,

The IMF is there­fore con­cerned not only with the prob­lems of indi­vidual coun­tries but also with the working of the inter­na­tional mon­e­tary system as a whole. Its activ­i­ties are aimed at pro­moting poli­cies and strate­gies through which its mem­bers can work together to ensure a stable world finan­cial system and sus­tain­able eco­nomic growth. The IMF pro­vides a forum for inter­na­tional mon­e­tary coop­er­a­tion, and thus for an orderly evo­lu­tion of the system, and it sub­jects a wide area of inter­na­tional mon­e­tary affairs to the covenants of law, moral sua­sion, and under­stand­ings.10

The IMF works closely with the Bank for Inter­na­tional Set­tle­ments in pro­moting smooth cur­rency mar­kets, exchange rates, mon­e­tary policy, etc. The BIS, as cen­tral bank for cen­tral banks, more likely tells the IMF what to do rather than vice versa. This notion is bol­stered by the fact that on March 10, 2003, the BIS adopted the SDR as its offi­cial reserve asset, aban­doning the 1930 gold Swiss franc altogether.

This action removed all restraint from the cre­ation of paper money in the world. In other words, gold backs no national cur­rency, leaving the cen­tral banks a wide-open field to create money as they alone see fit. Remember, that almost all the cen­tral banks in the world are pri­vately– or jointly-held enti­ties, with an exclu­sive fran­chise to arrange loans for their respec­tive host countries.

This is not to say that gold has no cur­rent or future role in inter­na­tional money. Under Bretton Woods, gold was the cen­tral reserve asset, and orig­inal sub­scribers con­tributed large amounts of gold bul­lion. Gold was aban­doned com­pletely in 1971, but the IMF con­tinues to own and hold gold into the present: 103.4 mil­lion ounces (3,217 metric tons) with a cur­rent market value of about $45 bil­lion. This is no small amount of gold!

The U.S. Trea­sury claims to have 261.5 mil­lion ounces of gold, but there has never been an offi­cial, phys­ical audit of Fort Knox and other repos­i­to­ries to back up this claim. By com­par­ison, Great Britain claims to own 228 mil­lion ounces of gold.

The BIS, IMF and major cen­tral banks (notably the New York Fed­eral Reserve Bank and the Bank of Eng­land) have col­lec­tively and method­i­cally sold por­tions of their gold stocks while claiming that “gold is dead”. This manip­u­la­tion has tended to sup­press the price of gold since the early 1970’s. Antony Sutton’s 1979 book, The War on Gold, dealt defin­i­tively on this matter. More recently, the group Gold Anti-Trust Action Com­mittee (GATA) was founded in 1999 with essen­tially the same argu­ment: gold has been unfairly manipulated.

Suf­fice it to say that if so many orga­ni­za­tions have con­spired to keep “gold as money” out of the public mind, then gold is not dead but just tem­porarily on the shelf. When fiat cur­ren­cies have been drained dry by the global cartel, gold will likely be brought back by the same people who told us it was for­ever a dead issue.

Moral Hazard

This is a tech­nical legal term with a pre­cise meaning, but it easily under­stood. Moral hazard is the term given to the increased risk of immoral behavior resulting in a neg­a­tive out­come (the “hazard”), because the per­sons who increased the risk poten­tial in the first place either suffer no con­se­quences, or ben­efit from it.

While the IMF is rid­dled with spe­cific instances of moral hazard, its very exis­tence is a moral hazard.

The emi­nent econ­o­mist Hans F. Sennholz (Grove City Col­lege) sums up the IMF oper­a­tions this way:

The IMF actu­ally encour­ages bankers and investors to take impru­dent risk by pro­viding tax­payer funds to bail them out. It encour­ages cor­rupt gov­ern­ments to engage in boom and bust poli­cies by coming to their rescue when­ever they run out of dollar reserves.11

The money shuffle goes like this: The World Bank and the BIS develop mar­kets for credit by enticing gov­ern­ments to borrow money. They (and the pri­vate banks along side of them) are encour­aged to make risky loans because they know that IMF stands ready to rescue coun­tries with defaulting loans — the moral hazard. As the usury interest builds up and finally threatens the entire finan­cial sta­bility of the affected country, the IMF steps in with a “bail out” oper­a­tion. Defaulted loans are replaced or restruc­tured with (tax­payer pro­vided) IMF loans. Addi­tional money is loaned to repay back interest and allow for fur­ther expan­sion of the economy. In the end, the des­perate country is even fur­ther in debt and is now sad­dled with all kinds of addi­tional restric­tions and con­di­tions. Plus, under the phony aegis of “poverty reduc­tion”, cit­i­zens are invari­ably left worse off than in the beginning.


