Tuesday, August 2, 2016


As I mentioned the other day the Independent Evaluation Office (the "IEO") of the IMF published a scathing report on the actions of the Fund before and during the Greek crisis.  To this day the only mention of this report has been made by Ambrose Evans Prichard of The Telegraph in a piece published on July 29.  Kudos to Mr. Evans Prichard a fine financial writer...not always on the same page with yours truly...but a fine writer.

The report is devastating.  I leave it to you to track down the description in the Telegraph as the original will take a bit of time (it's 500 pages) but it is worth the search.  I'll give you a brief run-down with, admittedly, a bit of editorializing added that I think is fair given I have said much of it many times in the past.

To begin at the beginning, it seems that from the creation of the Euro and the currency union, the IMF as an organization overlooked the well-documented concerns and viewed the structure as one that should be supported on the basis of a continuation of the aspirations and  political advancement of a unified Europe.  The obvious problem of the lack of any real fiscal discipline within the Union or backing for the nascent Central Bank (i.e. it is well-considered that the Treasury of the United States backs the Federal Reserve) was ignored.  So too was the thought that within such a currency union Balance of Payment issues affecting any one (or, as it turned out, groups of countries) could occur.  This was a monstrous mistake.

Affected by these previous miscalculations, the decision-making and actions of the Fund focused not on Greece (Portugal and Ireland are covered as well) as to specific solutions but as to political considerations regarding the Union as a whole and--my opinion--on the European banking system which was and is still inexorably linked to the political fabric of the continent.  As I have said many times in the past it was always about the banks as that system is what funds the politics of Europe and are the fiscal engines for every political regime save the UK which oddly...or perhaps not so oddly...uses its own currency and really has the only capital market in existence Over There.

The report goes on to demonstrate that the decisions made during the crisis were so colored by the ingrained prejudices that the Fund might as well have been in Coo-Coo Land.  From complacency to outright nonsense; from ignorance to improbable wish-lists of solutions; from the ignoring of plain facts to the creation of improbable scenarios and absurd speculative results that defied logic.  The examples of the foregoing presented are frightening to behold.

However, the worse was yet to come.  The IEO could not in many cases find documents relating to decisions taken, incidences of meeting for which there was no record, deletions from files and the absence in numerous instances of the Board of the Fund being apprised of events or of decisions taken.  The revelations are shocking.  Our gal, Chrissy, was not criticized in any way.  Imagine that.

Needless to say, our old bud Comrade Varoufakis had a kitten.  He's was right to do so but he remains the south end of northward bound horse.  The problem is not so much as to what occurred as the alternative would have undoubtedly been worse, but in how it occurred.  What the fund did, in effect, was to enshrine the status quo in Europe by allowing itself to be led by its nose by the Northern Tier, creating an even more unstable situation by delaying the inevitable reorganization of the Union or, in what may be its precursor in BREXIT, its dissolution.  If all the allegations are true, it is a disgraceful legacy, paid for in suffering by the Southern Tier to a degree hardly in accord with the admitted transgressions and breaches of trust by the Greeks and others--not to mention outright stupidity.  Surely at the very, least the organization must now be recognized for the nonsense that it has become so far from its original purpose and questions must be raised as to the reason for its existance in this form in today's environment.   But let us remember that only Evans Prichard has covered this sad tale as far as I can tell.  And the IEO released it's report on July 29...in Europe...where there was no one to read it...because the 29th of July is really August you know...and the only sound one hears is silence.  I fear it will remain.

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