The International Monetary Fund (IMF)

July 23rd 2010 | كتبها


 Ibrahim Alloush

Al-Sabeel 7/15/2010

(for the Arabic version, click the link below)

Under the heading: Know your Enemy, we summarize:

1) The International Monetary Fund (IMF) was established at the United Nations Monetary and Financial Conference in Bretton Woods.  That Conference convened in the US between the first and twenty-second of July 1944.  It also gave rise to the World Bank and the General Agreement on Tariff and Trade, which was formally transmuted into the World Trade Organization (WTO) on 1/1/1995. These organizations stemmed from the United Nations in the presence of forty four representatives of the “Allies,” who had opposed Germany, in order to establish a global monetary system for after World War II.

2) The IMF’s mission, in light of stabilizing the dollar-gold exchange rate at Bretton Woods, as well as the price of the dollar’s exchange rate with other currencies, was to provide urgent financial help and specialized consultations to countries that suffer balance-of-payments deficits,  that may lead to sudden collapse of their currencies. The bank’s official task was to ensure stability in the international monetary system, which would enable global investment and trade. Read: the dominance of financial capitalism globally.

3) After the unilateral American decision to cancel the fixed exchange rate regime in the early 1970s and a shift to a floating exchange rate regime, the IMF’s role didn’t shrink. On the contrary, its role of monitoring and controlling the third world’s economies increased via attaching to loans harsh conditions that usually involve increasing taxes during economic crises (economists term this a recessionary measure), privatizing the public sector, cutting governmental welfare programs and shifting the legal and institutional environment in favor of multinational corporations’ interest.

4) The IMF works like a bank that offers loans in a special currency called “Special Drawing Rights” (SDR’s) at an interest rate that is published weekly on the Fund’s website. These are electronically wired between central banks and the IMF.   SDR’s are denominated mostly in American Dollars and Euros, and Pounds Sterling and the Japanese Yen to a lesser extent.

5) The IMF is a bank for advanced industrial states. It is always headed by a European, while the World Bank is headed by an American. The IMF’s first deputy is always an American. Although the board includes 187 states, their votes are not equal. They are proportional to their share in the Fund. For example, the United States has 17% of the vote. It is interesting to note that important decisions require 85% of votes, which means the United States enjoys virtual veto power over bank decisions.

6) Proportionality between any given state’s share and its electoral vote does not mean it may increase its share in the Fund just as it wishes. China experienced a problem in 2001 when it tried to increase its share. Advanced industrial countries together have been controlling 57% of the Fund’s votes. After years of negotiations, it was decided in 2008 to increase the shares of four rising economies: China, India, Brazil and Russia. China, Korea, Mexico and Turkey’s shares were increased on 4/28/2008 while some advanced countries’ shares were decreased without threatening their control. The United Sates’ share, predictably, remains at 17%.

7) States cannot unilaterally withdraw from the IMF at their own whim. For example, in June 2009 Hugo Chavez announced his country’s withdrawal from the World Bank and the IMF. But Venezuela’s membership in both organizations continues to date. The reason is provisions in Venezuela’s Sovereign Bonds, denominated in foreign currencies, which imply the state’s de facto bankruptcy in the event of withdrawal from the IMF, which would destroy its financial credibility and ability to transact normally within the international monetary system!

8) In April 2009 the G-20 decided, after the global economic crisis, to increase the IMF’s lending power from 250 billion dollars to 750 billion dollars to help rescue the global capitalist system.

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