This is also a tech­nical term that has a spe­cific meaning: A con­di­tion­ality is a con­di­tion attached to a loan or a debt relief granted by the IMF or the World Bank. Con­di­tion­al­i­ties are typ­i­cally non-financial in nature, such as requiring a country to pri­va­tize or dereg­u­late key public services.

Con­di­tion­al­i­ties are most sig­nif­i­cant within so-called Struc­tural Adjust­ment Pro­grams (SAP) cre­ated by the IMF. Nations are required to imple­ment or promise to imple­ment the attached con­di­tion­al­i­ties prior to approval of the loan.

The fallout of con­di­tion­al­i­ties is notable. The glob­alist think-tank For­eign Policy in Focus pub­lished IMF Bailouts and Global Finan­cial Flows by Dr. David Felix in 1998. The report’s intro­duc­tion makes these key points:

  • The IMF has been trans­formed into an instru­ment for prying open third world mar­kets to for­eign cap­ital and for col­lecting for­eign debts.
  • This trans­for­ma­tion vio­lates the IMF charter in spirit and sub­stance, and has increased the costs to coun­tries requesting IMF finan­cial aid.
  • The IMF’s oper­a­tional crisis stems from growing debtor resis­tance to its policy demands, soaring fiscal costs, and accu­mu­lating evi­dence of IMF policy failure.12

The gen­eral public has not seen such “internal crit­i­cism” of the IMF. If an out­sider were to make the very same crit­i­cism, he would be ostra­cized for being part of the rad­ical fringe.

So, con­di­tion­al­i­ties are instru­ments of forcing open mar­kets in third-world coun­tries, and of col­lecting defaulted debts owed by public and pri­vate orga­ni­za­tions. The accu­mu­lating result of con­di­tion­al­i­ties is increasing resis­tance to such demands, bor­dering on hatred in many coun­tries. The coun­tries who can least afford it are sad­dled with soaring costs, addi­tional debt and reduced national sovereignty.

Per­haps the most author­i­ta­tive report on this topic was pro­duced in 2002 by Axel Dreher of the Ham­burg Insti­tute of Inter­na­tional Eco­nomics enti­tled The Devel­op­ment and Imple­men­ta­tion of IMF and World Bank Conditionality.

Dreher notes that there was no con­sid­er­a­tion of con­di­tion­al­i­ties at the founding of the IMF, but rather they were grad­u­ally added in increasing num­bers as the years passed and mostly by U.S. banking inter­ests.13 Con­di­tion­al­i­ties are arbi­trary, unreg­u­lated, and imposed in varying degrees on dif­ferent coun­tries according to the whims of the nego­tia­tors. The recip­ient coun­tries have little, if any, bar­gaining power.

The August Review has observed sev­eral times that 1973, with the cre­ation of the Tri­lat­eral Com­mis­sion, was a piv­otal year in the stam­pede to glob­al­iza­tion. It is no sur­prise then that con­di­tion­al­i­ties became a stan­dard busi­ness prac­tice in 1974 with the intro­duc­tion of the Extended Fund Facility (EFF).14 EFF cre­ated lines of credit, or “credit tranches”, that could be drawn on as needed by a trou­bled country, thus cre­ating addi­tional moral haz­ards as well.

Dreher also points out the tight coor­di­na­tion with the World Bank:

The reforms under IMF pro­grams have mainly been designed by World Bank econ­o­mists. Fund con­di­tion­ality often was sup­portive of mea­sures con­tained in Bank sup­ported public enter­prise reform oper­a­tions. The selec­tion of public enter­prises to be reformed as well as the modal­i­ties and time table was devel­oped by the Bank as well.15

So, we see that the IMF does not act alone in the appli­ca­tion of con­di­tion­al­i­ties and in some cases, it is point­edly driven by the World Bank.

Dreher’s metic­u­lous research uncov­ered another inter­esting sta­tistic: The most fre­quent con­di­tion included is bank pri­va­ti­za­tion — included in 35 per­cent of the pro­grams ana­lyzed!16 Inter­na­tional bankers have always had dis­dain for banking oper­a­tions run by gov­ern­ments instead of by pri­vate or cor­po­rate own­er­ship. Thus, they have used the IMF and World Bank to force pri­va­ti­za­tion of what remains in gov­ern­ment hands in the third-world.

