No global IMF

In an article called Can the US Do An IMF On Itself? Hellasious posits the global financial systems in terms of fire brigade HQs.

Picture the US as the Global Fire Department (GFD). In the last ten years or so the GFD became extremely irresponsible. It ignored the fire safety of its own firehouse, which became choked with highly flammable material (i.e. debt and derivatives), and relaxed the rules about the health and fitness of its firemen (i.e. oversight and regulation were greatly weakened).

Seeing this, the good citizens of the neighborhood (i.e. other western nations) also adopted the same attitude. And why not? If the fire department itself didn’t care about all that dead wood and turpentine piling up in its own back yard, why should they? A whole raft of nations from the UK and Australia, to Bulgaria, Poland, Iceland and Romania bought the same highly flammable “growth” model. Borrow – spend – inflate assets – borrow.

It was only a matter of time until a fire started somewhere. Unfortunately, it started in the worst possible place: the GFD firehouse itself. Predictably, the unfit firemen could not contain it and the fire quickly spread to the rest of the town. So, who’s going to put it out and how?

And he goes on to say that “the current plan is to take all that dry firewood and turpentine and stow it someplace else“. But there is no ’someplace else’ — everyone is up to their necks in it. In times past, the IMF would take some of the debt of, say, Mexico or the Argentine and parcel it up and shove it off into the economies of the richer countries, principally the US. But the IMF can’t do that now because essentially that lender of last resort is no longer able to lend.

What we need is to get rid of the debt. Globally.

But how, eh? Answers on a postcard to the President-Elect.

(Via Sudden Debt.)