'There's no shame in going to the IMF'. Oh really?
04 Apr 2009 - Bruno Prior
What does it mean if a government has to go to the IMF for funds?
- The government couldn't run a balanced budget.
- The economic outlook was so poor that there was little prospect of the budget coming back into balance over a reasonable timeframe.
- The government couldn't raise taxes sufficiently to bring the budget back into balance over a reasonable timeframe, without doing more harm than good to the economy.
- The government wouldn't cut public spending sufficiently to bring the budget back into balance over a reasonable timeframe.
- Lenders were so pessimistic about the government's ability to bring the budget back into balance over a reasonable timeframe that they were not willing to lend as much to the government as it needed to cover its net obligations.
- The central bank was so pessimistic about the government's ability to bring the budget back into balance over a reasonable timeframe that it was reluctant to print enough money to pay for government debt (because of fears that, when it came to unwind some of the monetary expansion, the gilt market would be flooded with a combination of central-bank assets and government new issuance, making the unwinding impossible and collapsing the value of new and existing gilts).
- The government was so cowardly, that it would rather turn to the IMF for expensive funds and instructions on what it must do to balance its budget, than figure out, implement and take responsibility for the necessary cuts itself.
No shame in going to the IMF?
Only for a government that has no shame.
Topics: EconomicsPhilosophy & Politics