If all of this was not dis­turbing enough, Dreher informs us that there are direct con­nec­tions between con­di­tion­al­i­ties imposed and var­ious pri­vate banks who work in con­cert with the IMF and World Bank:

Since pri­vate cred­i­tors were willing to lend fur­ther only if IMF pro­grams were in effect, the Fund’s leverage was enhanced… since for crisis res­o­lu­tion some­times more money is needed than can be pro­vided by the IFIs, IMF and World Bank depend on these pri­vate cred­i­tors who should there­fore be able to press for con­di­tions which lie in their interest.17

With the IMF, World Bank and other inter­na­tional banks forcing gov­ern­ments to run their coun­tries in ways not of their choosing, and with the United States viewed as the pri­mary driver of these orga­ni­za­tions, it is no wonder that the third-world musters such intense hatred for the U.S. and for the self-interested glob­al­iza­tion it exports wher­ever pos­sible. The glob­al­iza­tion process is most often anti-democratic and com­pletely inef­fec­tive at accom­plishing it’s lofty stated goal of poverty reduction.

It should be plainly evi­dent by now that the “can opener” for glob­al­iza­tion to take place is the power of money. Bor­rowed money enslaves the bor­rower, and puts him at the mercy of the lender. When Pres­i­dent Bill Clinton finally acknowl­edged the error of his ways during his affair with Monica Lewinski, he stated that it was for the absolutely worst of rea­sons: “Because I could.” Why do these global finan­cial orga­ni­za­tions take such advan­tage of those whom they sys­tem­at­i­cally put in jeop­ardy? Because they can!

IMF Bailout of Brazil

The 1998 the Brazil cur­rency crisis was caused by that country’s inability to pay inor­di­nate accu­mu­lated interest on loans made over a pro­tracted period of time. These loans were extended by banks like Cit­i­group, J.P. Morgan Chase and Fleet­Boston, and they stood to lose a huge amount of money.

The IMF, along with the World Bank and the U.S., bailed out Brazil with a $41.5 bil­lion package that saved Brazil, its cur­rency and, not inci­den­tally, cer­tain pri­vate banks.

Con­gressman Bernard Sanders (I-VT), ranking member of the Inter­na­tional Mon­e­tary Policy and Trade Sub­com­mittee, blew the whistle on this money laun­dering oper­a­tion. Sander’s entire con­gres­sional press release is worth reading:

IMF Bailout for Brazil is Wind­fall to Banks, Dis­aster for US Tax­payers Says Sanders

BURLINGTON, VERMONT — August 15 — Con­gressman Bernard Sanders (I-VT), the Ranking Member of the Inter­na­tional Mon­e­tary Policy and Trade Sub­com­mittee, today called for an imme­diate Con­gres­sional inves­ti­ga­tion of the recent $30 bil­lion Inter­na­tional Mon­e­tary Fund (IMF) bailout of Brazil.

Sanders, who is strongly opposed to the bailout and con­siders it cor­po­rate wel­fare, wants Con­gress to find out why U.S. tax­payers are being asked to pro­vide bil­lions of dol­lars to Brazil and how much of this money will be fun­neled to U.S. banks such as Cit­i­group, Fleet­Boston and J.P. Morgan Chase. These banks have about $25.6 bil­lion in out­standing loans to Brazilian bor­rowers. U.S. tax­payers cur­rently fund the IMF through a $37 bil­lion line of credit.

Sanders said, “At a time when we have a $6 tril­lion national debt, a growing fed­eral deficit, and an increasing number of unmet social needs for our vet­erans, seniors, and chil­dren, it is unac­cept­able that bil­lions of U.S. tax­payer dol­lars are being sent to the IMF to bailout Brazil.”

“This money is not going to sig­nif­i­cantly help the poor people of that country. The real win­ners in this sit­u­a­tion are the large, prof­itable U.S. banks such as Cit­i­group that have made bil­lions of dol­lars in risky invest­ments in Brazil and now want to make sure their invest­ments are repaid. This bailout rep­re­sents an egre­gious form of cor­po­rate wel­fare that must be put to an end. Inter­est­ingly, these banks have made sub­stan­tial cam­paign con­tri­bu­tions to both polit­ical par­ties,” the Con­gressman added.

