The Decline of Everything

— Dan Denning is still in the States…somewhere. He’s due back in town later this week. So we’re on the DR beat again this morning.

— The big story over the weekend was the arrest of IMF head Dominique Strauss-Khan for allegedly attempting to rape a New York hotel housemaid. Classy.

— We don’t know what really happened, but DSK has form on the board. In 2008 the IMF reprimanded him for having an affair with a colleague. He was accused of exercising a ‘serious error of judgment’. Might not have been a one-off.

— This type of behaviour, although shocking, hardly comes as a surprise to cynics. Abuse of power by the wealthy is not a new phenomenon. But it seems to be getting more audacious.

— Could it be that the respect shown by the monetary authorities to the currency they emit reflects the respect shown by these same people to society? Keynes said ‘there is no subtler, no surer means of overturning the existing basis of society than to debauch the currency’.

— Perhaps DSK’s alleged actions were none too subtle, but the point is easy money undermines a society’s morals and ethics. When you bully and bluster to get what you want on the world stage, why wouldn’t that same attitude work in the bedroom?

— It’s not just the IMF of course. It’s prevalent throughout global finances’ halls of power. And Goldman Sachs is merely the biggest target, representative of Wall Street’s contempt for Main Street.

— Getting back to the IMF, it has become a big dog in the world’s monetary affairs. It was initially created at Bretton Woods in 1944 to assist countries that developed trade imbalances. It has failed abysmally in this task.

— That’s because the biggest imbalances have surfaced in the countries that fund the Fund. For years, the IMF would dispense advice to emerging countries, advice that more often than not benefitted its benefactors. Just ask Argentina.

— As a result, the IMF has grown in stature over the decades and now, for the first time, it’s getting involved in the imbalances of Western powers. And true to form, its advice is austerity. Make no mistake, this is not about getting Greece, Ireland and Portugal back to economic health. It’s about protecting the Western bankers from default.

— It’s a shame the IMF doesn’t practice what it preaches. Austerity suggests sobriety, strictness, rigour, hard work and saving. All admirable qualities. But when the boss (allegedly) flees a $3,000-a-night hotel room, leaving his mobile phone in haste after trying to sexually abuse a staff member, austere behaviour is not the first thing that comes to mind.

— The IMF has been screwing with weaker countries for so long that it obviously thinks it can do the same to individuals. These unelected officials deserve little respect. The greater the power held, the more we should be suspicious of that power.

— Yet here we are, looking to the IMF and others to help ‘resolve’ the European sovereign-debt crisis. Its idea of resolution is different to most other, impartial observers though. It’s to punish the debtor and save the creditor.

— In the real world, if you lend money that has little capacity to be repaid, then you probably deserve to lose some of that money. There needs to be an acknowledgement for responsibility by both debtor and creditor. It’s an arrangement that ensures banks do their job, that is, allocate capital as efficiently as they can.

— Why then are organisations like the IMF and the ECB doing their best to avoid letting capitalism play out as it should? The truth is capitalism has been manipulated for decades to enrich the very few at the expense of the many. When things go pear-shaped, free-market capitalism gets the blame. And like in an Orwellian novel, the organisations that help cause the crisis are called in to provide resolutions.

— If it weren’t so tragically serious it would be hilarious.

— A tried-and-true tactic of these players is to bring out the Armageddon call if their policies are not pursued. A couple of them were blabbering over the weekend.

— Firstly, Jurgen Stark, a board member of the ECB, was busy creating hysteria over a potential restructure of Greek debt.

‘I would warn against underestimating the massive harmful effects a debt restructuring would cause for the country involved and for the eurozone as a whole.

‘It is very well conceivable that the risks for financial market stability could spread to other European countries. The idea that one could then solve a fiscal crisis through a simple debt reduction [from a restructuring] is consequently an illusion.’

–It’s true, restructuring Greece’s debt would lead to a restructuring of other debt and render Europe’s banking system insolvent. It would not be pretty. But piling more debt on top of the existing debt load to buy more time is the biggest illusion of all. It will just create a bigger bust when the reckoning comes.

— Europe’s unelected officials are playing the same game as those in the US. The weekend Wall Street Journal reported little Timmy Geithner playing the Armageddon card big time:

‘US Treasury Secretary Timothy Geithner has warned in a letter to Congress that failure to raise the $14.29 trillion US debt ceiling would drive up interest rates, push down household wealth, put more pressure on federal entitlement programs and cause a double-dip recession.’

— Gee, is that all? Thanks for the fear-mongering Timmy. Unfortunately, a weak Congress will take the bait and dig the debt hole even deeper.

— How did the world get into such a mess? How have we become so passive that we continue to allow these shysters to do exactly as they please? Is it because of its subtlety? Our modern-day democracy has morphed into a system whereby the unelected hold the real power and the elected are merely their puppets.

— Throughout history, endemic corruption has been a cause and a symptom of a nation’s decline. In decades hence we’ll look back on this era as a high water mark for a type of subtle and devious financial corruption, carried out by the people entrusted to run the system.

Greg Canavan
Markets and Money Australia

Greg Canavan
Greg Canavan is a contributing Editor of Markets and Money and is the foremost authority for retail investors on value investing in Australia. He is a former head of Australasian Research for an Australian asset-management group and has been a regular guest on CNBC, Sky Business’s The Perrett Report and Lateline Business. Greg is also the editor of Crisis & Opportunity, an investment publication designed to help investors profit from companies and stocks that are undervalued on the market. To follow Greg's financial world view more closely you can subscribe to Markets and Money for free here. If you’re already a Markets and Money subscriber, then we recommend you also join him on Google+. It's where he shares investment research, commentary and ideas that he can't always fit into his regular Markets and Money emails. For more on Greg go here.

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3 Comments on "The Decline of Everything"

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The IMF, BIS and World Bank should be abolished!

The IMF has been raping nations for decades. Greg Palast wrote a great article on this titled ‘IMF’s four steps to damnation’.

Also watch ‘Banking with Hitler’. It exposes how the BIS financed Hitler.


Well said!


The US is a hotbed of major crime as The Great Recession finally hits home:

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