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Except Greece probably doesn’t qualify under normal IMF standards, and the IMF would have to get short euro to make the payment.

And ideologically it means ceding control of EU macro policy to an external international institution with strong US influence.

Nor does the macro work, as the ‘strict enough conditions’ imposed will further weaken demand in Greece and the rest of the EU.

Also, the rapidly expanding deficit of Greece has benefited the entire EU and a sudden reversal will reverse those forces.

Likewise, leaving the EU would be contractionary/deflationary for the EU.

But if they all believe the IMF is the way to go there’s a good chance it happens.

Meanwhile, Greece and the rest of the eurozone is being revealed as necessarily being in a continual state of ponzi that demands institutional resolution
of some sort to be sustainable.

Issing Says IMF Better Suited Than EU to Greek Rescue, NYT Says

By John Fraher

Feb. 8 (Bloomberg) — Former European Central Bank Chief Economist Otmar Issing said the International Monetary Fund may be better suited to rescuing Greece than the European Union, the New York Times said, citing an interview.

“I don’t think that the EU can impose the kind of sanctions that would be needed, and it would make Brussels too unpopular,” the newspaper cited Issing as saying in an article published Feb. 6. “A better way is for Greece to approach the IMF. It is the only institution that can impose strict enough conditions.”

Issing said he doesn’t see support “in Germany or elsewhere” for a bailout that would involve “a more or less disguised transfer of taxpayer money,” the paper said.

Issing said leaving the euro region would be “economic suicide” for Greece, though he dismissed the idea that it would hurt the euro region as “misguided,” the paper said.

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>   
>   (email exchange)
>   
>   On Sun, Feb 7, 2010 at 8:45 AM, Seth wrote:
>   
>   scott brown was on TV this week saying we had to stop spending money we don’t have
>   and are borrowing from the Chinese-that 40% of obama’s budget will have to be
>   borrowed from Chinese and paid back by our children hopefully he is reading your stuff
>   

Yes, hope to put that to rest Thursday, assuming that’s what CNBC wants me to discuss.

Hope to definitively dismiss the entire line of thought.

1. Taxation serves to regulate aggregate demand, not to collect revenue per se.
  Govt doesn’t ever have or not have dollars- it’s the score keeper
  It taxes by changing numbers down in our accounts, and doesn’t ‘get’ anything
  It spends by changing numbers up in our accounts, and doesn’t ‘have less’ of anything.
  China is not involved in this process.
  There is no operational connection between taxing and spending.

2. China gets dollars by voluntarily selling things to us, presumably because they’d rather
  have the dollars than what they sold.
  Those dollars go into their ‘checking account’ at the Fed called a ‘reserve account.’
  Treasury securities are functionally nothing more than a ‘savings account’ at the Fed
  When China buys tsy securities to earn more interest the Fed debits their reserve account
  and credits their securities account.
  The $13 trillion of US debt is best thought of as the $13 billion held in savings accounts at
  the Fed.
  When China’s or anyone else’s tsy secs mature the Fed debits their securities account and
  credits their reserve account.
  That’s all.
  Debt paid.
  This is operationally unrelated to spending and taxing.

3. The issues of concern include ‘inflation,’ but not dependence on foreign ‘investors’ and
  not solvency nor funding issues.
  All we owe China is a bank statement.

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Or maybe the money fund lobby is in control.

As always, the liability side of banking is not the place for market discipline.

Australia Removes Funding Guarantee Even as Economy Is Fragile

By Shani Raja

Feb. 8 (Bloomberg) — The Australian government is withdrawing a guarantee on large deposits and wholesale funding that helped banks access credit after the global financial crisis, even as the economy overall remains “fragile.”

The program is being withdrawn on March 31 on the advice of the Council of Financial Regulators, Treasurer Wayne Swan said in a news release yesterday. The removal of the guarantees indicates the nation’s banks are recovering from the impact of the credit crunch.

“This is a definite milestone on the road to recovery from the global financial crisis,” said Tim Schroeders, who helps manage $1.1 billion at Pengana Capital Ltd. in Melbourne. “It’s an indication the worst is over and that banks don’t need a government guarantee to legitimize them as deposit-taking entities.” A plan that gives certainty over deposits of up to A$1 million ($870,000) won’t be affected, Swan said.

The bank guarantees were introduced in October 2008 after the collapse of Lehman Brothers Holdings Inc., which roiled financial markets worldwide and helped precipitate a global recession. They enabled Australian banks to raise funds on international markets, helping lenders avoid the sorts of bankruptcies that hampered the U.S. financial system.

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