Sanders noted that the neo-liberal poli­cies of the IMF devel­oped in the 1980’s pushing coun­tries towards unfet­tered free trade, pri­va­ti­za­tion, and slashing social safety nets has been a dis­aster for Latin America and has con­tributed to increased global poverty throughout the world. At the same time that Latin America coun­tries such as Brazil and Argentina fol­lowed these neo-liberal dic­tates imposed by the IMF, from 1980 – 2000, per capita income in Latin America grew at only one-tenth the rate of the pre­vious two decades.

Sanders con­tinued, “The poli­cies of the IMF over the past 20 years advo­cating unfet­tered free trade, pri­va­tizing industry, dereg­u­la­tion and slashing gov­ern­ment invest­ments in health, edu­ca­tion, and pen­sions has been a com­plete failure for low income and middle class fam­i­lies in the devel­oping world and in the United States . Clearly, these poli­cies have only helped cor­po­ra­tions in their con­stant search for the cheapest labor and weakest envi­ron­mental reg­u­la­tions. Con­gress must work on a new global policy that pro­tects workers, increases living stan­dards and improves the envi­ron­ment.” [Emphasis added]

IMF Bailout of Asia

The Asian cur­rency crisis came to a head in 1998, and the IMF was on the spot for a mas­sive bailout. Vocal critics of the IMF at that time included George P. Schultz (member of the Tri­lat­eral Com­mis­sion), William E. Simon (Sec­re­tary of the Trea­sury under Nixon and Ford) and Walter B. Wriston (former chairman of Citigroup/Citibank and member of the Council on For­eign Rela­tions). They jointly wrote Abolish the IMF? for the Hoover Insti­tu­tion, where Shultz is also a dis­tin­guished fellow. The article states:

The $118 bil­lion Asian bailout, which may rise to as much as $160 bil­lion, is by far the largest ever under­taken by the IMF. A dis­tant second was the 1995 Mex­ican bailout, which involved some $30 bil­lion in loans, mostly from the IMF and the U.S. Trea­sury. The IMF’s defenders often tout the Mex­ican bailout as a suc­cess because the Mex­ican gov­ern­ment repaid the loans on schedule. But the Mex­ican people suf­fered a mas­sive decline in their stan­dard of living as a result of that crisis. As is typ­ical when the IMF inter­venes, the gov­ern­ments and the lenders were res­cued but not the people.18 [Emphasis added]

Their scathing attack con­tinues throughout the article, and con­cludes with

The IMF is inef­fec­tive, unnec­es­sary, and obso­lete. We do not need another IMF, as Mr. (George) Soros rec­om­mends. Once the Asian crisis is over, we should abolish the one we have.18

It’s inter­esting that these core mem­bers of the global elite are throwing stones at their own insti­tu­tion. What is out­ra­geous is that they are com­pletely side-stepping their own per­sonal cul­pa­bility for having used it to drive glob­al­iza­tion with all of its ill side-effects. The fact that they suc­cinctly describe the damage done by the IMF clearly dis­penses their typ­ical claim of “igno­rance.” Are they set­ting the stage to dis­band the IMF in favor of another, more pow­erful mon­e­tary authority? Time will tell.

Argentina: A Case Study of Privatization

In 2001, the IMF handed a bailout package to Argentina, valued at $8 bil­lion. The major ben­e­fi­cia­ries were the Euro­pean mega­banks, which held about 75 per­cent of the country’s for­eign debt. The money river flowed like this: IMF gives $8 bil­lion (about $1.6 bil­lion of which was tax money col­lected from hard working Amer­i­cans) to Argentina; Argentina buys U.S. Trea­sury bills (U.S. gets the dol­lars back after being “mon­e­tized”); Argentina delivers Trea­sury Bills to cred­itor banks who gra­ciously agree to retire their worth­less Argen­tinian bonds.

Less than a decade ear­lier, the IMF and the World Bank backed Argentina in the largest water pri­va­ti­za­tion project in the world. In 1993, Aquas Argentinas was formed between Argentina’s water authority and a con­sor­tium that included the Suez group from France (largest pri­vate water com­pany in the world) and Aquas de Barcelona of Spain. The new com­pany cov­ered a region pop­u­lated by over 10 mil­lion inhabitants.

Now, after 10 years of higher water rates, decreased quality of water and sewage treat­ment, and neglected infra­struc­ture improve­ments, the con­sor­tium is breaking its 30-year con­tract and pulling out. Bit­ter­ness between Aqua and gov­ern­ment offi­cials runs deep because of broken promises and polit­ical backlash.

