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Courtesy of Walter Gault, Communications Editor, Sabrient
Was That a Seismic Shift In the Global Economy We Just Felt?
“As a novelist, I tell stories and people give me money. Then financial planners tell me stories and I give them money.” — Martin Cruz Smith
Beneath the daily noise of the continuing saga know as the European Union sovereign debt crisis, there is a strong underlying tremor going on, one that might eventually shake out as a major shift in the alignment of global financial power.
Aside from the obvious power struggle that seems to be playing out on pretty much a daily basis between elements represented by Germany and France, another drama is currently being played out around the International Monetary Fund’s (IMF) role in helping the EU extricate itself from what appears to be a problem without any viable long-term solution.
One of the proposals to emerge from last week’s final EU summit meeting of the year was that the ECB would lend up to $268 billion dollars to the IMF for the purpose of helping it meet a potential increase in loan demands from Italy, Spain, and other euro-zone members.
And if that concept seems to be a reasonably good example of pretzel logic, that’s because it probably is.
What the loan seeks to accomplish is to provide the recognized need for additional funds by the PIIGS (Portugal, Ireland, Italy, Greece and Spain) without violating some of the European Central Bank (ECB) rules that comprise its charter, which looks at direct lending to individual governments as a big no-no.
A work-around solution, then, is lending the money to the IMF, which can, according to its charter, make “crisis loans” to any of its members. Which, of course, includes the euro-zone member states.
If anyone needs a primer as to what is actually going on, it may require viewing of a Marx Brothers movie.
OK, so where does the seismic shift in power take place?
It has to do with the IMF and the influence it has on a global basis.
Up until now, it would be safe to say that the United States has been the premier power player among the IMF members. However, what is significant is that the U.S. will not be participating in this particular loan…
