International Business Editor Ambrose Evans-Pritchard has changed his stance on Greece. Previously, he’s supported the Greek bailout and wanted to avoid a “sovereign Lehman.” Today, he sees the “moral hazard rescue” for what it is, and now chooses to “flagellate” himself and “wear a dunce’s hat.”
What prompted the turnaround? The wisdom he sees in Congress blocking the IMF from using US taxpayer money to backstop Greece.
From the Telegraph:
“The US Senate has voted 94:0 to block use of taxpayers’ money for IMF rescues that make no economic sense or bail-outs for countries like Greece that far are beyond the point of no return.
“’This amendment will help prevent American taxpayer dollars from underwriting dysfunctional governments abroad,’ said Texas Senator John Cornyn, the chief sponsor. ‘American taxpayers have seen more bailouts than they can stomach, and the last thing they should have to worry about are their hard-earned tax dollars being used to rescue a foreign government. Greece is not by any stretch of the imagination too big to fail.’
“Co-sponsor David Vitter from Louisiana said America had run out of money. ‘Our country already owes trillions of dollars in debt. We simply can’t afford to take on other countries’ debt in addition to our own.’ It is unclear where this leaves the EU’s $1 trillion ‘shock and uh’ package. Urlich Leuchtmann from Commerzbank said the IMF share of $320bn was the only genuine money on the table, the rest being largely euro smoke and mirrors, or plain bluff.”
Now here is a case of “shock and awe”… to see Congress have the sense to at least not spend the money of an already broke US on foreign governments. This is especially true when US states are themselves ranking so highly on lists of probable defaults. Like California, shown to be ranked at number eight here, just four places south of Greece.
The bill is not a law yet, but hopefully soon the US will be able to oppose an essentially hopeless IMF rescue package in Greece, where public debt is already greater than 100 percent of GDP and the loan is unlikely to be repaid. For perspective, Evans-Pritchard points out that the “IMF share of the Greek bail-out is 30 times quota, more than double any other rescue in the history of the Fund.”
For more details visit the Telegraph’s coverage of Congress blocking indiscriminate IMF aid for Europe.
The Daily Reckoning
Rocky Vega is publisher of Agora Financial International, where he advances the growth of Agora Financial publishing enterprises outside of the US. Previously, he was publisher of The Daily Reckoning, and founding publisher of both UrbanTurf and RFID Update -- which he ran from Brazil, Chile, and Puerto Rico -- as well as associate publisher of FierceFinance. Rocky has an honors MS from the Stockholm School of Economics and an honors BA from Harvard University, where he served on the board of directors for Let?s Go Publications, Harvard Student Agencies, and The Harvard Advocate.
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