The after­math of Aqua Argentina is recorded in the November 21, 2005 online edi­tion of the Guardian:

More than 1 mil­lion res­i­dents in the rural Argen­tinian province of Santa Fe are facing an anx­ious wait to dis­cover if their taps will still flow or their toi­lets flush over the next few weeks.

Since 1995, the province has had its water supply and sewage ser­vices pro­vided by a con­sor­tium led by the French multi­na­tional Suez; now the giant utility wants out, and plans to leave within the month.

The deci­sion, which fol­lows the high-profile col­lapse of other water pri­vati­sa­tion schemes in coun­tries including Tan­zania, Puerto Rico, the Philip­pines and Bolivia, has again raised ques­tions about the via­bility of pri­vatising util­i­ties in the devel­oping world.

Suez is also preparing an early depar­ture from its for­merly lucra­tive con­ces­sion in the Argen­tine cap­ital, Buenos Aires. The deal, struck in 1993, marked the largest water pri­vati­sa­tion project in the world.

In both cases, the French utility is ter­mi­nating its 30-year con­tract a third of the way through. Suez cannot get the con­ces­sions to turn a profit — at least not under the terms of its cur­rent agreements.

The French utility giant snapped up both ser­vice agree­ments in the mid-1990s when Argentina was under­going a mas­sive reform of its public sector, largely at the behest of the World Bank and other lending agen­cies.19

Aqua Argentina milked the market as long as it could, and then simply bailed out. And, why not? The profit dried up and it’s not their country!

Global sta­tis­tics show that some 460 mil­lion people around the world must rely on pri­vate water cor­po­ra­tions like Aqua Argentina, com­pared to only 51 mil­lion in 1990. The IMF (and World Bank) lev­ered the extra 400 mil­lion people into pri­va­tized con­tracts with water mega-companies from Europe and the U.S. Now that the cream has been skimmed off the top of the milk, these same com­pa­nies are excusing them­selves from the party — leaving a sham­bles, angry cus­tomers and inca­pable gov­ern­ments still sad­dled with the bil­lions of dol­lars of debt incurred (at their insis­tence) to start pri­va­ti­za­tion in the first place.

[Note: In Feb­ruary 2003, CBC News in Canada pro­duced an in depth report Water for Profit: how multi­na­tionals are taking con­trol of a public resource that included fea­tures and seg­ments that were deliv­ered across five days of broad­casting.]20


This report does not pre­tend to be an exhaus­tive analysis of the IMF. There are many facets, exam­ples and case studies that could be explored. In fact, many crit­ical analysis books have been written about the IMF. The object of this report was to show gen­er­ally how the IMF fits into glob­al­iza­tion as a crit­ical member in the triad of global mon­e­tary powers: The IMF, the BIS and the World Bank.

Despite even estab­lish­ment calls for the dis­so­lu­tion of the IMF, it con­tinues to operate unhin­dered and with vir­tu­ally no account­ability. This is rem­i­nis­cent of the BIS con­tin­uing to operate even after its dis­so­lu­tion was offi­cially man­dated after WWII.

For the pur­pose of this report, it is suf­fi­cient to con­clude that…

  • of the two founders of the IMF, one was an out­right traitor to the U.S. and the other was a British cit­izen totally ded­i­cated to globalism
  • the IMF, in coor­di­na­tion with the BIS, tightly con­trols cur­ren­cies and for­eign exchange rates in the global economy
  • the IMF is a channel for tax­payer money to be used to bail out pri­vate banks who made ques­tion­able loans to coun­tries already sad­dled with too much debt
  • the IMF uses con­di­tion­al­i­ties is a lever to force pri­va­ti­za­tion of key and basic indus­tries, such as banking, water, sewer and utilities
  • con­di­tion­al­i­ties are often struc­tured with help from the pri­vate banks who loan along­side of the IMF
  • the poli­cies of pri­va­ti­za­tion accom­plish just the oppo­site of what was promised
  • the global elite are nei­ther igno­rant nor repen­tant of the dis­tress the IMF has caused so many nations in the third-world
  • when the public heat gets too hot, the global elite simply join the critics (thereby shun­ning all blame) while qui­etly cre­ating new ini­tia­tives that allow them to get on with busi­ness — that is, their busi­ness!


