Monday, May 10, 2010

We're from the IMF and we are here to help you.

Before the PIIGS (Portugal, Italy, Ireland, Greece, Spain) of Europe breathe a deep sigh of relief as their funding problems are 'fixed' there's a few items to mention:

Assuming the money arrives you still have to deal with the IMF which has a usual gameplan of:

  • Devalue the currency
  • Raise taxes
  • Cut government spending
Item 1 is out the door as countries use the Euro
Raising taxes and cutting government spending is not a mix that encourages GDP growth.  Consider that when making your investments.   Don't forget that during this period of IMF induced austerity debt / GDP levels will continue to rise.  This is the mother of all 'kicking the cans down the road'.

The wad of money (nearly a $US Trillion!) will be used to allow countries to roll their debts, not stimulus.  The French banks are breathing a deep sigh of relief right now.  Everyone else should rethink what this all means.

Here's a video with my favorite hedge fund agitator explaining the situation.  This interview occured before the announcement but it still holds true.

(ht Zerohedge)

No comments:

Post a Comment