Dousing the IMF Fires
As part of their general pre-election cave in, Congressional Republicans are greasing the skids for $18 billion in fresh money for the International Monetary Fund. Having set themselves up in 1995, the Congressional leadership wakes up at night shaking with fear that President Clinton will veto a bill to keep the government open, then blame them for closing the government.</br></br>With Asian economies toppling and the U.S. financial boom topping out, Republicans are particularly worried about getting tagged for an economic crisis unless they give Mr. Clinton anything he asks. The President lectured them again when speaking at the IMF meeting this week: They should pay the $18 billion because "there is no excuse for refusing to supply the fire department with water while the fire is burning."</br></br>Before you pour liquid on a raging fire, we might suggest, make sure it doesn't smell like gasoline. On the record of the past 15 months of crisis, the IMF doesn't look like much of a fireman. More of an arsonist. Back in March 1997, IMF Managing Director Michel Camdessus gave a speech predicting for Asia at worst a "cyclical correction that is not expected to be deep or prolonged." Mr. Camdessus was at that point already urging Thailand to devalue -- apparently clueless about the trouble that would come of it. The IMF went on to urge the devaluations that dragged down South Korea, wrecked Indonesia and set off shock waves that -- amplified by Russia -- now threaten Brazil.</br></br>To combat this, the IMF began by pouring $18 billion into Thailand, and said the worst was over. Then the Fund led a $43 billion bailout for Indonesia and said all would be well. There followed $57 billion for South Korea, $23 billion for Russia. That comes to $141 billion. The fund is now arranging a similar $30 billion experience for Brazil, bringing recent IMF crisis-dousing to $171 billion. Yet clearly the world is in worse shape than when the Fund back in 1994 hopped on its fire engine to put out Mexico.</br></br>Why is Congress buying in to this? Three reasons.