  1. Stiglitz, Glob­al­iza­tion and its Dis­con­tents (Norton, 2002), p.12
  2. ibid, p. 3
  3. Ladd, FBI Office Mem­o­randum, October 16, 1950
  4. Beichman, Guilty as Charged, Hoover Digest 1999 No. 2
  5. IMF web site, http://www.imf.org
  6. World Bank web site. http://www.WorldBank.org
  7. Baker, The Bank for Inter­na­tional Set­tle­ments: Evo­lu­tion and Eval­u­a­tion, (Quorum, 2002), p. 141 – 142
  8. IMF, What is the Inter­na­tional Mon­e­tary Fund?, 2004
  9. IMF, Overview of the IMF as a Finan­cial Insti­tu­tion, p.11
  10. ibid, p. 3
  11. Sennholz, IMF Bailouts Make Mat­ters Worse
  12. Felix, IMF Bailouts and Global Finan­cial Flows, Vol. 3, No. 3, April 1998
  13. Dreher, The Devel­op­ment and Imple­men­ta­tion of IMF and World Bank Con­di­tion­ality, Ham­burg Insti­tute of Inter­na­tional Economics
  14. ibid, p. 9
  15. ibid, p. 17
  16. ibid, p. 18
  17. ibid, p. 21
  18. Shultz, et. al, Who Needs the IMF?, Hoover Insti­tu­tion Public Policy Inquiry on the IMF
  19. The trickle-away effect, The Guardian, November 21, 2005
  20. CBC News, Water for Profit: how multi­na­tionals are taking con­trol of a public resource
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What is Globalization?

It is the col­lective effect of pur­poseful and amoral manip­u­la­tion that seeks to cen­tralize eco­nomic, polit­ical, tech­no­log­ical and soci­etal forces in order to accrue max­imum profit and polit­ical power to global banks, global cor­po­ra­tions and the elit­ists who run them. It is rapidly moving toward an full and final imple­men­ta­tion of Technocracy.

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What is the Tri­lat­eral Commission?

Founded in 1973 by David Rock­e­feller and Zbig­niew Brzezinski, the Com­mis­sion set out to create a “New Inter­na­tional Eco­nomic Order”, namely, Tech­noc­racy. The orig­inal mem­ber­ship con­sisted of elit­ists (bankers, politi­cians, aca­d­e­mics, indus­tri­al­ists) from Japan, North America and Europe. Col­lec­tively, they have dom­i­nated and con­trolled trade and eco­nomic policy in their respec­tive coun­tries since at least 1974.

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What is Technocracy?

Tech­noc­racy is a move­ment started in the 1930’s by engi­neers, sci­en­tists and tech­ni­cians that pro­posed the replace­ment of cap­i­talism with an energy-based economy. Orig­i­nally envi­sioned for North America only, it is now being applied on a global basis. Authors Aldous Huxley and George Orwell believed that Tech­noc­racy would result in a Sci­en­tific Dic­ta­tor­ship, as reflected in their books, “Brave New World” and “1984″.

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What is Smart Grid?

Smart Grid is the national and global imple­men­ta­tion of dig­ital and Wi-fi enabled power meters that enable com­mu­ni­ca­tion between the appli­ances in your home or busi­ness, with the power provider. This pro­vides con­trol over your appli­ances and your usage of elec­tricity, gas and water.

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Who is M. King Hubbert?

Hub­bert was a geo-physicist who co-founded Tech­noc­racy, Inc. in 1932 and authored its Tech­noc­racy Study Course. In 1954, he became the cre­ator of the “Peak Oil Theory”, or “Hubbert’s Peak” which the­o­rized that the world was rapidly run­ning out of carbon-based fuels. Hub­bert is widely con­sid­ered as a “founding father” of the global warming and green movements.

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Who is R. Buck­min­ster Fuller?

A pio­neer in global eco­log­ical theory, Fuller (1895 – 1984) was the first to sug­gest the devel­op­ment of a Global Energy Grid that is today known as the Global Smart Grid. Fuller is widely con­sid­ered to be a “founding father” of the global green move­ment, including global warming, Sus­tain­able Devel­op­ment, Agenda 21, etc.

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Is the Venus Project like Technocracy?

The Venus Project, founded by Jacque Fresco, is a utopian, modern-day iter­a­tion of Tech­noc­racy. Like Tech­noc­racy, it scraps cap­i­talism and pro­poses that “a resource-based economy all of the world’s resources are held as the common her­itage of all of Earth’s people, thus even­tu­ally out­growing the need for the arti­fi­cial bound­aries that sep­a­rate people.” The appli­ca­tion of tech­nology is the answer to all of the world’s prob­lems, including war, famine and poverty.

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