Cato Handbook for Congress: Policy Recommendations for the 106th Congress

By Edward H. Crane; David Boaz | Go to book overview
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63.
International Financial Crises and
the IMF
Congress should
reject additional funding requests for the International Monetary Fund;
close down the Exchange Stabilization Fund at the U.S. Department of the Treasury;
avoid giving the IMF new missions, including that of economic surveillance; and
withdraw the United States from the IMF.

Since the $30 billion bailout of Mexico in 1995, national-currency and financial crises in developing countries have increased, as has the incidence of IMF-led bailout packages. Since 1997 those packages have totaled more than $180 billion for Asia, Russia, and Brazil. Those bailouts and the turmoil in international financial markets resulted in urgent requests for a massive increase in the IMF's resources. For the United States, the added contribution was $18 billion, which U.S. Treasury officials disingenuously claimed did not cost U.S. taxpayers a dime even as those officials pleaded for more money. Cato Institute chairman William Niskanen, former head of President Reagan's Council of Economic Advisers, puts the U.S. relationship with the IMF more accurately: “U.S. government membership in the IMF is like being a limited partner in a financial firm that makes high-risk loans, pays dividends at a rate lower than that on Treasury bills, and makes large periodic cash calls for additional funds.”

But the monetary costs of supporting the IMF are not the most important reasons to oppose more funding. The costs to the global economy are high, and the people who are most directly affected by IMF interventions— the world's poor—are those who can least afford it. If the goal is to help developing countries progress economically and to promote a liberal global

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